The lack of chips O semiconductors is affecting the industry in the process of digitization. Any current product is equipped with semiconductors, that integrated circuit that has become the basis of electronics, the basis of the sensorization of any industrial installation. They control from electric windows, temperatures or any computer device. Without those components, systems and production lines stop. In the case of the automotive sector it is particularly important, since the lack of any component in the assembly line prevents the delivery of the final finished product. But it also happens in the majority of technical industrial products. These are the keys that explain the lack of microchips in international markets:
Who sells microchips? Which country is the biggest buyer?
The great global seller of microchips in the world is USA. Although popular perception tends to point out that China The world technology market is being done little by little, the truth is that the Asian giant barely sells 5% of the microchips to the rest of the world, the main brain and catalyst of the digital revolution. The US sells 47% of the semiconductors in the world. China is the big buyer of semiconductors, around 50% of which are sold on a global scale. But production of the most advanced chips is moving to Asia with speed. Microchips are the fourth most traded good in the world, behind petroleum, refined petroleum products and automobiles.
Who makes the microchips?
World statistics indicate that the US is the great leader in the sale of the semiconductor market with that 47% of the market, followed by Korea (20%), Japan and Europe (10% each), Taiwan (7%) and China (5%), according to the latest data from the Semiconductor Industry Association. Nevertheless, experts agree that this ranking is misleading when analyzing the present and future of the sector. China imported around $ 301 billion worth of microchips in 2020 and exported $ 238,000. Dependence on Taiwan factories is increasing year by year. The US designs most of the chips but it is this small Asian country that manufactures more and more and the one that monopolizes the most advanced chips.
Who designs and who makes the most sophisticated microchips?
According to the Semiconductor Industry Association (SIA), around 51% of current embedded devices are designed in the US. A good part of these are those promoted by Intel. 29% are designed in Korea, 9% in Europe and 2% in Taiwan. In the case of chip design (‘fabless’, in Anglo-Saxon terminology), the US is also the world leader with 65% of the world, followed by Taiwan with 17% and China, with 15%. But the situation changes in the so-called Foundry market, that of those firms that manufacture but do not design chips, or in the case of factories managed remotely by chip designers. In this way, 60% of the manufacturing that is sold to designers is located in Taiwan. And 52% of custom chip factories are also located in Taiwan (21% in China). And the most sophisticated chips are made in Taiwan, in plants so sophisticated that it is difficult for them to be installed in other countries today. The overall idea is that the Fabless model seems to prevail, the design is focused on the US but the manufacturing has moved to Asia and, consequently, the US advantage in advanced technologies has been reduced. Fewer and fewer Western companies decide to compete or can afford to tackle microcircuit manufacturing.
What does a microchip factory cost?
A new chip plant currently costs in the order of 20,000 million dollars, and requires a labor ‘Know How’ that only seems possible at the moment in Asia. If one takes into account the manufacturing capacity only in advanced chips, in highly miniaturized technologies, the map of microchip manufacturing is even lighter and darker for the future of the United States: 92% of the global manufacture of microchips less than 10 nanometers is concentrated in Taiwan and the remaining 8% in Korea.
Mobile, made in Taiwan
Specifically, a single company in Taiwan, TSMC, sells practically all the chips of less than 10nm, which are those used by companies such as Apple or Qualcomm, leading firms in the manufacture of mobile phones. The mobile industry has overtaken the personal computer industry embodied by Intel, both in building technology and energy consumption. And the general consequence of all this is that Asia’s advantage in manufacturing tends to increase. And China announces huge investments in new factories and equipment. The analyzes of the consultancy BGC suggest that the manufacturing of China, Taiwan, Korea and Japan will account for more than 75% of the new chip manufacturing by the end of 2030.
Why are microchips missing in the automotive industry?
The companies in the sector, anticipating the drop in consumption during the pandemic, suddenly stopped purchases. Chip suppliers stopped production and stocks ran out. Chip suppliers have a response time of between three months and six months to return to production. The production chain was paralyzed and the consequences are still being suffered.
What are microchips used for in the car?
For almost everything. In the car there are specific certifications for each chip and a car uses hundreds of different microprocessors, manufactured by different suppliers.
International conflict over microchips
The alarm situation due to the lack of microchips in the markets has even more relevant consequences in terms of geopolitics. The US may lose control of the market in the event of a technological turnaround that favors the technologies applied in advanced microchips for mobile phones (something that Apple is already doing). The death of Intel’s 8086 series is a game changer. It is not surprising, therefore, that the administration of US President Joe Biden has recognized its concern about the shortage of microchips or semiconductors. Or that Intel announces investments in Ireland for the installation of a microchip factory. The goal is not to lose the market in the next few years.
Is there a technological war?
Effectively. Trump’s strategy of hindering Huawei was nothing more than an attempt to stop this Chinese giant from taking advantage in a market where US firms are losing leadership. Huawei’s commitment to 5G is also part of the same international microchip war and that Asian leadership is the great threat. The great threat also depends on existing bottlenecks in the complex global supply chain. The lack of a simple chip that controls a power window can cripple the production of an automobile assembly line. The bottlenecks in the supply chain are in Asia, for example, with the firm TSMC; in the US, with Cadence and Synopsys, in Europe, with ASML. They are firms with privileged market positions that complicate the security of global supply in the event of problems.
Are there new investments?
The American manufacturer of microprocessors Intel plans to build “at least” two new chip factories in Europe with future investments that could reach 80,000 million euros during the next decade. It has also planned an investment of around 20,000 million dollars (16,901 million euros) in the construction of two new factories in Arizona (United States) to expand its production capacity, which will create more than 20,000 direct and indirect jobs. Taiwan Semiconductor Manufacturing (TSMC) recently announced that it will invest about $ 100 billion (€ 82.744 billion) over the next three years to expand its capacity. Samsung Electronics plans to invest 125,105 million euros until 2030 to accelerate its semiconductor development and production capacity, including the construction of new microchip manufacturing plants. The goal is to become the world leader in logic chips by 2030.
What is the most advanced project?
Samsung has announced that it has begun the construction of a new production line in the town of Pyeongtaek, southwest of South Korea, expected to be completed in the second half of 2022. This state-of-the-art production facility will be equipped with the latest P3 technology for the production of 14 nanometer and 5 nanometer DRAM logic semiconductors, both based on extreme ultraviolet lithography technology. (EUV), indicated the multinational. “The semiconductor industry is facing a watershed moment and now is the time to lay out a long-term investment and strategy plan,” said Kinam Kim, vice president and head of the device solutions division at Samsung Electronics.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.