Leaders in semiconductor in 2030 (10): Golden decade vs perfect storm

Colley Hwang, DIGITIMES Asia, Taipei 0

DIGITIMES Asia president Colley Hwang (2nd from right) at TSIA 2022. Credit: DIGITIMES

MediaTek chairman Ming-Kai Tsai has noted that we often overestimate the short-term benefits and underestimate the long-term business opportunities. In 1998 when he started his business, the worldwide IT market had a size about US$500 billion. That's the time when the Internet was just taking off. In 2020, the IT industry expanded to US$3 trillion, but the Internet business opportunities reached US$13 trillion. At this point in time, the artificial intelligence (AI) and deep learning opportunities are just emerging. Can we imagine a huge business opportunity of over US$30 trillion by 2030, driven by the 3D Internet worldwide?

All eyes are on the semiconductor industry, which is promising a "golden decade" to come, but the world seems to be going in the opposite direction. The US dollar is strong; Asia's major currencies are weak; and China's economy shows no signs of recovery. And from the changes in the supply chain of the electronics industry, we can see that there is no good news for servers and handset components destined for China. TSMC CEO CC Wei has encouraged company employees to go on vacation, but everyone is wondering whether all current headwinds will converge into a perfect storm.

Kye-Hyun Kyung, who oversees Samsung's semiconductor business, has noted that the DRAM market has seen several major crashes, each lasting at least five years with a decline of over 41%. Since July 2022, memory sales have nosedived. Third-quarter 2022 sales dropped 38% and you can't expect much from the fourth quarter.

Can we expect good news when the leading companies strike a pessimistic note? The semiconductor industry has always thrived in difficult times. In the 1970s, semiconductors were spun off from IBM and NEC to become independent businesses led by Intel and Texas Instruments (TI). That was the era of the oil crisis and baby boomers where competition was intense and yet achievements were tremendous.

During the Asian financial crisis in 1998, Samsung received a new lease of life, while TSMC and UMC entered the international stage and became the "heroes" of Taiwan's foundry sector. But I think both TSMC and Samsung became world-leading companies during the financial tsunami in 2009 because of their excellent corporate health and competitiveness. This time, the test has just begun, with the addition of regionalized production and geopolitics as new variables. Countries like Japan, South Korea and Taiwan may not necessarily be on tenterhooks, but may find new market demands within the general trend.

This is also a time when it is difficult to distinguish between friend and foe. When the industry shifts its focus from technologies/products to applications in this new era, participants in the supply chain should abandon the traditional differentiation between enemies and friends. For example, when the panel industry sees panel prices drop below production costs, there will be higher chances for AUO and Innolux to merge.

When AUO sells panels to Ennoconn, won't Innolux want the business opportunities from other IPC makers? Taiwan-based memory vendors Winbond and Macronix offer products with specs and competitiveness rather different from Samsung's, but Winbond has become a major supplier of Samsung.

We should strive to create new business opportunities, not to defeat competitors. In order to avoid over-reliance on the Chinese market and rejuvenate Asia's medium-sized markets, turning second-tier seaports and airports into e-commerce hubs can give more leverage to the third-party markets of India and ASEAN. It really depends on how we handle it, and what we need is a forward-looking vision in tough times.

(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.