Challenges for the semiconductor industry (4): Alternatives to head-on collision

Each country may have its own weaknesses or Achilles’ heels in the development of the industry. For example, the design of integrated circuits is the weak point of Japan and Korea. In the future, when it comes to designing various logic computing functions on memory chips, lack of talent and a weak ecosystem will make it difficult for the two countries to break through the past era of IC design. pure.

Although Taiwan’s IC design industry is booming, most of its IC design companies still use mature processes above 28nm, except for a few companies such as MediaTek . While we know that 45nm projects often require more than $70 million in investment, Taiwan’s strategy for advanced design architecture can only focus on breakthroughs in specific areas, rather than comprehensively. .

Intel is clearly looking to squeeze market space from TSMC’s major customers, such as Nvidia and AMD, and challenge TSMC’s dominance in a few years. It’s hard for outsiders to understand the wisdom of running a business, but it’s real competition for everyone to see.

But we all understand that the rules of the game for the entire industry may date back to the ancient days. Semiconductor technology before the 1970s originated from the product requirements of many original manufacturers, such as IBM, NEC, Siemens, Philips and today Chinese automakers have already expressed their intention to participate in the development of chip specifications.

Not only are camakers eager to participate in defining chip specifications, but Google, Amazon, Tesla and Microsoft are also developing mechanisms to standardize their products for AI and telematics opportunities, and semiconductors are the best way to standardize these requirements.

Tesla, which has done well in chip integration, reduced the total number of MCUs in an electric vehicle from 80+ in 2018 to 50+, and will gradually shift MCU production from 8 inches to 12 inches in the future. It will take time to resolve the MCU shortage issue, but over the past year, TI’s analog IC inventory has shrunk. TI, which accounts for more than 30% of analog ICs worldwide, primarily uses 45-130nm mature processes with high product differentiation. Each car may need hundreds of analog ICs, and without aggressive capacity expansions, the shortage will continue.

TI is expected to build six 12-inch fabs over the next three years, and that’s theoretically enough to meet needs from 2025 to 2035. But if automotive semiconductor companies, including Renesas, spend just 5% of their revenues in capital expenditures and relying on TSMC or UMC for capacity expansion, I fear that the structure of supply and demand will not change much over the next decade.

Once standardization is achieved, other companies, including those in Taiwan, will have a better chance of following common technical standards and quickly establishing production systems. But Taiwan doesn’t have Internet giants like those in the United States and China. According to CB Insights, by mid-2022, of more than 1,000 unicorns worldwide, about half will be American companies and about 18% Chinese companies.

American tech giants are typically multi-billion dollar companies. And Chinese companies, in the process of developing virtual currencies, let Taiwanese foundries manufacture their chips for reasons. Compared to China and the United States, both of which have domestic markets to support local system manufacturers, Taiwan obviously does not have such a hinterland for industrial development.

As cars will soon become the third mobile computer, the development of the industry is moving towards software-hardware integration.

We believe that the demand and possibility of local production will increase and that opportunities for all kinds of manufacturers will arise at a time when the structure of the automotive industry is changing.