The Semiconductor Alliance and the Death of Globalization

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On December 6, stimulated by the US Chip Act, TSMC held a relocation ceremony for its new plant in Phoenix, Arizona. I thought it was a new step for TSMC to enter the global stronghold, but the speech delivered by TSMC founder Zhang Zhongmou at the live event was exactly the opposite. He said that “globalization and free trade are almost dead, and it is unlikely to come back.”

This year’s chip alliance is also in full swing. Is it “globalization” or “the global technology supply chain is divided into two camps”?


Semiconductor Alliance: not “connected”

The Chiplet Standard Alliance is a chip industry alliance jointly established by ten industry giants such as Intel, AMD, ARM, Qualcomm, TSMC, Samsung, ASE, Google Cloud, Meta (Facebook), and Microsoft.

The establishment of Chiplet Alliance standards is mainly controlled by manufacturers in the front-end process of chip manufacturing, and wafer manufacturers will have more say in the field of advanced packaging.

First of all, this alliance came for the chiplet standard, but there is no Chinese chip manufacturer among the founding members, because before they formed the team, China also united with domestic chip manufacturers to draft the chiplet standard, and even entered the stage of soliciting opinions.

Secondly, its members are also “other strange”. Intel, TSMC and Samsung are in a competitive relationship. For decades, the three chip giants have been competing with each other. Their chip technologies are all kept secret and they rarely cooperate. But now However, they abandoned their respective technical barriers for the Chiplet Alliance and chose to cooperate.

Jan Vardaman, president of TechSearch, a research institution, pointed out that chiplets not only give IC designers more flexibility to realize the chips they want to design, but also make 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.

Because chiplets can bring higher flexibility and better cost structure, many components using chiplet architecture have appeared on the market in recent years. However, the Chiplet products currently on the market are the results of the self-development of various major manufacturers. Therefore, there are currently a variety of incompatible Chiplet interconnection technologies in the semiconductor industry, resulting in a fragmented Chiplet ecosystem.

In fact, in order to realize Chiplet-based chip design, many leading manufacturers have invested considerable resources in developing the necessary underlying technologies. Taking the interconnection of Chiplets as an example, AMD has developed its own exclusive technology called Infinity Fabric, and TSMC has also developed its own LIPINCON interface technology. Although these major manufacturers are also supporters and initiators of the UCIe standard, will these major manufacturers give up their hard-earned and unique technologies and turn to open standards in an all-round way? You may still have to take a relatively reserved attitude towards this.


TSMC and Arm jointly demonstrated a chiplet-based processor SoC connected through the LIPINCON interface

In addition to the unique technology independently developed by major manufacturers, the semiconductor industry has long seen that the standardization of Chiplet interconnection will be the key to promoting heterogeneous integration. Therefore, before the advent of UCIe, there was already an Open Domain-Specific Architecture. Open standards such as (OSDA) and Bunch of Wires (BoW) exist, but unlike UCIe, these open standards are unanimously supported by almost all major manufacturers.

Therefore, the UCIe standard aimed at breaking barriers is an important development milestone for the Chiplet ecosystem, but it will not be the answer to all problems.

This technology alliance may not really be “connected”.


The Death of Globalization: Not Dead

Blocking Russia: Quicksand between our fingers

In late February, just days after the conflict between Russia and Ukraine, 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 made using U.S. equipment, software or blueprints.

In addition to the United States, South Korea, Taiwan, which dominates the high-end chip field, and Japan, which is powerful in chip manufacturing materials and tools, also prohibit the export to Russia of products included in the US export control list. Their move cut off Russia’s access to many high-end chips as well as the materials and components needed to re-produce them locally.

Tom Rafferty, regional director for Asia at the Economist Intelligence Unit, a business analysis firm, said the impact of coordinated sanctions on Russia would be huge. “This draconian export ban will target semiconductors, especially high-end semiconductors, of which South Korea and Taiwan have a near-monopoly in production. So there will be no supply anywhere that Russia can rely on,” he said.

While the sanctions appear to limit Russia’s access to chip supplies, their actual impact cannot be fully determined. Russia’s industry, trade and economic development ministries have yet to comment. At present, Russia still relies heavily on foreign technology to design chips, and its own chip production capacity is limited.

However, in December, Reuters did a special report on the flow of semiconductor supply chains to Russia. Under globalization, it seems that such a strong ban has not been “driven to a dead end.”

Reuters reports indicated that Azu International, co-founded by Turkish businessman Gokturk Agvaz, stepped in to help fill the supply gap. Over the next seven months, the company exported at least $20 million worth of components to Russia, including chips made by U.S. manufacturers, according to Russian customs records.

Azu International’s fast-growing business has not all been plain sailing. Agvaz manages a wholesaler of IT products called Smart Impex GmbH in Germany. Before the conflict, Russian customs records showed the German company shipped U.S. and other national products to customers in Moscow who had recently imported goods from Azu International.

Agvaz, who arrived at his office near Cologne in October, told Reuters that Smart Impex stopped exports to Russia to comply with EU trade restrictions, but sold to Turkey, a non-EU country that does not enforce most of the West’s restrictions on Moscow. sanctions. “We can’t export to Russia, we can’t sell to Russia, that’s why we only sell to Turkey,” he said. Asked about Azu International’s sales to Russia, he replied: “It’s our trade secret.”

Reached out shortly before launch, Agvaz said Smart Impex “complied with all export restrictions and manufacturer bans” and “did not circumvent Western sanctions against Russia.” He said he could not answer questions about the international. He sold his 50 percent stake in the Istanbul company to his co-founder Huma Gulum Ulucan on Nov. 30, Turkish corporate records show.

Azu International is an example of how supply channels from Russia have remained open despite Western export restrictions and a ban on manufacturers. At least $2.6 billion worth of computers and other electronic components flowed into Russia in the seven months ended Oct. 31, Russian customs records show. At least $777 million of these products are manufactured by Western companies: Intel, AMD, Texas Instruments and Analog Devices in the US, and Infineon in Germany.

Among them, a spokesman for the European Commission said, “The European Union attaches great importance to circumvention behavior, because this practice undermines the effectiveness of EU sanctions.” measures remain consistent. However, it seems that it is difficult to “catch up with a dead end” with such a large-scale ban.

Many countries and regions are rethinking and understanding the impact of semiconductors on geopolitics, technological sovereignty, and national security, and have introduced a large number of policies to promote the development of the semiconductor industry. The semiconductor industry has become a key area for countries to strengthen their layout and game. However, judging from the sanctions against Russia, “isolation” is difficult, and “reverse globalization” is a phenomenon but it is difficult to become a result.


How to survive?

The first is to attach importance to the cultivation of local supply chain ecology. Geopolitics, the game of great powers, the new crown epidemic, and digital transformation have all become the causes of the rise of protectionism, but it is not feasible to completely pursue the localization of the semiconductor supply chain. Globalization is optimizing resource allocation, improving international division of labor, and promoting economic structure optimization. The value of aspects is more obvious, so the trend of globalization is irreversible.

Perhaps under the new development pattern of the semiconductor industry, companies will reduce the length of the semiconductor supply chain and choose to give more opportunities to local suppliers, thereby promoting the construction of the country’s semiconductor industry chain, which has become an important current trend.

However, the development of local industrial chains does not mean that countries can “make cars behind closed doors”. Since suppliers and customers come from all over the world, it is very important to keep the market open. Only an open market can develop the semiconductor industry. All countries and regions need to jointly maintain the globalization of the global semiconductor industry, resolve conflicts and problems in global cooperation in a timely manner, and avoid industrial division.

Governments of various countries should also reduce restrictions on the export of chip technology and focus on technology research to promote innovation in the entire semiconductor industry. The semiconductor industry should also strengthen collaboration, analyze the bottlenecks in the development of the semiconductor industry, jointly carry out research on semiconductor technology and industrial development, promote global knowledge openness, and enhance innovation exchanges and cooperation.

In the face of many current challenges, how to improve the anti-risk capabilities of the supply chain while balancing the needs of national security, adhering to global resource allocation, and emphasizing open market access is still the key for the semiconductor industry to move forward amid challenges.

The second is to develop an entire industrial chain, not a “top student”, everyone is really good. Recently, the example of Huawei and OPPO announcing the signing of a global patent cross-licensing agreement is a good illustration of this point. The agreement covers essential patents for cellular communication standards, including 5G standards. Ren Zhengfei previously stated that “we must establish scientific and reasonable intellectual property values, establish the company’s image as an innovator, and at the same time benefit the company’s sustainable and quality development.” Sustainability here also refers to the development of domestic companies such as OPPO, whole forward. The semiconductor industry chain must be the same.

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