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INTERVIEW/Tech expert and witness to semiconductor boom, urges Taiwan to think big

04/20/2024 12:50 PM
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Digitimes founder and president Colley Hwang records a CNA podcast in Taipei on June 24, 2022. CNA file photo
Digitimes founder and president Colley Hwang records a CNA podcast in Taipei on June 24, 2022. CNA file photo

By Alison Hsiao, CNA staff reporter

Taiwan produces 90 percent of the world's high-end chips and has more than 50 percent of the global pure-play foundry market, a level of dominance that has had major world economies concerned.

Having as vital a commodity as semiconductors concentrated in a geopolitical hotspot could spell disaster for them, especially after COVID-19 showed how vulnerable the world was to supply chain disruptions.

That has prompted the United States, Europe and Japan to invite the world's largest contract chipmaker, Taiwan Semiconductor Manufacturing Company (TSMC), to build fabs in their countries, but that in turn has stoked fears in Taiwan that such moves will reduce Taiwan's strategic importance.

In an interview with CNA, however, a Taiwanese tech expert said such fears were misplaced and thought the trend of expanding overseas was in fact a great opportunity.

Colley Hwang (黃欽勇), the 65-year-old founder and president of tech media Digitimes, argued that Taiwanese semiconductor companies should battle for the global market with the ferocity of Genghis Khan over the next five to 10 years.

Colley Hwang. Photo courtesy of Digitimes April 20, 2024
Colley Hwang. Photo courtesy of Digitimes April 20, 2024

Hwang, who witnessed the rise of Taiwan's semiconductor industry and wrote about it in the book "World Semiconductor Classic - Quarterfinals in 2030" (決勝矽紀元), said Taiwan, led by TSMC, should keep its edge in chips until 2030 if there are no major upheavals.

"The real question is what Taiwan should do now to maintain its competitive edge after 2030" in a world in which major industrial countries are aggressively trying to strengthen their own semiconductor sectors as a matter of national security, he said.

His prescription? In a less globalized world in which businesses are seeking to diversify away from China, Huang said Taiwan should work with other like-minded countries and use their talent to bolster Taiwan's semiconductor and information and communications technology industries.

That is "what we're doing now with Germany and Japan," Hwang said, referring to TSMC setting up fabs in those countries and bringing people from those countries to Taiwan for training.

Hwang insisted that contrary to conventional wisdom, Taiwan is not at risk of giving away its edge in advanced chip manufacturing -- even by putting fabs in countries with strong industrial foundations -- due to its inherent advantages.

Key factors behind Taiwan dominance

Taiwan has catapulted to and maintained its semiconductor dominance because of three unique elements -- its decisive technological edges, broad customer base, and ecosystem -- Hwang argued.

"[TSMC founder] Morris Chang (張忠謀) once said he is a learning curve believer, meaning his strategy was to invest so much that it left his competitors in the dust," he said.

TSMC averages about US$30 billion in capital expenditure a year, around 45 percent of its annual revenue, and TSMC's yield, the success rate of the manufacturing process, is peerless, according to Hwang, who has observed the tech sector for nearly 40 years.

TSMC's majority-owned manufacturing subsidiary in Kumamoto, Japan Advanced Semiconductor Manufacturing, opens its first fab on Feb. 24, 2024. CNA file photo
TSMC's majority-owned manufacturing subsidiary in Kumamoto, Japan Advanced Semiconductor Manufacturing, opens its first fab on Feb. 24, 2024. CNA file photo

As for the customer base, it takes more than two years for a company to secure a core customer, and TSMC has around 500 core customers while Samsung has only about 100, Hwang said.

"You might snatch one or two away, but not many, as Taiwan has around 55 percent of the world's contract chipmaking capacity," Hwang added.

Also, compared to Samsung or Intel, TSMC and other Taiwanese contract chipmakers are "harmless" to their customers because they do not develop their own products, he noted.

The third key factor is Taiwan's industrial ecosystem, Hwang said.

"Taiwan might not be strong in branding, but the industrial structure embedded in the science parks in Hsinchu, Taoyuan, and Taipei's Neihu and Nangang includes all kinds of tech companies," Hwang wrote in his book.

"These companies specialize in fields ranging from semiconductors and ICT supply chains to AI and low Earth orbit satellites," he said.

Their lack of brand affiliation ensures complementary partnerships with multinational brands and entices big players to set up research and development teams in Taiwan.

Staying ahead while cooperating

Those factors explain why Hwang is unfazed by the talk of Taiwan being overtaken or outmaneuvered by other countries' subsidies and other moves.

"Japan had no technology more advanced than 28 nanometers [before TSMC opening its subsidiary in Kumamoto], and the Kumamoto fab is aiming to have a monthly capacity of 50,000 wafers," or 100,000 in total once the second fab it has planned is completed, Hwang said.

TSMC's existing capacity in Taiwan alone is about 1 million wafers per month, Hwang said, "so it would not be easy for them to catch up."

He did not think the U.S., where TSMC has now committed to build three fabs, would pose much of a threat to Taiwan, either.

"The idea of pouring a lot of money in an industry and believing it could work is a mindset of the old Industrial Revolution," Hwang said.

Colley Hwang. Photo courtesy of Digitimes April 20, 2024
Colley Hwang. Photo courtesy of Digitimes April 20, 2024

Beyond arguing that expanding abroad would not hurt Taiwan's semiconductor sector, Hwang insisted it would actually offer beneficial opportunities, especially in terms of leveraging global talent.

He saw taking advantage of overseas talent as a must for Taiwan because of its low birth rate and dwindling supply of engineers.

"Look at IC design, for example, a field where Taiwan has a global market share of about 18 percent. For revenue in the field to grow at a 6 percent compound annual growth rate, Taiwan will need to have 34,000 more engineers by 2030," he said.

Taiwan currently has only about 10,000 STEM (science, technology, engineering, and mathematics) graduate school graduates a year, who have be shared with foundry companies such as TSMC and UMC, Hwang said, pinpointing Taiwan's human resource predicament.

Taiwan's physical resource limitations can also be solved by using the abundant land and water provided by other countries, with Kumamoto as an example, according to Hwang.

With global talent, generous government subsidies, and land provided and infrastructure built for Taiwanese companies, "we will come to realize that in the next five to 10 years, the best resources will be in Taiwanese hands," Hwang said.

Taiwan will also be able to take advantage of a less-globalized, more regionalized world by going further than China and working with local talents, needs, and brands in many countries, such as India and Vietnam, he noted.

Which all points to a simple reality, Hwang said: "Taiwan's value in the next 50 years will depend on our vision and ambition now."

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