The latest upheaval is the United States' ban on chip exports to China, which is prompting companies to consider shifting some of their chipmaking capabilities to neighboring Vietnam and India.
Nonetheless, experts believe that the Biden administration's semiconductor export restrictions on China will have little impact on the global battle for chipmaking supremacy.
According to Walter Kuijpers, a Singapore-based partner at KPMG, the number of recent inquiries from clients and prospects about expanding chipmaking capabilities across Southeast Asia has increased by 30% to 40% since the pandemic.
“Corporates are seeing merits in segregating supply chains rather than having a single point of reliance … Recent geopolitical developments are expected to accelerate these strategies that are already in motion,” said Kuijpers.
In October, the U.S. began requiring companies to obtain licenses to export advanced semiconductors or related manufacturing equipment to China. Those businesses also need Washington’s approval if they use American equipment to manufacture specific high-end chips for sale to China.
Semiconductor firms attempted to devise workarounds.
Taiwanese chipmaker TSMC, as well as South Korean rivals Samsung and SK Hynix, are said to have obtained one-year waivers to continue sending American chipmaking equipment to their Chinese facilities.
ASML, a Dutch semiconductor toolmaker, has stated that its employees in the United States are not permitted to provide certain services to advanced semiconductor fabrication plants, or fabs, in China.
The tariffs are the most recent in a string of changes for the $600 billion global semiconductor industry.
Chipmakers that were once drawn to China's competitiveness in chip manufacturing have had to deal with rising labor costs in China, supply chain disruptions due to Covid-19 restrictions, and rising geopolitical risk in recent years.
These chipmakers with a focus on China are now finding new impetus to replicate those production lines elsewhere. The highest cost for these wafer fabs is equipment depreciation.
As a result, they would prefer to relocate somewhere nearby in order to maximize production and yields, according to Jan Nicholas, an executive director focusing on the semiconductor sector at Deloitte.
According to him, Southeast Asia has emerged as a natural choice for factories looking to relocate outside of China.
“When you’re making investment decisions that are that big, that have that long of a useful life for a factory, you tend to stay away from risky situations … the more uncertainty there is, the more that these companies will flee towards a greater certainty,” said Nicholas.
Because of the region's perceived neutrality amid ongoing trade tensions between the United States and China, Southeast Asia may be seen as more appealing than chipmaking powerhouses such as South Korea and Taiwan.
“South Korea and Taiwan can’t camouflage themselves, but countries like Vietnam, India, and Singapore are positioning themselves as a third way, a neutral bridge between two titans,” Sarah Kreps, director of Cornell University’s Tech Policy Lab, told CNBC.
Vietnam
For global semiconductor manufacturers, Vietnam has emerged as an alternative production base to China. The country has invested billions of dollars in research and education centers, attracting major chipmakers to set up shop there.
The biggest semiconductor chip maker of the world, Samsung, is said to be investing an additional $3.3 billion in the Southeast Asian country this year. By July 2023, the South Korean conglomerate plans to manufacture chip components.
“Companies that have had manufacturing facilities in China like Samsung can invest in manufacturing alternatives that bring many of the benefits of manufacturing facilities in China but without the political baggage,” said Kreps.
India
According to Kuijpers of KPMG, India is also arising as a manufacturing hub for these chipmakers, as it has an increasing stream of design talent in microprocessors, memory subsystems, and analog chip design.
He added that labor is plentiful and costs are low in India. However, the country's lack of manufacturing capabilities makes it less appealing.
“While India has tried to set up fabrication units in the past, the initiatives faced numerous obstacles, including the high capital expenditure investments for set-up cost,” he said.
China firmly in the lead
Despite Asia's growing appeal for chipmakers, experts note that China continues to outperform regional economies in terms of chipmaking competitiveness.
The country laid the groundwork for technological self-sufficiency in chipmaking in its "Made in China 2025" blueprint, which was released in 2015.
According to KPMG's Kuijpers, its domestic chip sector is also benefiting from rising demand for chips in applications such as 5G, autonomous driving, and artificial intelligence.
China is still a major player and major semiconductor producer today, particularly for lower-end chips. According to some estimates, China is the third largest semiconductor chip producer, accounting for about 16% of global semiconductor production capacity — ahead of the United States but trailing South Korea and Taiwan.
“China has spent a long time developing that skill set … it will take somebody else roughly the same amount of time to figure that out because the skill set doesn’t come immediately,” said Nicholas.
Not everyone agrees that US restrictions on Beijing will directly benefit Vietnam or India.
“It is doubtful if Vietnam and India can benefit from the U.S. export controls on China, as they do not have strengths in fabrication capacity,” said Yongwook Ryu, an East Asia international relations researcher at the National University of Singapore.
"A country or a firm that can produce quality chips at competitive prices — in other words, a nation or firm that can replace China or Chinese chip manufacturers — can emerge as a major winner in the future," he added.
(Source:www.flipboard.com)
Nonetheless, experts believe that the Biden administration's semiconductor export restrictions on China will have little impact on the global battle for chipmaking supremacy.
According to Walter Kuijpers, a Singapore-based partner at KPMG, the number of recent inquiries from clients and prospects about expanding chipmaking capabilities across Southeast Asia has increased by 30% to 40% since the pandemic.
“Corporates are seeing merits in segregating supply chains rather than having a single point of reliance … Recent geopolitical developments are expected to accelerate these strategies that are already in motion,” said Kuijpers.
In October, the U.S. began requiring companies to obtain licenses to export advanced semiconductors or related manufacturing equipment to China. Those businesses also need Washington’s approval if they use American equipment to manufacture specific high-end chips for sale to China.
Semiconductor firms attempted to devise workarounds.
Taiwanese chipmaker TSMC, as well as South Korean rivals Samsung and SK Hynix, are said to have obtained one-year waivers to continue sending American chipmaking equipment to their Chinese facilities.
ASML, a Dutch semiconductor toolmaker, has stated that its employees in the United States are not permitted to provide certain services to advanced semiconductor fabrication plants, or fabs, in China.
The tariffs are the most recent in a string of changes for the $600 billion global semiconductor industry.
Chipmakers that were once drawn to China's competitiveness in chip manufacturing have had to deal with rising labor costs in China, supply chain disruptions due to Covid-19 restrictions, and rising geopolitical risk in recent years.
These chipmakers with a focus on China are now finding new impetus to replicate those production lines elsewhere. The highest cost for these wafer fabs is equipment depreciation.
As a result, they would prefer to relocate somewhere nearby in order to maximize production and yields, according to Jan Nicholas, an executive director focusing on the semiconductor sector at Deloitte.
According to him, Southeast Asia has emerged as a natural choice for factories looking to relocate outside of China.
“When you’re making investment decisions that are that big, that have that long of a useful life for a factory, you tend to stay away from risky situations … the more uncertainty there is, the more that these companies will flee towards a greater certainty,” said Nicholas.
Because of the region's perceived neutrality amid ongoing trade tensions between the United States and China, Southeast Asia may be seen as more appealing than chipmaking powerhouses such as South Korea and Taiwan.
“South Korea and Taiwan can’t camouflage themselves, but countries like Vietnam, India, and Singapore are positioning themselves as a third way, a neutral bridge between two titans,” Sarah Kreps, director of Cornell University’s Tech Policy Lab, told CNBC.
Vietnam
For global semiconductor manufacturers, Vietnam has emerged as an alternative production base to China. The country has invested billions of dollars in research and education centers, attracting major chipmakers to set up shop there.
The biggest semiconductor chip maker of the world, Samsung, is said to be investing an additional $3.3 billion in the Southeast Asian country this year. By July 2023, the South Korean conglomerate plans to manufacture chip components.
“Companies that have had manufacturing facilities in China like Samsung can invest in manufacturing alternatives that bring many of the benefits of manufacturing facilities in China but without the political baggage,” said Kreps.
India
According to Kuijpers of KPMG, India is also arising as a manufacturing hub for these chipmakers, as it has an increasing stream of design talent in microprocessors, memory subsystems, and analog chip design.
He added that labor is plentiful and costs are low in India. However, the country's lack of manufacturing capabilities makes it less appealing.
“While India has tried to set up fabrication units in the past, the initiatives faced numerous obstacles, including the high capital expenditure investments for set-up cost,” he said.
China firmly in the lead
Despite Asia's growing appeal for chipmakers, experts note that China continues to outperform regional economies in terms of chipmaking competitiveness.
The country laid the groundwork for technological self-sufficiency in chipmaking in its "Made in China 2025" blueprint, which was released in 2015.
According to KPMG's Kuijpers, its domestic chip sector is also benefiting from rising demand for chips in applications such as 5G, autonomous driving, and artificial intelligence.
China is still a major player and major semiconductor producer today, particularly for lower-end chips. According to some estimates, China is the third largest semiconductor chip producer, accounting for about 16% of global semiconductor production capacity — ahead of the United States but trailing South Korea and Taiwan.
“China has spent a long time developing that skill set … it will take somebody else roughly the same amount of time to figure that out because the skill set doesn’t come immediately,” said Nicholas.
Not everyone agrees that US restrictions on Beijing will directly benefit Vietnam or India.
“It is doubtful if Vietnam and India can benefit from the U.S. export controls on China, as they do not have strengths in fabrication capacity,” said Yongwook Ryu, an East Asia international relations researcher at the National University of Singapore.
"A country or a firm that can produce quality chips at competitive prices — in other words, a nation or firm that can replace China or Chinese chip manufacturers — can emerge as a major winner in the future," he added.
(Source:www.flipboard.com)