Taiwan is unparalleled in semiconductor manufacturing, and the country’s major chipmakers are among the most sought-after investors in the latest global trend of building local chip supply chains amid escalating US-China trade frictions and geopolitical risks. However, Taiwan has long lagged rivals in developing chip manufacturing equipment in a market dominated by US, European and Japanese companies.
Taiwan is the world’s largest supplier of foundry services with a market share of more than 75 percent and also the No. 1 supplier of chip packaging and testing services.
However, the nation’s chip companies source most manufacturing tools from foreign semiconductor equipment suppliers such as Applied Materials Inc, ASML Holding NV and Tokyo Electron Ltd.
Only 1 percent of front-end chip manufacturing equipment used by local chipmakers is made by Taiwanese companies despite the government’s decade-long push to build a semiconductor manufacturing equipment supply chain.
It is understandable that semiconductor firms are reluctant to take risks and adopt locally developed equipment, as any delay in rolling out next-generation technology is a matter of life or death for them.
In addition, lukewarm government support has had an effect on the slow uptake of Taiwan-made components. Some analysts believe that it would take 30 years for local semiconductor equipment makers to catch up with their Japanese rivals.
With Taiwan ascending to center stage in the semiconductor industry over the past few years and playing a key role in enabling artificial intelligence (AI) applications worldwide, there would never be an optimal time for the nation to strengthen its semiconductor equipment supply chain.
However, it is already happening to the nation’s chip packaging segment. That Taiwan Semiconductor Manufacturing Co (TSMC) is racing to produce AI chips to catch up with rapidly growing demand helps boost demand for locally made equipment for chip-on-wafer-on-silicon (CoWoS) packaging technology. The adoption rate of locally made chip packaging tools has increased to 15 percent.
CoWoS equipment suppliers from All Ring Technology Co and Grand Process Technology Corp to Gallant Micro Machining Co are enjoying strong revenue growth. All Ring’s profits ballooned to NT$895 million (US$27.6 million) in the first three quarters of this year from NT$72 million in the same period last year. Earnings per share skyrocketed to NT$10.3 from NT$0.9.
However, only a few local firms can enjoy the growth of chip manufacturing business, given most local companies are small and have meager financial resources for research and development (R&D).
To address those problems, the Taiwan Electronic Equipment Industry Association on Friday last week urged the government to provide more assistance. The government’s latest tax incentives are appealing to large-scale companies with a high threshold of NT$6 billion in R&D investment. The association said the government should relax restrictions on tax incentives for R&D investment and push for more collaboration with research institutions.
It also called on the government to help small and medium-sized businesses gain better access to overseas markets.
The semiconductor equipment industry has a good business outlook, as about half of the nation’s electronic equipment production would come from such tools by 2028, up from 34 percent this year, the association said.
The adoption rate of locally developed tools has moved at a snail’s pace over the past 10 years. Therefore, the government should consider taking the association’s advice and better support local suppliers to grasp business opportunities stemming from emerging technologies such as AI.
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