Taiwan’s government and industry groups in the island nation near China are taking formal steps to localize semiconductor equipment production, an apparent side effect of President Trump’s trade actions against China.
“This is a very troubling event,” wrote US-based analyst Dan Hutchinson of VLSI Research on Wednesday. He called the move a “clear post-globalization defensive move to counter the current US administration’s action to shutdown China and China’s response to develop its own equipment industry.”
Hutchinson said Taiwan expects to gain leeway in choosing its alliances with the U.S. and China. Also, Taiwan may hope to absorb chip production from China, similar to what has happened in Hong Kong.
If Taiwan succeeds in creating its own semiconductor manufacturing equipment sector, “it would make it possible for Taiwan to decouple from the West,” Hutchinson continued. “Worse, it points to post-globalization world heading to a dark age of over-supply, fractured R&D resources and low innovation.”
Hutchinson was responding to news that five industry associations signed a memorandum of understanding to promote Taiwan-based semiconductor equipment production in a ceremony held in Taipei early Thursday local time. The effort is backed by the Taiwanese government.
The industry groups are concerned Taiwan is too dependent on imported production equipment, according to a report in Taipei Times. “We have a world-leading semiconductor industry in Taiwan, but 90% of our semiconductor manufacturing equipment is imported,” said Habor Hsu, chairman of the Taiwan Machine Tool and Accessory Builders’ Association.
He called for increased production of semi manufacturing equipment. “In the wake of COVID-19 and the U.S.-China trade dispute, international businesses will change where and how they make their products,” he predicted.
Taiwan is the world’s largest buyer of semiconductor manufacturing equipment and may spend up to $62 billion on such equipment in 2020, according to SEMI Taiwan President Terry Tsao. “The most important task at hand is to convince international industry leaders to expand their operations to Taiwan,” he said, according to the report.
Taiwan Vice Premier Shen Jong-chin said the government plans to make Taiwan “an advanced semiconductor production center” with the first step of encouraging foreign semiconductor equipment companies to make their products in Taiwan.
To reach its goal, Taiwan needs to add a fourth or perhaps a fifth science park to three existing parks to support the semi production chain, although there are no concrete plans to do so, Shen added.
The news that Taiwan is seeking to support home-grown semi equipment comes as the US Congress is weighing legislation to increase semiconductor production at home by using tax incentives and other measures contained in the Chips for America Act. President-elect Biden is expected to support the measure if Congress approves.
Various chip industry groups in the US, including the Semiconductor Industry Association, support the Chips Act. Intel CEO Bob Swan recently urged Biden in an open letter to support domestic semi production.
The news out of Taiwan came on the same day that the SEMI industry association in the U.S. reported that semiconductor equipment billings declined by 45% in North America in the third quarter compared to a 63% improvement in China.
The North America decline was also matched with a 47% increase in Europe for the quarter as compared to a year earlier. Korea saw a 92% improvement and Japan saw a 34% surge while Taiwan saw a 22% improvement.
The global picture overall was a 30% year-over-year improvement for the third quarter, with total billings at nearly $20 billion, SEMI reported. In North America, the total was $1.37 billion.
By comparison, chip sales globally as opposed to equipment sales nearly hit their first $10 billion week ever last week, VLSI also reported Wednesday. That level represented a 10% year-over-year gain. VLSI’s forecast for all the fourth quarter predicts a 15% improvement. Auto chips declined last week by the most of any market segment with DRAM and NAND slowly significantly, VLSI added.