The World is Dangerously Dependent on Taiwan for Chips

The Taipai Times recently published this position paper (written by reporters from Bloomberg) making the point that Taiwan could become the flashpoint between China and the West due to their position in the world economy driven by their chip manufacturing capabilities.

According to the paper, by dominating chip manufacturing technology, Taiwan has become the most critical single point of failure in the entire semiconductor value chain. Taiwan’s role in the world economy came to recent prominence as the auto industry, including  Volkswagen, Ford, and Toyota suffered shortfalls in chips used for automobile production. They were forced to halt production and idle plants. Thus, the U.S., European and Japanese automakers are lobbying their governments for help, with Taiwan and TSMC being asked to step in.

Taiwan’s grip on the semiconductor business, while under constant threat of invasion by China, has given new urgency to plans to increase local self-reliance. News that Intel is considering outsourcing production of leading-edge chips to TSMC underscored the need for a U.S. player that can fabricate at the leading edge and continued unhindered access to Taiwan as a source of such products.

We know about recent efforts in the U.S. to “onshore” electronic production with laws such as the “CHIPS for America Act”. The US also negotiated with TSMC to establish a US$12 billion chip fabrication plant in Arizona. South Korea’s Samsung is set to follow, with a US$10 billion facility in Austin, Texas.

Germany’s Merkel and France’s Macron reportedly discussed the potential for chip shortages last year and agreed on the need to accelerate Europe’s push to develop its own chip industry. The EU aims to bolster its share of the global chip market through an alliance funded initially at $36B of public-private investment to raise Europe’s share of the global chip market to 20 % from its current, less than 10 %. Tokyo is also wooing TSMC to set up in Japan. In the meantime, geopolitics means chip shortages could become a more regular occurrence around the world. For all the global moves to bring back domestic chip fabrication, it is optimistic to think the supply chain for such a complex product as semiconductors could change in a short time, ASML (who controls the lithography market) told Bloomberg. “If you want to reallocate semiconductor build capacity, manufacturing capacity, you have to think in years,” they said.

Recent moves by the U.S. to ban access to all U.S. chip technology including design has enabled it to cut off the supply of semiconductors from TSMC and other foundries to Huawei Technologies, China’s biggest tech company.

China, in its five-year plan presented last year, is helping the chip industry and aligned industries with  US$1.4T through 2025. In addition, China has long tapped Taiwan for chipmaking talent. For example, two key executives at China’s top chipmaker, SMIC used to work at TSMC (CEO Liang Mong-Song and vice-chairman Chiang Shang-Yi).

Taiwanese cybersecurity reports a steady increase in attacks on the local chip industry corresponding to the tightening of U.S. export controls on China. The greater worry is that reportedly, TSMC’s chip factories could become collateral damage if China were to make good on threats to invade Taiwan if it moves toward independence.

Let’s take a look at the most recent SEMI chart for production by region:

Figure 1: Total IC wafer fab capacity for top five regions. (Courtesy: SEMI)

They show that from 2019 through the end of 2021, China will have increased wafer capacity for memory by 95%, foundry by 47%, and analog by 29%.

SEMI reports that from 2019 through 2021, Chinese-owned companies will add almost 60% capacity for foundries, the most of all sectors. Companies including SMIC, Hua Hong Semiconductor, Nexchip, XMC, and Hua Li Microelectronics are driving the increases. During the same period, Chinese-owned companies will ramp up memory capacity from basically zero to 300,000 wpm. Companies such as Yangtze Memory Technology and ChangXin Memory Technologies (CXMT), are powering the quick rise with aggressive ramps of 3D NAND and DRAM capacity.

If China were to take over current Taiwan production the world would be in a “world of hurt” (no pun intended).

SMIC – More Focus on Packaging?

According to the South China Morning Post, Chiang Shang-Yi, former TSMC R&D director now at Semiconductor Manufacturing International Corp (SMIC), has stated that Chinese chipmakers should focus on developing advanced packaging technologies to overcome their weakness in advanced process nodes.

Chiang, currently SMIC’s executive director and vice-chairman, said future breakthroughs for the country’s integrated circuit (IC) manufacturing industry would come from advanced packaging techniques.

Chiang’s comments were made at a closed-door China IC Conference earlier this month.

DuPont / ITRI Semiconductor Materials Laboratory

Taiwan’s Industrial Technology Research Institute (ITRI) and DuPont Electronics & Imaging announced the opening of a new semiconductor materials laboratory in Hsinchu, Taiwan.

 

In this ever-changing world that we live in, IFTLE will remind you that Dow and DuPont, what could be considered the last two pure major chemical companies left in the U.S. merged in Sept of 2017 and then split the company into three divisions focused on Agriculture, Materials Science and Specialty Products.

The Agriculture Company brought together DuPont Pioneer, DuPont Crop Protection, and Dow AgroSciences. The Agriculture Company headquartered in Wilmington, Delaware, with global business centers in Johnston, Iowa, and Indianapolis, Indiana.

The Materials Science Company, named Dow, brought together Dow operating segments: Performance Plastics, Performance Materials & Chemicals, Infrastructure Solutions, and Consumer Solutions as well as DuPont’s Performance Materials operating segment. The intended Materials Science Company will be headquartered in Midland, Michigan.

The Specialty Products Company brought together DuPont Protection Solutions, Sustainable Solutions, Industrial Biosciences and Nutrition & Health, and  Electronic Technologies, which combines DuPont’s Electronics & Communications business with Dow’s Electronic Materials business unit. The intended Specialty Products Company will be headquartered in Wilmington, Delaware.

DuPont Electronics reported that it had established this laboratory in Hsinchu “… to stay close to the semiconductor industry in Taiwan” DuPont will conduct, in collaboration with ITRI, semiconductor material research, development, and enhancement, and accelerate pilot testing and commercial viability to support DuPont’s customers as they pursue the next generation of semiconductors in Taiwan.

“Our investment in semiconductor technology and manufacturing centers in Taiwan serves as our hub in the Asia Pacific to promote advanced semiconductor technologies globally,” said Dennis Chen, DuPont Taiwan President. DuPont Advanced Packaging Technologies global business director Rob Kavanagh added, “DuPont is committed to the development of advanced materials in support of the increasingly complex packaging technologies. We have seen positive outcomes from our past collaboration with ITRI and look forward to further leveraging each other’s competencies and experience for our customers and Taiwan’s semiconductor industry.”

For all the latest on Advanced Packaging stay linked to IFTLE……………………

Phil Garrou

Dr. Philip Garrou is a subject matter expert for DARPA and runs his consulting company…

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