[News] Are Asian Chip Factories Uniquely Well-Positioned?

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In recent years, influenced by shifts in the international landscape, the issue of global semiconductor supply chain security has garnered increasing attention. Driven by policies like chip subsidies, various regions are strengthening their semiconductor industry chains, with Europe and the United States being prime examples. Both aim to attract large chip manufacturers to set up factories locally. However, will they succeed in altering the current global semiconductor production landscape dominated by Asia?

 

Even with Increased Capacity in Europe and the US, Will Asia Remain the Semiconductor Hub?

 

Christophe Fouquet, President and CEO of ASML, recently provided his perspective on this question.

 

In a media interview, Fouquet mentioned his attendance at TSMC’s groundbreaking ceremony in Dresden, Germany. He believes that Europe and the United States need to not only establish subsidized chip factories but also genuinely impact the industry’s structure. Addressing long-term cost and resilience issues is crucial for developing a true ecosystem.

 

Fouquet argues that for Europe and the US to succeed, they must improve the economic model of semiconductor manufacturing. Producing components at a significantly higher cost is not sustainable. Subsidies are a temporary solution to cultivate time and space; the real challenge lies in tackling more structural issues. Europe’s primary advantages in semiconductors lie in its skilled workforce and renewable energy resources.

 

Fouquet believes that increased chip production capacity in Western countries is unlikely to shift the balance of power in the semiconductor industry. Even with subsidized new semiconductor plants, he anticipates a slowdown in chip production capacity growth, with Asia remaining the dominant manufacturing leader for many years to come.

 

Industry insiders reveal that expanding wafer fabrication capacity often leads to significant cost challenges. The cost structure of a wafer fab includes land and facility construction, equipment procurement, technology R&D and intellectual property, operation and maintenance, etc. A modern wafer fab can cost hundreds of billions of dollars. Construction costs also vary across regions. In Europe and the US, the need to import technology, cultivate talent, and enhance the industrial chain could lead to higher wafer fab construction costs.

 

Comparatively, the Asian market benefits from a mature supply chain, a vast talent pool, and supportive policies, resulting in relatively lower wafer fab construction costs.

 

Asian Chip Factories are Flourishing

Driven by recovering market demand and favorable chip subsidy policies worldwide, the global semiconductor market value continues to grow in 2024.

 

TrendForce indicated in a September survey that driven by AI deployments and improved supply chain inventory, the foundry market value is projected to grow by 20% in 2025, surpassing the 16% growth in 2024.

 

Industry sources also reveal that Asia stands out in terms of regional semiconductor capacity layout. Major markets like mainland China, Taiwan, South Korea, and Japan boast leading monthly production capacities, followed by Europe and the United States.

 

Besides these established markets, new semiconductor manufacturing forces have emerged in Asia, represented by Singapore, Malaysia, and Vietnam.

 

Singapore, a semiconductor powerhouse in Southeast Asia, possesses a complete semiconductor industry chain encompassing design, manufacturing, packaging, testing, equipment, materials, and distribution.

Many semiconductor companies including Texas Instruments, STMicroelectronics, Infineon, Micron, GlobalFoundries, TSMC, UMC, VIS, and ASE, have established branches or expanded their factories in Singapore. Leading foundries like TSMC, GlobalFoundries, UMC, and VIS have set up 8-inch and 12-inch fabs there.

 

Malaysia plays a crucial role in the global semiconductor packaging and testing segment. DRAMeXchange estimates that approximately 50 semiconductor companies have established back-end packaging and testing plants in Malaysia, including Intel, Micron, Texas Instruments, NXP, ASE, Nexperia, Infineon, HT-Tech, Tongfu Microelectronics, Suzhou Good-Ark Electronics, Renesas, Onsemi, Amkor, and STMicroelectronics.

 

Vietnam has attracted foreign investments from companies such as Intel, ASE, Samsung Electronics, Amkor, Qualcomm, Onsemi, Renesas, TI, NXP, Marvell, Synaptics, Heno Microelectronics, and Amphenol etc..

 

Notably, the semiconductor industry is one of Vietnam’s nine national products and has been listed as a key development focus for the next 30 to 50 years. According to the plan, Vietnam aims to have at least 300 chip design companies, three semiconductor chip manufacturing plants, and 20 semiconductor packaging and testing plants by 2040-2050.

(Photo credit: Samsung)