The global semiconductor supply chain is to see a transformation, spearheaded by the US government’s move to tackle chip shortages and safeguard its economy, which would benefit semiconductor foundries, including Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), Fitch Ratings said yesterday.
The US Innovation and Competition Act (USICA), endorsed by the White House and passed by the Senate, would allocate large-scale funding for domestic chip production to alleviate supply chain crunches and ensure dependable semiconductor sourcing. The bill is awaiting passage by the US House of Representatives.
Leading chip makers such as TSMC, South Korea’s Samsung Electronics Co and the US’ Intel Corp would be the biggest beneficiaries due to their specialty in producing leading-edge nodes, Fitch said.
Photo: Tyrone Siu, Reuters
The windfall would extend to capital equipment suppliers such as KLA Corp and ASML Holding NV for supplying the tools used in the production of advanced chips, Fitch said.
The bill is intended to boost global competitiveness in industries deemed critical, with US$250 billion of government investment, it said, adding that about US$52 billion is to fund semiconductor research, design and manufacturing initiatives.
The US Department of Commerce expects the policy to unlock private investment, resulting in US$150 billion or more in funding for seven to 10 new US-based factories.
Several firms have announced expansion plans in the US. TSMC has announced a US$12 billion plan to build a 5-nanometer plant in Arizona, with media reports saying it is mulling up to five additional plants. Intel expects to invest US$20 billion in two new manufacturing facilities in the same state and Samsung intends to spend US$17 billion on a new 5-nanometer plant in Austin, Texas.
US policymakers view the semiconductor industry as strategically important because it supplies the fundamental enabling technologies for advanced defense, communications, big data and artificial intelligence among other industries, Fitch said.
The ongoing semiconductor shortage, driven by a confluence of factors, including inadequate capacity and stronger-than-expected demand, has highlighted supply chain vulnerability, it said.
The predicament also underscores the need to secure a dependable source of semiconductor components as the US’ share of semiconductor production has declined to about 12 percent from 37 percent in 1990, it said.
The global chip shortage has enhanced the bargaining position of foundries, Fitch said, adding that TSMC recently announced price increases of up to 20 percent.
Some chip consumers are making upfront payments to secure supply, Fitch said.
Electric vehicle maker Tesla Inc is expected to pay in advance to secure capacity, while Apple Inc has reserved TSMC’s initial capacity of 4-nanometer for its latest generation MacBook, it said.
TSMC supplies 50 to 55 percent of global semiconductor output and is the only foundry capable of turning out 7-nanometer and even more advanced chips, which enable everything from the latest smartphone models to graphics processing units used in data centers and artificial-intelligence applications.
TSMC’s operations are primarily centered in Taiwan, resulting in heightened geographic concentration risks, as earthquakes, droughts and blackouts have challenged manufacturing, Fitch said.
Ongoing droughts have the potential to affect TSMC’s production volume, as it uses 63,000 tonnes of water per day, it said, adding that Taiwan is also dealing with a COVID-19 outbreak.
STATE SUBSIDIES: The talks over a factory in Dresden have a top end on par with what Japan is offering TSMC and outdo a cap other firms are being offered in Europe Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s biggest contract chipmaker, is in talks to receive German government subsidies for as much as 50 percent of the costs to build a new semiconductor fab in the country, people familiar with the matter said. The government is in ongoing negotiations with TSMC, as well as its partners on the project — Bosch Ltd, NXP Semiconductors NV and Infineon Technologies AG — the people said, asking not to be identified because the deliberations are private. No final decisions have been made and the final subsidy amount could still change. Any state aid must also
South Korea would avoid capitalizing on China’s ban on a US chipmaker, seeing the move by Beijing as an attempt to drive a wedge between Seoul and Washington, a person familiar with the situation said. The South Korean government would not encourage its memorychip firms to grab market share in China lost by Micron Technology Inc, which has been barred for use in critical industries by Beijing on national security grounds, the person said. China is the biggest market for South Korea semiconductor firms Samsung Electronics Co and SK Hynix Inc and home to some of their factories. Their operations in China
GEOPOLITICAL RISKS: The company has a deep collaboration with TSMC, but it is also open to working with Samsung Electronics Co and Intel Corp, Nvidia’s CEO said Nvidia Corp, the world’s biggest artificial intelligence (AI) GPU supplier, yesterday said that it is diversifying its supply chain partners in order to enhance supply chain resilience amid geopolitical tensions. “All of our supply chain is designed for maximum diversity and redundancy so that we can have resilience. Our company is very big and so we have a lot of customers depending on us. And so our supply chain resilience is very important to us. We manufacture in as many places as we can,” Nvidia founder and chief executive officer Jensen Huang (黃仁勳) said in response to a reporter’s question in
BIG MARKET: As growth in the number of devices and data traffic accelerates, it will not be possible to send everything to the cloud, a Qualcomm executive said Qualcomm Inc is betting the future of artificial intelligence (AI) will require more computing power than what the cloud alone can provide. The world’s largest maker of smartphone processors is transitioning from a communications company into an “intelligent edge computing” firm, Qualcomm senior vice president Alex Katouzian said. The edge in question is the mobile device that a user taps to access a network or service, and Katouzian used his time headlining one of the major keynote events at the Computex show in Taipei to make the case for how big a market that would be. The US company’s chips help smartphones harness