John Carter
Senior Editor, Political Economy
News sources quoted from South China Morning Post
Craig Addison, a production editor on SCMP’s technology desk and accomplished semiconductor writer, takes a look this week at the ever-widening global semiconductor shortage. Calls for “self-sufficiency” and “supply chain security” are not new, but the effect of recent developments on production and jobs has forced more politicians and policy makers to sit up and take notice.
Media www.rajawalisiber.com – Despite waging a tech war on multiple fronts, it turns out that Beijing and Washington agree on one thing: the lack of their own semiconductor production capacity poses a worrying potential national security risk amid an increasingly serious global chip shortage.
As the chip shortage spreads from the automotive sector into more industries, both the US and China are now keen to invest more to develop their domestic chip industries and wean themselves off a growing dependence on Taiwan Semiconductor Manufacturing Company (TSMC), which supplies more than half of the world’s advanced semiconductors.
“Right now we make zero per cent of leading-edge chips in the United States. That’s a problem,” said US Commerce Secretary Gina Raimondo. “We ought to be making 30 per cent, because that matches our demand.”
Last month, President Biden assured the US chip industry of Washington’s bipartisan support for his proposed US$50 billion in funding for semiconductor manufacturing and research.
China’s own chip making champion, Semiconductor Manufacturing International Corp (SMIC), has attempted to emulate TSMC’s business model, but its ability to fill China’s need for advanced chips has been stymied by US sanctions that restrict its access to the most advanced chip making tools from the US and Europe.
This, along with China’s increasing appetite for imported chips, has prompted calls from the top leadership, including Chinese president Xi Jinping, for the country to double down on becoming self-sufficient in its semiconductor supply chain.
However, analysts, academics and industry executives point out that achieving total self sufficiency is going to be a marathon effort, and may not even be practical today because the global supply chain is already highly integrated.
Calls for supply chain security that started over medical equipment and supplies have only grown louder with the current chip shortage that started after General Motors, Ford Motor and Volkswagen, among others, were forced to temporarily shut down production lines amid the early months of the global coronavirus pandemic. Anticipating a market slowdown that would last some months, they cancelled orders for chips, but when demand resumed faster than expected, they found themselves at the back of the line when it came to accessing foundry capacity.
At the end of last year, the shortage spread from the auto sector to consumer electronics products, where strong demand for laptops, next generation gaming consoles, and other consumer electronics had already tightened inventory.
Many analysts say a contributing factor to the chip shortage was the escalation of US-China tech tensions, when former president Donald Trump restricted Chinese access to advanced US-origin tech like semiconductors.
In anticipation of being put on a US trade blacklist, Huawei Technologies began stockpiling chips from 2019, which contributed to capacity constraints at Huawei’s main foundry supplier TSMC. The tight supply encouraged other chip buyers to double book to ensure continuation of supply, further exacerbating the shortage.
While the double booking problem is easing, with TSMC saying it can tell real orders from those by stockpilers, the capacity shortfall will take longer, and cost a lot more, to fix. TSMC is investing US$2.87 billion to expand mature capacity at its fab in Nanjing, China, which will help the auto industry, but volume production on the new lines won’t begin until the second half of 2022.
Intel, the biggest US chip maker, has earmarked US$3.5 billion to expand capacity at its fabs in the US. The company also joined a new coalition of US chip makers and users to help advance semiconductor manufacturing and research in the US.
The big question on everyone’s lips is: how long will it last? Most analysts and industry executives say it will be well into 2022 before the supply-demand balance is restored.
Meanwhile, Chinese carmakers and chip suppliers are huddling to come up with their own solutions.
Craig Addison
Copy Editor, Technology