Leaders in semiconductor in 2030 (3): Who makes the rules?

Colley Hwang, DIGITIMES Asia, Taipei 0


Sun Tzu's "The Art of War" maintains that you "shape" the battle and your enemy will have to play along. By having competitors and even strategic partners play within a pre-determined framework, the winner is the one who controls the game.

From the recent news events and the technological progress of the tech industry we can roughly depict what the world's semiconductor industry will be like in 2030. The Chips Act, the Chip 4 Alliance, and even patent infringement accusations - these are all part of the US government's move to set the framework of a game within which all competitors and even strategic partners have to play.

Previously, many US network giants had high expectations for the Chinese market, but it was China that set the framework, denying US companies strategic advantages or even a level playing field. Many key technologies were taken away by China, which left Google, Meta and Amazon with no choice but to depart from the Chinese market. This also smacks of a "data war."

President Biden has repeatedly stressed that the US must regain control of the supply chain in a meaningful way. With the support of the Chips Act and other related policies, the US is looking to form the Chip 4 Alliance. Intel is eyeing the foundry sector, making every effort to adopt EUV equipment in an attempt to embrace the pure-play foundry business model. If Intel is unable to make a breakthrough in its transformation, can TSMC, Samsung Electronics and other semiconductor companies using US equipment and software not bow down and set up fabs in the US?

The moves of TSMC and Samsung setting up fabs in the US can be described as "political submission." In the case of a full-blown conflict between the US and China, things could become much more radical and catastrophic. During World War II, Germany was unable to secure its oil storage and chose to blow up oil tanks. Taiwan's foundry houses can hardly expect to come through the US-China conflicts unscathed: There will be some form of "sacrifice." But the price of sacrificing Taiwan will be too high to bear for either the US or China.

After all, what Taiwan has is not only its semiconductor industry. The ICT industry that supports the entire semiconductor industry also depends heavily on the Taiwanese ecosystem. More than 80% of the world's notebooks are made by Taiwanese manufacturers, and 92% of the servers in the last two quarters came from Taiwanese manufacturers. Without chips and servers from Taiwan, data centers will not be able to operate. The highly promising EV and IoV sectors will be no exception.

The key to stabilizing the global economy in the next decade is undoubtedly the peace in the Taiwan Strait, which not only concerns the well-being of Taiwan's 23 million people, but also has a profound impact on the economic and industrial development of Japan and South Korea. Turmoil in the Taiwan Strait could send the US dollar and gold price soaring, and when that happens, can South Korea, with its fragile financial structure, still function normally? The aging Japan will be weak; India's growth alone won't be able to resuce the entire world; Europe can't even take of itself; and China, with businesses leaving in the wake of the US sanctions, won't be the growth engine of the global economy it has been for the past 30 years.

The world is entering an era characterized by multiple competitions, but it will also be a time of distress. The coming of "Great Depression" is not a possibility but an inevitability: It is not a prediction by people analyzing the situation from their offices in New York or Boston, but rather by those facing the threats constantly on the front line in Taiwan.

(Editor's note: This is part of a series of articles that revolves around the issues of the US-China confrontation, but focuses on the problems that Taiwan, Japan, Korea, ASEAN, India and other emerging Asian countries have to face in their industrial strategies and ICT supply chains.)

Colley Hwang, president of DIGITIMES Asia, is a tech industry analyst with more than three decades of experience under his belt. He has written several books about the trends and developments of the tech industry, including Asian Edge: On the Frontline of the ICT World published in 2019, and Disconnected ICT Supply Chain: New Power Plays Unfolding published in 2020.