Chip Industry, Bird Startled by a Bow

Please proceed as soon as possible after signing.110 20236.7(60)2022 In South Korea, the longest weekly working hours are 52 hours. The System LSI department of Samsung Electronics faces challenges in completing projects on time, as employees are often forced to give up unfinished tasks in order to comply with regulations.The senior engineer of Samsung's mobile application (AP) development team said, "In recent years, despite the approaching project deadline, I have had to leave work and go home with unfinished work due to the 52-hour limit, which has happened many times. As a result, some key employees sometimes have to work overtime, so the company does not record their overtime hours." The AP team is responsible for chip development, competing with overseas giants such as Apple, Qualcomm, and MediaTek, but its workforce is 10 to 20 times smaller than its competitors, adding pressure to meet project deadlines on time. Senior researchers believe that this policy restricts Samsung from implementing its "super gap" strategy. The "super gap" strategy is a long-term goal aimed at gaining a significant competitive advantage among global competitors by continually achieving technological and efficiency breakthroughs. This strategy requires a significant amount of time and resources, but the current work time limit hinders this investment, preventing the company from fully leveraging its competitive potential. Samsung's internal employment regulations stipulate that the semiconductor development team follows a flexible work system for a month, requiring an average of 52 hours per week, rather than per week. Failure to comply immediately prompts intervention from the human resources department and mandatory suspension. Therefore, some employees have to resort to "informal" work to meet customer product delivery schedules and performance standards. Meanwhile, compared to Samsung's memory division, which is based on mass production, the system LSI and foundry businesses rely heavily on skilled engineers and an adequate workforce. Samsung's foundry team competes with Taiwan's TSMC and must consistently meet urgent project deadlines, providing new chips to smartphone manufacturers every six to twelve months. Additionally, Samsung's foundry division requires professionals to promptly respond to requests from US and European tech companies focused on advanced processes. However, the law also faced opposition, with the Samsung union opposing the measure, claiming that Samsung was trying to blame its "management failures" on labor laws, and some critics believe that SK Hynix, which also adheres to a 52-hour work week, remains competitive. For South Korea, it is a case of both success and failure, especially considering that SK Hynix is not involved in non-memory chip research and development. The burden of competing with overseas giants falls on Samsung's shoulders, and if internal competition continues, it may be challenging to keep up with the increasingly fierce semiconductor market competition, posing a dilemma for the South Korean government. Taiwan-China - Export restrictions on 2nm technology For Taiwan, its strength in wafer foundry is unparalleled globally, with TSMC being the crucial player. While Taiwan has previously provided numerous favorable policies to TSMC, the focus has now shifted to their overseas fab technology, with Taiwan recently reiterating certain red lines. Taiwan's Minister of Economic Affairs, Garfield Hou, stated that Taiwan's technology protection rules prevent TSMC from producing 2nm chips overseas, forcing the company to keep its most advanced technology in Taiwan. He said at a meeting of the Legislative Yuan's Economic Committee in Taipei, "Due to Taiwan's regulations to protect its technology, TSMC cannot produce 2nm chips overseas at present." He also stated, "Although TSMC plans to produce 2nm chips overseas in the future, its core technology will still remain in Taiwan." It is understood that Taiwan's laws limit chip manufacturers to producing chips overseas that are one generation behind the technology of domestic wafer fabs. TSMC announced in July that its next-generation A16 chip is planned to enter mass production in the second half of 2026, with 2nm chips set to begin mass production next year. According to TSMC's overseas manufacturing roadmap, the company plans to produce 2nm or more advanced chips in the US by the end of this decade. Their second fab in Arizona is scheduled to be operational by 2028, utilizing 3nm and 2nm process technologies. TSMC stated that its third fab in Arizona will produce chips with 2nm or more advanced process technologies, while its first fab in Arizona will begin expanding the production of 4nm chips next month. Meanwhile, the President of the Taiwan Semiconductor Industry Association (TSIA), Hou Yung-Ching, stated that historical evidence shows that the result of the US presidential election does not significantly impact cooperation relationships. He said at a forum in Hsinchu, "Bilateral relations have not changed due to political changes." He added, "Although there may be adjustments in cooperation details, we will evaluate them after everything is finalized." When asked how the Semiconductor Industry Association helped local semiconductor companies deal with the threat of a 10% tariff during the Trump administration, Hou Yung-Ching said that the association had not received any formal notice. However, he emphasized that Taiwan should invest more resources in advancing chip technology and expanding supply chain expertise to maintain its global leadership position. Hou Yung-Ching said, "We need to accelerate research and development to ensure our indispensable position in the global semiconductor supply chain." He also said, "We are working with the government to see if we can attract foreign partners to establish design and material centers in Taiwan." For Taiwan, while the trend of TSMC's overseas fab is unavoidable, retaining control of the most advanced processes is crucial. Considering the slow progress of TSMC's US fab, it does not need to worry about technology outflow for a considerable period. Europe - Warning from giants Compared to other regions, Europe has more concerns, with not only governments but also companies feeling anxious. CEOs of Europe's three major semiconductor companies stated at the 2024 Munich Electronics Show that they are cautious about protectionism and said, "No single country can dominate the semiconductor industry." CEOs from Germany's Infineon, France and Italy's STMicroelectronics, and the Netherlands' NXP made these remarks at Electronica 2024 held in Munich.During the exhibition, there was a collective voice calling for the European Union to independently produce semiconductors in addition to the United States and China. They stated: "In the past decade, uncertainty has increased, and the industry has been affected by continued nationalist industrial policies."Infineon CEO Johanna pointed out, "The supply chain of the semiconductor industry is very fragmented, and due to tariff policies, the situation will only get worse." STMicroelectronics CEO Jean-Marc Chery stated, "To produce semiconductors needed by China and the West, establishing supply chains in other locations is very expensive in terms of materials and engineering." He highlighted that the supply chain of the semiconductor industry is being blocked. NXP CEO Kurt Sievers congratulated the return of US President-elect Donald Trump, but also expressed disappointment, saying, "No country can dominate the semiconductor industry or become independent from other countries." The European Union plans to invest 43 billion euros (approximately 64 trillion Korean won) by 2030 to increase its market share to 20%. It is worth noting that the Dutch economic minister previously expressed in October that he hopes to establish a "voluntary alliance" to strengthen the EU's domestic computer chip industry and maintain competitiveness with the US and China. During the G7 Industrial Ministers meeting held in Rome, Dirk Beljaarts stated that despite the Netherlands being the headquarters of the leading chip equipment manufacturer ASML, the Netherlands hopes to "promote other EU countries to have multiple production, assembly, and packaging factories." He said, "Cooperation is very important to have stronger EU influence in the global competition with other major competitors, and the Netherlands is willing to take a leading role in this process." For Europe, keeping more chip manufacturing in-house is not an easy task. According to the EU's "European Chip Act," the EU Commission aims to account for 20% of the global microchip value chain by 2030, higher than the 9% around 2022. However, earlier this year, the Commission admitted that the EU cannot achieve this goal: a report in July stated that by 2030, the EU's share is expected to only increase to 11.7%. In fact, the most iconic new factories, Intel has already postponed its investment plans, and only TSMC's factory is steadily moving forward. This is not good news for the European semiconductor industry, and it's no wonder why the three giants have jointly expressed concerns about the future. India and Southeast Asia - Cooperation and Subsidies For India in South Asia and several Southeast Asian countries excluding Singapore, recent accelerated subsidy programs for semiconductors have also been implemented. Regarding India, the first phase of the Indian Semiconductor Mission (ISM), which provides a fund of 76,000 crore rupees, was successfully implemented in December 2021. Within less than 36 months, five semiconductor projects have been approved and have received incentives from the central and state governments. This includes four chip packaging plants and one chip manufacturing plant in various stages of construction, expected to be operational between 2025 and 2027. With the end of the first phase of the ISM, Indian experts are urging the initiation of the second phase of the project, focusing on establishing partnerships with global semiconductor leaders, expanding the ecosystem for materials such as chemicals and gases, and increasing efforts to cultivate skilled talent for the growing industry. Recently, Indian media reported that Nvidia has proposed to establish a joint chip development company in India. This partnership aims to leverage India's growing semiconductor design expertise and explore the expanding Indian market, with the global leading graphics processing unit (GPU) provider aiming to develop a chip specifically for the Indian market. Sources emphasized that the proposal was put forward by Nvidia CEO Huang Renxun during a meeting with Indian Prime Minister Narendra Modi earlier this year. Sources revealed, "The government is currently studying the cost, benefits, use cases, and other details of this joint chip development." It is understood that this jointly developed chip can be customized based on Indian use cases, such as the safety system Kavach for Indian Railways, allowing Indian startups, enterprises, and the government to use the chip to support various applications that may arise when the chip is introduced based on government AI tasks. From subsidies to cooperation, the emerging semiconductor market in India is gearing up to strengthen its capabilities. Similarly, Vietnam is also following suit, with Vietnam's Minister of Planning and Investment, Nguyen Chi Dung, stating last week that the government is "preparing for a new era" between 2026 and 2030. He told the media that the Vietnamese National Assembly is considering simplifying the investment process for chip manufacturing to attract foreign companies to invest. This simplification measure will transition Vietnam from pre-approval to post-approval for investing in some high-tech company projects. In addition, some industrial parks and environmental protection zones will no longer require prior approval for environmental protection and fire prevention measures. According to a report released earlier this year by BCG and the Semiconductor Industry Association, Vietnam is considered one of the countries expected to increase its Assembly, Testing, and Packaging (ATP) capacity. The report predicts that emerging markets like Southeast Asia will undergo a "massive ATP capacity expansion" in the packaging field. Vietnam's ATP capacity accounted for 1% of the global capacity in 2022/2023, but is expected to account for 9% of global ATP capacity by 2032. BCG describes Vietnam as a "relatively new player," but also notes that Vietnam has successfully attracted investments from companies like Intel and Amkor - reportedly, Amkor is investing $1.6 billion to build a 200,000 square meter advanced packaging facility. Malaysia and Vietnam's circumstances are similar, with both countries increasing efforts to attract investments from foreign companies. Prime Minister of Malaysia Anwar bin Ibrahim stated in a press conference earlier this year, "I believe that Malaysia is the most neutral and non-aligned location for semiconductor manufacturing, helping to establish a more secure and resilient global semiconductor supply chain." Last year, Penang alone attractedForeign direct investment reached $128 billion, more than the total of the previous seven years. The government is intensifying efforts to benefit from geopolitical realities. As part of the National Semiconductor Strategy (NSS), the country plans to establish ten local design and advanced chip manufacturing companies with annual revenues of at least $2.1 billion. It also plans to establish over 100 semiconductor-related companies with annual revenues of up to $2.1 billion.Earlier this year, Malaysia announced that it would invest about $107 billion in its semiconductor industry. One of the main goals of the National Semiconductor Strategy (NSS) is to increase Malaysia's share of high-tech manufacturing exports from 5% to 6% by 2030. This strategy emphasizes advanced packaging, chip design, and front-end manufacturing, while also aiming to train 60,000 skilled semiconductor professionals by 2030. For India and Southeast Asia, they have already shown their potential, but the semiconductor industry chains they attract have significant overlap, which will inevitably lead to fierce competition in the future. Chip competition intensifies again As Trump is about to take office, once firm alliances and cooperation are gradually becoming less reliable, and the process of globalization seems to have entered a new bottleneck. Countries are taking protectionist measures one after another to ensure their technological advantages and industrial security in the increasingly tense international competition. In this context, the intensification of the chip competition is not only a contest of technology and market, but also an important reflection of the reshaping of the global industrial competition pattern. To continue to ensure competitiveness is not only a challenge at the national level but also a challenge faced by many multinational companies. Who can be prepared for this new round of arms race? This article was reprinted from Semiconductor Industry Observation, edited by GMTEight: Chen Wenfang.