Tue, Sep 17, 2013 - Page 13 News List

Nation’s chipmaking industry feeling unappreciated

By Eric Pfanner  /  NY Times News Service, TAIPEI

Tien Wu (吳田玉), chief operating officer of Advanced Semiconductor Engineering (ASE, 日月光半導體), has a problem: The brightest young people in Taiwan do not want to work in the nation’s signature business, chipmaking.

“All the college freshmen are asking, ‘Why should I join the industry? I’d rather work for Facebook, Apple or Google,’” Wu said.

Taiwan is the world’s biggest chipmaker. The industry generated about US$63 billion in sales last year — more than one-fifth of the global total, according to the Taiwan Semiconductor Industry Association.

Made-in-Taiwan chips are major components in many of the world’s PCs, smartphones, cameras and other gadgets.

Many semiconductor companies struggle with low profit margins or even lose money.

At the same time, Silicon Valley giants like Google and Apple, whose wizardry would be impossible without the continuing innovations of the semiconductor industry, are sitting on so much cash they do not know what to do with it.

“We’re the guys in the hot room, forging the iron and taking the heat, and someone else is reaping the benefit,” Wu said.

His lament was echoed by executives of other companies during a semiconductor trade show in Taiwan last week.

Even as engineers toil at the latest technological breakthroughs in chip design and manufacturing, industry leaders are also wrestling with a bigger question: How can the semiconductor business grab a bigger portion of the profits it enables?

The issue is gaining urgency because one of the axioms of semiconductors may be about to break down, putting new financial pressure on the industry.

According to Moore’s Law, named after Gordon Moore, co-founder of Intel, the number of transistors on a chip doubles every two years. However, transistors are now packed so densely on chips that it may be technically impossible to go further without corrupting data, specialists say.

“Everybody is coming up against this,” said Pascal Viaud, chief strategy officer of Yole Developpement, a consulting firm in Lyon, France. “The industry is going to need to find new ways of creating value.”

One approach is to stack transistors, creating so-called three-dimensional chips, rather than line them up side by side.

Samsung Electronics of South Korea announced this summer what it described as the first mass-produced 3D chips for flash memory, a major component in smartphones.

Although 3D technology and other advances promise to lower the cost and increase the performance of consumer electronics, they make chip design and manufacturing more complicated and expensive.

This has prompted semiconductor companies to rethink how the industry is structured.

The giants of the industry, including Samsung and Intel, offer one-stop shopping — designing, manufacturing and packaging chips into integrated circuits that are sold to the companies that design and assemble finished phones, cameras and other products.

Another approach is more specialized, with separate companies handling different stages in the creation of an integrated circuit.

To try to cope with the new challenges, the nation’s biggest chipmaker, Taiwan Semiconductor Manufacturing Co (台積電), long considered purely a foundry, has recently moved to add capabilities, like chip packaging.

Despite all the maneuvering, this year is shaping up as a pretty good year for chipmakers in Taiwan, with total revenue expected to rise to NT$1.87 trillion (US$63 billion), up 14 percent from last year, according to the association.

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