On December 6th, stimulated by the US Chip Act, TSMC held a relocation ceremony at its new factory in Phoenix, Arizona. Originally intended to be a new step for TSMC to enter the global headquarters, TSMC founder Zhang Zhongmou delivered a speech at the on-site event. He said, “Globalization and free trade are almost dead, and there is little likelihood of a comeback.”.
This year’s chip alliance is also in full swing. Is it “globalization” or “the global technology supply chain divided into two camps”?
01
Semiconductor Alliance: Not “Connected”
The Chiplet Standards Alliance is composed of Intel, AMD, ARM, Qualcomm, TSMC, Samsung, Sunrise, Google Cloud, Meta (Facebook)
The establishment of the chiplet alliance standard is mainly controlled by the manufacturers in the previous process of chip manufacturing, and the wafer manufacturers will have more voice in the field of advanced packaging.
First of all, the alliance is for the chiplet standard, but there is no Chinese chip manufacturer among the founding members, because before they formed the team, China also joined forces with domestic chip manufacturers, drafting the chiplet standard, and even has entered the stage of soliciting opinions.
Secondly, its members also have “other quirks”. Intel, TSMC and Samsung are competing. For decades, the three chip giants have been competing with each other. Their chip technologies are confidential and rarely cooperate. But now, they have abandoned their technical barriers for the chiplet alliance and chose to cooperate.
Jan Vardaman, president of TechSearch, a research institute, pointed out that the chiplet not only allows IC designers to realize the chips they want to design more flexibly, but also makes the cost of chip manufacturing cheaper. Because different functional circuits can be produced with the most cost-effective process technology, it is not necessary to use the most advanced process.
Due to the higher flexibility and better cost structure that Chiplet can bring, many components in the market have adopted the Chiplet architecture in recent years. However, currently, the chiplet products on the market are the result of self research by major manufacturers. Therefore, there are many different chiplet interconnection technologies in the semiconductor industry, leading to fragmentation of the chiplet ecosystem.
In fact, in order to implement chip design based on chiplet, many leading manufacturers have invested a lot of resources to develop the necessary underlying technology. Taking the interconnection of Chiplet as an example, AMD has developed its own exclusive technology Infinity Fabirc, and TSMC also has its own LIPINCON interface technology. Although these large factories are also supporters and initiators of the UCIE standard, will these large factories abandon their hard accumulated unique technology and fully switch to open standards? We may still hold a conservative attitude towards this.
TSMC and ARM jointly demonstrated the processor SoC connected with LIPINCON interface and adopting Chiplet architecture
In addition to the unique technologies developed by large manufacturers themselves, in fact, the semiconductor industry has long seen that the standardization of chiplet interconnection will be the key to promoting heterogeneous integration forward. Therefore, before the advent of UCIE, there were open standards such as Open Domain － Specific Architecture (OSDA), Bunch of Wires (BoW), but these open standards, unlike UCIE, were almost unanimously supported by all large manufacturers.
Therefore, the UCIE standard, which aims at breaking barriers, is an important development milestone of the Chiplet ecosystem, but it will not be the answer to all questions.https://www.slw-ele.com/
This time, the technology alliance may not really be “connected”.
02
Death of globalization: not dead
Blocking Russia: Finger gap quicksand
At the end of February this year, just days after the Russian-Uzbekistan conflict, the United States banned the sale of high-tech products to Russia and its ally Belarus, including semiconductors and telecommunications systems used in the defense, aerospace and maritime industries. The ban also includes certain foreign products produced using American equipment, software or design drawings.
In addition to the United States, South Korea, Taiwan, China, which dominates the high-end chip field, and Japan, which is powerful in chip manufacturing materials and tools, are also prohibited from exporting to Russia products listed in the export control list by the United States. Their move cut off the way for Russia to obtain many high-end chips and re-produce the materials and components needed for these products locally.
Tom Rafferty, Asia regional director of the Economist think-tank, a business analyst, said that the impact of coordinated sanctions would be huge for Russia. “This severe export ban will target semiconductors, especially high-end semiconductors, which are almost monopolized by South Korea and Taiwan. Therefore, there will be no supply that Russia can rely on anywhere,” he said.
Although the sanctions appear to limit Russia’s access to chip supplies, their actual impact is not fully determined. The Russian Ministry of Industry and Trade and the Ministry of Economic Development have not yet commented. Currently, Russian chip design still relies heavily on foreign technology and chip production capacity is limited.
However, in December, Reuters made a special report on the flow of semiconductor supply chains to Russia. In the context of globalization, such a strong blockade does not seem to be “desperate”.
Reuters reported that Azu International was co founded by Gokturk Agvaz, a Türkiye businessman, to help fill the supply gap. According to Russian customs records, in the next seven months, the company exported at least $20 million worth of components to Russia, including chips produced by American manufacturers.
The rapid growth of Azu International’s business is not smooth sailing. Agvaz is managing an IT product wholesaler named Smart Impex GmbH in Germany. Before the conflict, Russian customs records showed that the German company transported products from the United States and other countries to Moscow customers who had recently imported goods from Azu International.
Agvaz arrived at his office near Cologne in October. He told Reuters that Smart Impex stopped exporting to Russia to comply with EU trade restrictions, but sold its products to T ü rkiye, a non EU country that has not implemented most Western sanctions against Moscow. “We cannot export to Russia, we cannot sell to Russia, which is why we only sell to T ü rkiye,” he said. When asked about Azumi’s sales to Russia, he replied, “This is our business secret.”
After contacting again shortly before the release, Agvaz said that Smart Impex “abides by all export restrictions and manufacturer prohibitions” and “has not evaded the sanctions imposed by the West on Russia.” He said that he could not answer the international questions. Türkiye company records show that he sold 50% of his equity in Istanbul company to his co-founder Huma Gulum Ulucan on November 30.
Azu International is an example of how Russia’s supply channels remain open despite western export restrictions and manufacturers’ bans. Russian customs records show that at least US $2.6 billion of computers and other electronic components have flowed into Russia in the seven months ended October 31. At least $777 million of these products are manufactured by Western companies: Intel, AMD, Texas Instruments and Analog Equipment in the United States, and Infineon in Germany.
“The EU attaches great importance to circumvention because it can undermine the effectiveness of EU sanctions,” said a spokesman for the European Commission. The spokesman pointed out that this group of 27 member countries has been encouraging other countries to maintain consistency with the measures taken by the EU against Russia. However, such a strong blockade seems difficult to “catch up with the dead end.”.
Many countries and regions are rethinking and recognizing the impact of semiconductors on geopolitical, technological sovereignty, and national security, and have introduced a large number of policies to promote the development of the semiconductor industry. However, from the perspective of sanctions against Russia, “isolation” is difficult, and “anti globalization” is a phenomenon, but it is difficult to become a result.
03
How to survive?
The first is to attach importance to the cultivation of local supply chain ecology. Geopolitics, big country games, the COVID-19, digital transformation, etc. have all become the causes of the rise of protectionism, but it is impossible to completely pursue the localization of semiconductor supply chain. Globalization has more obvious value in optimizing resource allocation, improving international division of labor, and promoting the optimization of economic structure. Therefore, the trend of globalization is irreversible.
Perhaps in the new pattern of semiconductor industry development, enterprises will reduce the length of semiconductor supply chain, choose to give more opportunities to local suppliers, thus promoting the construction of domestic semiconductor industry chain, which has become an important trend at present.
However, the development of local industrial chain does not mean that countries can “build cars behind closed doors”. Since suppliers and customers come from all over the world, it is essential to keep the market open. Only an open market can develop the semiconductor industry. All countries and regions need to jointly safeguard the globalization of the global semiconductor industry, solve the contradictions and problems in global cooperation in a timely manner, and avoid industrial division.
Governments should also reduce restrictions on the export of chip technology and focus on technological research to promote the innovation of the entire semiconductor industry. The semiconductor industry should also strengthen cooperation, analyze the bottlenecks in the development of the semiconductor industry, jointly carry out research on semiconductor technology and industry development, promote global knowledge opening, and enhance innovation exchange and cooperation.
In the face of many challenges, how to improve the anti-risk capability of the supply chain, balance the needs of national security, adhere to the global resource allocation, and emphasize open market access are still the key for the semiconductor industry to move forward in the challenges.
The second is to develop a whole industrial chain, not a “top student”. It is really good to be good to everyone. Recently, Huawei and OPPO announced the signing of a global patent cross-licensing agreement, which is a good example to illustrate this point. The protocol covers basic patents of cellular communication standards including 5G standard. Ren Zhengfei previously said that “we should establish scientific and reasonable intellectual property values, establish the company’s image as an innovator, and at the same time be conducive to the company’s sustainable and high-quality development.” Sustainability here also refers to helping domestic companies, such as OPPO, develop and move forward as a whole. The semiconductor industry chain must be the same.
