Autonomy and regionalization jeopardize the "neutrality" underpinning chip industry growth

Misha Lu, DIGITIMES Asia, Taipei 1

Credit: Imec

As geopolitical competition and the concept of national security gain a technological dimension, fueled by US-China rivalry and the post-pandemic supply chain disruption, semiconductors, which underpin the technology industry, have particularly been weaponized. Amid talks of "de-risking", "de-coupling", "autonomy" and "regionalization," few remember the virtue of neutrality that laid the groundwork of the burgeoning global semiconductor industry.

When the US-based GPU giant Nvidia declared its intention to acquire the UK-based global silicon IP vendor Arm for US$40 billion in 2020, the US Federal Trade Commission filed a lawsuit to block the would-be largest merger in the history of the semiconductor industry. Calling Arm the "Switzerland" of the semiconductor industry, the FTC believed the acquisition would place Arm customers at the mercy of Nvidia. Though the acquisition attempt ultimately failed, the neutrality of Arm was still infringed upon as the US rolled out sweeping export control measures against China in October 2022. As a result of the new measures, according to a report from Financial Times, Chinese semiconductor companies like Alibaba's T-Head cannot obtain Arm's advanced Neoverse V-series CPU IP designated for HPC applications. Another Financial Times report indicated that China's deputy minister of science and technology, Zhang Guangjun, urged Arm to work more closely with Chinese companies, universities and research institutes in a meeting with Arm CEO Rene Haas in early June.

The fear of having supply chains further disrupted by the chip war certainly added to the momentum of de-risking and the pursuit of greater autonomy. For example, RISC-V, the open-source alternative to Arm's architecture, gained traction in China. In fact, back in 2019, RISC-V Foundation, a non-profit corporation that directs the future development and drives the adoption of the RISC-V architecture, decided to move from the US to Switzerland in an attempt to shield itself from geopolitical ripples.

In a recent interview with Taiwan-based media Central News Agency (CNA), Luc Van den hove, the President and CEO of Belgium-based semiconductor research facility Imec, reminded us of the importance of neutrality as the European Union (EU) makes headway in its chip autonomy initiative. On June 8, the European Commission has just approved EUR8.1 billion of state aid for microelectronics and communication technology projects that have been collectively designated an Important Project of Common European Interest (IPCEI) – two months after the the European Council and the European Parliament reached a provisional deal on the European Chips Act in April.

In the interview, the Imec CEO stressed that international cooperation and partnership had played a big part in the success of the semiconductor industry. Therefore, it would be unrealistic if the EU and any single country seeks to control the entire value chain. Van den hove noted that the best way to implement the Chips Act is to bolster the existing strengths of each region in the global value chain and promote international alliances. De-connection, on the other hand, would slow the pace of innovation and contradict the Chips Act's goals to accelerate innovation.

Notably, Van den hove pointed out that Imec has many values similar to those of TSMC, emphasizing the need to build trust with all partners and not to compete with customers. In this sense, when asked by the CNA if the eurocentric European Chips Act would impact Imec's own neutrality, Van den hove perceives a possible danger.

Indeed, neutrality has been fundamental to the success of TSMC's foundry model, and it wins TSMC an unmatched level of deep trust from its customers that is often cited by TSMC leadership as its core advantage against competitors like Samsung and Intel. Though TSMC CEO C. C. Wei continued to emphasize that the foundry would continue to serve "all customers" in an earnings call following the US chip sanctions on China in October 2022, TSMC is nevertheless prohobited from shipping certain types of chips to China that meet the criteria set in US sanctions.

Meanwhile, various voices within Taiwan's semiconductor R&D ecosystem have called for Taiwan to build its version of Imec, recognizing the risk posed by the increasing geopoliticalization of semiconductor.

Among them is Dr. Chiueh Tzi-dar, Dean of National Taiwan University's Graduate School of Advanced Technology. Chiueh noted that as leading economies like the US and Japan have all set up national semiconductor R&D centers, Taiwan should answer with the establishment of an international semiconductor R&D center, modeled on Imec's role within the global chip industry, especially when Taiwan already enjoys a leading role in the global semiconductor industry. With geopolitical factors, such as the so-called "Chip 4" alliance, playing an ever larger role in the global chip industry, Chiueh considers it a necessary step to take.

In a conversation with DIGITIMES Asia, retired Admiral Lee Hsi-min, who served as the Chief of General Staff of Taiwan's armed forces between 2017 and 2019, was also concerned about TSMC's strategic value as a deterrent against Chinese military aggression as the foundry stops shipping certain chips to China.

In this context, does de-risking actually lead to more risks in the long term?