TAIWAN SET FOR BIG GAINS FROM EDGE IN CHIP RACE

Faster semiconductors to be put into production by 2025 on island while mainland firms are left behind amid Washington’s curbs on exports

The mainland could find itself left behind as many of the world’s personal computers and cellphones receive a big bump in processing power over the coming few years, while Taiwan’s economy stands to reap a massive windfall from trade with the West.

Advancements in computer chip technology, producing faster semiconductors that require less power, are expected to be put into production by 2025 in Taiwan, which has been at the cutting edge of hi-tech manufacturing for half a century.

And some industry experts expect that edge to extend so fast that the mainland will be studying it for ways to compete technologically with Western countries that rely on tech from the self-ruled island.

“If the United States continues to control high-end chips shipped to China, it will face a long-term challenge as it may not be able to obtain any advanced processing chips,” said Ben Yeh, a Taiwanbased analyst with research firm Canalys.

Taiwan Semiconductor Manufacturing Co (TSMC) says it will begin mass-producing topend 2-nanometre chips at its facilities south of Taipei in 2025.

Chief executive C.C. Wei reported “good” progress at an October earnings conference for TSMC, the world’s largest contract manufacturer of chips.

The current industry standard is chips with 7nm transistors, though Apple has begun moving to 5nm. Last year, IBM unveiled the world’s first 2nm chips.

A boost to Taiwan’s economy is all but inevitable, analysts say, as only TSMC will be able to mass-produce 2nm chips by 2025 for the world’s major developers of consumer electronics.

Apple would probably be the first customer of TSMC’s 2nm chips and use them in MacBooks, said Mario Morales, group vice-president of semiconductor research with market research firm IDC.

Yeh also noted how “demand for advanced nodes normally comes from key customers such as Apple, which TSMC has maintained strong relationships with, regardless of geopolitics”.

Morales expects US-based Qualcomm and Taiwan’s MediaTek, both designers of processors for smartphones, will place orders after Apple.

Taiwan’s multibillion-dollar tech supply chain ranges from upstream components to the assembly of iPads and iPhones by suburban Taipei-based Foxconn Technology. Contractors in Taiwan particularly supply iPhone camera lenses, metal casings and packaging.

On the whole, Taiwan supplies about 60 per cent of the world’s computer chips.

“TSMC’s ability to massproduce chips based on the 2nm process will help Taiwan’s semiconductor industry seize more international orders,” said Cheng Kai-an, a senior industry analyst with the Market Intelligence and Consulting Institute in Taipei.

Output value for its integrated circuit sector alone should increase by 15.6 per cent to 20 per cent this year, and the market was set to be worth US$157.3 billion this year, industry association Semi Taiwan forecast.

The mainland is expected to learn from Taiwan by bidding for its talent, trying to carve out international supply chain alliances as the island has done and striving for advancements in research and development – a hallmark of TSMC since its founding in 1987.

Companies on the mainland currently lack the know-how or esources to make chips more advanced than the 7nm process.

“China will face a long-term challenge as it may not be able to obtain any advanced process chips below 7nm,” Cheng said. “However, the country is likely to do all it can to obtain advanced chips and technologies.”

The mainland spent a record US$441 billion on research and development last year, up by more than 14 per cent over 2020, and that figure is expected to increase in the coming years.

Private-sector research and development spending in Taiwan reached about NT$800 billion (HK$203.38 billion) in 2021 after a decade of steady increases.

TSMC’s engineers also had a reputation for taking on “longer and more flexible work hours” when the company was working towards chip process advances, Yeh said.

Taiwan bans outsourcing of advanced chips to the mainland, though other Taiwanese hi-tech gear is widely made there.

Mainland tech firms are expected to try hiring away Taiwan’s top talent, analysts say.

Tapping into that talent pool would “shorten its learning curve in advanced process nodes”, Cheng said.

Taiwan’s Ministry of Justice Investigation Bureau raided 10 mainland companies in May on suspicion of using illegal means to poach chip engineers. Other companies have simply offered higher salaries.

The mainland might learn that it needed an offshore network to pace other countries’ development of advanced chips, said Mark Natkin, managing director with Beijing-based market research firm Marbridge Consulting.

“With a global ecosystem of this scale and complexity, it’s better to seek alliances rather than to try to go it alone,” he said.

TSMC’s ability to mass-produce chips based on the 2nm process will help ... seize more orders

CHENG KAI-AN, INDUSTRY ANALYST