Shopping malls are like battlefields, which is vividly reflected in the current semiconductor industry. On the battlefield, several important factors that determine the outcome include combat effectiveness, economic strength, and public opinion and momentum. In the semi-conductor arena without gunpowder, these factors also play an important role.
Since the 1990s, when South Korea’s semiconductor industry rose and overtook Japan to become a major global memory production place, the United States, Europe and East Asia have been in a tripartite confrontation for nearly 30 years. Before 2019, East Asia was mainly composed of South Korea, Japan and Taiwan, China of China. In those 20 years, the sense of existence of Chinese Mainland was relatively low.
However, 2019 has become a turning point. There are two main reasons why it is 2019. First, the United States launched an industrial attack on Huawei that year, which continues to this day, and the scale and scope of the attack are expanding; Second, the COVID-19 broke out in 2020, which has had a huge impact on all industries in the world, including semiconductor.
After 2019, the semiconductor industry in Chinese Mainland has become more and more global, which is due to two reasons: first, since the country issued relevant industrial policies and “big funds” in 2014, the development of the local semiconductor industry has significantly accelerated; The second is the “assistance” of the United States. Huawei is prohibited from importing high-end chips from the United States, relevant enterprises are prohibited from purchasing high-end semiconductor equipment from the United States, and relevant enterprises are prohibited from purchasing EDA software tools from American enterprises. To date, the provision that “internationally renowned semiconductor enterprises receiving subsidies from the United States government are not allowed to further invest in the semiconductor industry in Chinese Mainland” has been written into its latest “Chip Act”. Under such a strong offensive, the semiconductor industry in Chinese Mainland has been put on the cusp of the storm.
Due to the policy and financial support of the central government, the position and role of Chinese Mainland in East Asia has changed significantly. It is no longer a processing point in the middle and low end of the semiconductor industry chain as it was in the early years, but has rapidly developed into the focus area where the other two branches (the United States and Europe) compete and all parties’ interests are tangled and torn. The reason why this is said is that advanced and large-scale semiconductor manufacturing represented by TSMC and Samsung, local enterprises in Chinese Mainland are accelerating their progress towards advanced and large-scale semiconductor manufacturing, and the overlapping interests of these two aspects are increasing, thus forming a coordinated development trend of “you have me, you have me”. This situation makes the United States fidget and start to use administrative, financial and other means, Try to break the “group development” situation of East Asia.
Since the end of the 1980s when TSMC initiated the wafer foundry business model, the focus of the global semiconductor manufacturing industry has gradually shifted to East Asia. That is to say, during this period, the manufacturing industry in the United States, including semiconductor manufacturing, has largely shifted overseas, mainly to East Asia. As a result, the proportion of East Asia in the global semiconductor manufacturing industry has increased to nearly 70%. Moreover, the development trend of Chinese Mainland worries the United States. Therefore, in the view of the United States, it is imperative to divide the semiconductor power in East Asia.
In fact, not only the United States, but also the European semiconductor industry has been rethinking in the past two years. Its advanced semiconductor manufacturing capacity has been left behind by East Asia. After China and the United States, various chip bills in the region are also in the process of deliberation. In addition, the European chip giants represented by Infineon and Italian French semiconductors have to embrace the thigh of the East Asian representative TSMC in the advanced manufacturing process, In particular, the third generation of semiconductors (silicon carbide and gallium nitride) seek in-depth cooperation with TSMC and invite the latter to build factories in Europe. The United States has done the same thing, but this is obviously different from the nature of “holding the thigh” in Europe, because in the face of the United States, the East Asian powers have to yield more.
The United States wants to implement “besieged”
The latest move to disrupt the East Asian power is the “Chip 4” of the United States, which aims to establish a four party semiconductor alliance led by the United States, with Japan, South Korea and Taiwan, China as the main members. It seems that it wants to sing a song of distress to semiconductors in Chinese Mainland.
In addition to “Chip 4”, the US government launched a fund plan to support the development of local semiconductor industry, namely the “Chip Bill”, which was signed and passed by the country’s President Biden on August 9, local time. Since then, the total amount of US $280 billion and the special government subsidy of US $52 billion for semiconductor manufacturing have been officially launched, and the US has entered a new era of “planned economy”.
It is inevitable for the United States to do so, which is caused by both internal and external factors.
Internally, in the past few decades, the self-sufficiency rate of semiconductor manufacturing in the United States has continued to decline. According to the statistics of the American Semiconductor Industry Association (SIA), the global share of the country’s semiconductor manufacturing capacity has dropped from 37% in 1990 to 12% in 2021. SIA believes that this decline is mainly due to the large number of manufacturing incentives provided by the government of its global competitors, which puts the United States at a competitive disadvantage in attracting new wafer plants. In addition, the federal government’s investment in semiconductor R&D accounts for the same proportion of GDP, while other governments have invested a lot of money in R&D plans to strengthen their semiconductor competitiveness, while the existing R&D tax incentives in the United States lag behind other countries.
Externally, the level of semiconductor manufacturing in East Asia and its global share have been increasing. If not stopped, its growth rate will be accelerated and the level will be improved, which is unacceptable to the United States, especially in semiconductor technology and capital-intensive industries. Looking back more than 30 years ago, after 20 years of rapid development of the Japanese semiconductor industry, its design and manufacturing level has been able to keep pace with that of the United States. In the 1980s, among the top 10 integrated circuit manufacturers in the world, 6 were Japanese enterprises, which were more popular than the semiconductor giants Intel, Texas Instruments, Fairchild Semiconductor, etc. in the United States at that time. Today, 30 years later, it is difficult for Japanese integrated circuit enterprises to enter the top 10 in the global manufacturers list.
With the rise of the semiconductor industry in Chinese Mainland, especially the launch of the government industry “big fund”, it has given a shot in the arm to the already strong semiconductor manufacturing industry in East Asia, which makes American semiconductor feel uneasy. In order not to let East Asian semiconductors form a group, on the one hand, the United States restricts the output of high-end EDA software, semiconductor equipment, and advanced manufacturing processes required for the design and manufacturing of integrated circuits in Chinese Mainland; on the other hand, it actively attracts semiconductor manufacturers in East Asia, represented by TSMC and Samsung, to set up factories in the United States, and provides government subsidies. Driven by both hardware and software, these top fabs are increasingly inclined to go to the United States to build factories.
Japan’s semiconductor equipment and materials are still the world’s top in terms of IC manufacturing, although it has lost its former style. The United States regards it as a good leverage tool to control the development of semiconductor manufacturing in East Asia, because both Chinese Mainland and South Korea need Japan’s advanced semiconductor equipment and materials. In the past three years, Chinese Mainland and South Korea have suffered a lot in this regard.
These measures launched by the United States in response to the development status of its semiconductor industry will certainly have a great negative impact on the objective development status of East Asia’s semiconductor industry, and at the same time, it can strengthen the industry influence of its local semiconductor manufacturing industry. However, these measures are also a double-edged sword, because the “big fund” policy of Chinese Mainland is to enable market-oriented operation, that is, to promote the process of market-oriented development, which is to respond to the trend of the entire industry and market. On the contrary, the United States “learns” from the “big fund” policy of Chinese Mainland, but its specific measures and effects are anti market-oriented, which makes the promotion process of the entire policy very tangled and twisted, This is reflected in the constant conflicts between the interests of relevant enterprises and these policies. In particular, semiconductor equipment and EDA software manufacturers’ restrictions on their products’ export to the Chinese Mainland market have greatly damaged the revenue interests of these enterprises.
In order to alleviate this contradiction, the U.S. government has to increase industrial capital subsidies, but most of these benefits have been taken away by enterprises building new wafer factories, while equipment and software tool manufacturers can only watch others eat meat and drink their own soup. Moreover, even if new policies are introduced in the future to give more subsidies to these equipment and software enterprises, the relevant market is too large, especially the market with rapid development and huge potential in Chinese Mainland, Such revenue and profit expectations have great attraction for these manufacturers of semiconductor equipment and EDA tools in the United States. It is impossible to meet the demand solely by government subsidies.
Can we beat each other?
The semiconductor strategy of the United States is becoming more and more clear, and its intention towards Chinese Mainland is no longer hidden. Under the relatively strong external pressure, the development of Chinese Mainland’s semiconductor industry will certainly encounter unprecedented difficulties. At the same time, in addition to accelerating the improvement of its own semiconductor manufacturing, equipment, materials, EDA software and other technologies and product levels, it also needs to find ways to eliminate external adverse factors, Strive for a better industrial development environment.
The core task is to strengthen the interest relationship with major international fabs, semiconductor equipment, materials and other manufacturers. In addition to adhering to an open attitude and business environment, we also need to break some traditional boundaries and provide higher level practical policies for foreign semiconductor enterprises. Tesla’s establishment of a factory in Shanghai is a similar typical case. Tesla can build an automobile factory in Chinese Mainland solely by itself, breaking the policy shackles that foreign enterprises in mainland China must establish joint ventures with local enterprises for more than 30 years. This has achieved immediate results. In the past two years, Tesla has developed rapidly, several times faster than its development in the United States, and has greatly driven the development of related enterprises in the local automobile industry chain in Chinese Mainland, This situation makes Tesla “crowded out” in the United States, which in turn further promotes its capacity expansion in Chinese Mainland, thus further driving the development of the local industrial chain.
Of course, compared with semiconductors, cars have a much lower technological content, which cannot be compared on a horizontal line. However, similar strategies can be used for reference. They rely on the huge and potential market in Chinese Mainland. Such attraction cannot be rejected by any highly market-oriented and capitalized high-tech enterprise.
Just seeing this situation, the United States had to restrict the development of its local semiconductor enterprises in Chinese Mainland through administrative coercive measures and government subsidies. Although this can achieve results in the short term, in the long term, the longer the time, the more prominent the contradiction between its policies and the maximization of corporate interests, and the more serious its internal entanglement. In this case, Chinese Mainland is not afraid to delay, while the United States hopes to achieve its goal in a relatively short time.
At the same time, “Chip 4” is not an unbreakable fortress, especially in South Korea and Taiwan, China. Recently, South Korea has kept a very cautious attitude towards many American initiatives, that is, it formally joined the “Chip 4” initiative without damaging its relationship with Chinese Mainland. The Korean government said that the prerequisite for joining is that it cannot do restrictive or destructive acts against the semiconductor industry in Chinese Mainland. The reason why South Korea is so cautious is mainly because Samsung and SK Hynix, the pillar enterprises of the semiconductor industry in South Korea, have huge investment and revenue in Chinese Mainland, and no one is willing to throw away these to marry a third country. Although the United States has also given them corresponding subsidies to build factories in the United States, such magnitude has limited appeal compared with the investment and revenue in Chinese Mainland. Moreover, it is not clear whether the U.S. subsidies will be “water month” in the future.
In a word, the big semiconductor manufacturers represented by Samsung, SK Hynix and TSMC need both the Chinese Mainland and the U.S. market, so they will try to avoid choosing between the United States and Chinese Mainland.
In fact, if the United States had not launched the “Chip 4” forcibly, South Korea, Japan and Taiwan, China would not have the idea and source power to restrict semiconductor cooperation and trade with Chinese Mainland. Moreover, these coercive actions of the United States may also aggravate the contradictions between the two countries that have existed but have been in a hidden state.
For example, South Korea and Japan have feuds, and their relationship has always been bad. South Korea’s relationship with Taiwan, China, China is also very common. The semiconductor industry has more competition than cooperation.
South Korea is uncertain about joining “Chip 4”. The United States may add some chips, such as more subsidies and preferential policies for Samsung and SK Hynix to build factories in the United States. At the same time, by wooing Samsung, the United States can also check and balance the powerful TSMC, because the company is located in Taiwan, China, China, rather than the United States. The United States has attracted South Korea to attack Japan’s semiconductor industry since the 1980s. Is it possible to attract South Korea to attack Taiwan, China in the future?
South Korea is the core area of global memory production, and only American Meguiar and Japanese Armor can compete with Samsung and SK Hynix. Recently, Armour Xia has cooperated closely with manufacturers in Taiwan, China, China, and Meguiar is also cooperating with TSMC to balance Samsung and SK Hynix in South Korea.
In short, the roles and trends of South Korea and Samsung are worth paying attention to. Driven by American policies, the company may be the key force to break through the monopoly situation of TSMC, which is also the development goal that Samsung’s wafer foundry business has been pursuing since 2017.
In addition, TSMC does not want to be a pawn of others. Although it has built a 5nm process wafer factory in the United States, the plant construction funds in Taiwan, China, China, are the largest part of the company’s annual capital expenditure. Obviously, this is beneficial for China in the future.
These historical and interest disputes between the “Chip 4” members and their key enterprises are exactly what Chinese Mainland can take advantage of. As long as we keep an open attitude, constantly strengthen our own strength, and play steadily, then time is our best friend!
epilogue
In ancient China, there were Wei, Shu and Wu. Today, the world’s semiconductor industry has three strong regions, namely, Europe, East Asia and the United States. During the Three Kingdoms Period, the State of Wei was the strongest, and its founder was Cao Cao. However, Cao Cao came from a humble background and was not rich enough for three generations. The Great Wei built by Cao Cao was eventually taken over by Sima Yi’s family, and finally unified the Three Kingdoms and established the Western Jin Dynasty. Sima Yi is characterized by resourcefulness, and is a traditional famous family, has a profound family history, and can represent the interests of the vast majority of nobles at that time, so he can unify the world and return the three kingdoms to Jin. Of course, the twists and hardships are inevitable.
At present, East Asia is the strongest among the three major regions of semiconductor manufacturing in the world, while Chinese Mainland is the rising star of the semiconductor industry in this region, and has a deep foundation and historical accumulation. As long as we work steadily, remain open, and handle the interests of all parties, the future is very promising.