In terms of the economic outlook for the semiconductor industry, Taiwan has outperformed the rest of the world for three consecutive years. This is quite rare.
In addition, Taiwan has been playing an important role in the US-China technology dispute, and both want Taiwan on their side, reflecting the remaking of the nation’s semiconductor industry.
Under the leadership of — above all — Taiwan Semiconductor Manufacturing Co (TSMC), the industry as a whole has shifted from a focus on capacity to a focus on quality, as companies now have to be able to provide integration of hardware and software, as well as a powerful ecosystem, to succeed.
Annual sales volume growth in the global semiconductor industry was 12.0 percent in 2019 and 5.1 percent last year, and its sales volume is forecast to grow 8.4 percent this year, according to World Semiconductor Trade Statistics.
The analyst recently raised its estimate for last year and the forecast for this year.
The main reason that the global industry’s sales volume last year did not go into recession was that the COVID-19 pandemic created new opportunities for semiconductor use. As the pandemic forced global digitalization to accelerate, there was a surge of innovation in the areas of 5G, artificial intelligence and high-performance computing, in which semiconductors play an important part.
Companies also continue to develop optimized semiconductor technologies as the pandemic drives the development of secure chips for contact-free commercial use.
Annual global sales volume growth for this year could increase to a high-single-digit percentage, mainly because global economic growth is expected to increase to 4.2 to 5.2 percent from last year’s 3.2 to 5.2 percent decline.
This is expected to drive demand in the terminal application market, and 5G and high-performance computing would become the main drivers in the semiconductor market.
Taiwan’s annual semiconductor production value increased 1.7 percent in 2019 and 24.7 percent last year, and is projected to grow 12.0 percent this year, outperforming the rest of the world for three consecutive years.
Despite the pandemic and the US-China technology dispute, Taiwan’s semiconductor industry performed well last year, and the market value of its key firms continued to set records.
In addition, the importance of TSMC in the global technology supply chain has increased rapidly. When even Intel was forced to fall back on original equipment manufacturers to resolve problems with its lagging process technology and its inability to supply its CPUs on time, it showed the high competitiveness of TSMC’s advanced processes, and that it enjoys the praise and support of global heavyweights.
Furthermore, orders at Taiwanese firms last year increased as the US sanctioned China’s industry. For example, the ban on Huawei Technologies Co meant that Taiwan’s semiconductor industry during the first three quarters of last year received a large number of orders that would have gone to Huawei.
Semiconductor Manufacturing International Corp was also included on a US Department of Defense blacklist, and the department later added more military end users, including JCET Group’s packaging and testing subsidiary, JSTATS ChipPAC, and Arrow Asia Pac, a subsidiary of the world’s largest semiconductor distributor, Arrow Electronics.
This also resulted in orders being redirected to Taiwanese wafer foundries, flash memory businesses, semiconductor packaging and testing companies, and semiconductor distributors.
Despite last year being a high baseline period, the forecast is still that growth in Taiwan’s semiconductor industry would surpass the global average.
In particular, the partial shortages and price increases during the fourth quarter in the silicon wafer, integrated circuit design, foundry, and semiconductor packaging and testing industries could continue at least through the first half of this year.
This would lead to growth momentum in the industry, as supply side expansion is lagging, while demand is growing as a result of increasing 5G penetration and a recovery in terminal application markets.
Moreover, the semiconductor industry supply chain is moving from globalized division of labor toward integration of key regional supply chains. As the friction between the US and China seems to be here for the long term, competition between nations in the post-pandemic world will likely be manifested in the competition for technological strength.
As the foundation of technological development, countries are focusing on the semiconductor industry, which is why Taiwan, the US, South Korea and China are all introducing plans to revive domestic chipmaking.
In Taiwan, leading companies are investing in research and development, with the aim to make Taiwan an advanced semiconductor manufacturing process center. To promote such a plan, leading companies and research institutes on Nov. 26 last year agreed to invest NT$9.6 billion (US$337,850 million) over 12 years to establish a national semiconductor research institute.
As part of the plan, National Taiwan University, National Tsing Hua University, National Chiao Tung University and National Cheng Kung University said they would train a total of 4,800 master’s and doctoral degree holders, beginning as early as this year.
The plan also includes national experimental regulations for key sectors that would relax regulations on industry representatives providing instruction at schools and professors engaging in exchanges with industry.
Liu Pei-chen is a researcher at Taiwan Industry Economics Services and Asia Pacific Industrial Analysis Association director.
Translated by Perry Svensson
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