I saw "de-globalization" at Semicon China

Eric Huang, special to DIGITIMES Asia 0

A view from Semicon China 2023. Credit: DIGITIMES

TSMC founder Morris Chang on July 4 delivered a keynote speech titled "Redefining Globalization," presenting his views on the current geopolitics and posing a question to the audience, "Can this still be considered globalization?"

Chang said the new definition of "globalization" is to allow domestic enterprises to make profits in the country, and also allow foreign products and services to enter domestic market without undermining the national security as well as the current or future technological and economic leaderships of the country.

Coincidentally, at Semicon China 2023, held June 29 to July 1 in Shanghai, several opening keynote speeches revolved around the topics of globalization and de-globalization. I happened to be on the spot, personally experiencing the current atmosphere of the Chinese semiconductor industry under the impact of geopolitical tensions.

This year's Semicon China took place on the cusp of a massive export control ban imposed by the US in October 2022, followed by equipment trade restrictions launched by Japan and the Netherlands. As such, it seemed too sensitive to talk directly about the US actions, nor appropriate to touch on technological autonomy in a high-profile and nationalistic manner. Therefore, several keynote speakers at the opening forum all started with the theme of "globalization" for their speeches.

Lung Chu, president of SEMI China, remarked that the development of the semiconductor industry can be divided into three stages: globalization, de-globalization, and re-globalization. Prior to the US-China trade war, the industry followed the trend of globalization, with global division of specialization and regional division of labor moving from the US, Europe, Japan, South Korea and Taiwan to China. However, after the trade war broke out, there has been a trend of de-globalization. Nevertheless, Lung said he believes that even with the implementation of chip laws and related investment plans in various countries, no single country can independently complete the entire semiconductor industry ecosystem. The industry still needs to continue collaboration and integration to facilitate re-globalization.

Chen Nanxiang, chairman of Yangtze Memory Technologies (YMTC), made a rare appearance at a public event and discussed the prosperous development of the semiconductor industry in the past. He emphasized that this development was built on five key elements: globalization of markets and competition, innovation and technological standards, supply chains, talent mobility, and resource allocation. These elements were supported by international systems such as the World Trade Organization (WTO), the World Customs Organization (WCO), and the World Intellectual Property Organization (WIPO)."

Chen believes that in the past, enterprises were the main drivers of globalization, but after the US-China trade war, the main actors have shifted to governments, aiming to control value chains and deter the development of others. He urges that if this is the current reality, the process of re-globalization should preserve at least two key elements: globalization of markets and competition, and globalization of innovation and technological standards, in order to support a healthy development of the semiconductor industry in the future.

Wei Shaojun, president of VLSI Design Chapter of the China Semiconductor Industry Association and professor at Tsinghua University, noted that the establishment of a successful global semiconductor supply chain mainly resulted from "government acquiescence and industry initiative." But the trend of de-globalization has made it difficult to achieve optimal resource allocation in the semiconductor "design-fabrication" model. He suggested that on the one hand, the goal should be to achieve self-reliance by breaking through blockades and restrictions, and on the other hand, China should leverage its largest domestic market and adhere to expanding openness, allowing cooperation partners in the global supply chain to benefit collectively.

My view is that under such trends of globalization/de-globalization, the national interests of the US may not necessarily align completely with the interests of its enterprises.

The national interests of the US lie in containing the development of China's key technologies and industries and maintaining a single hegemonic position in dominating the world order. However, corporate interests are classified into three types. First is the "market first" camp, which insists that as the largest market, China should be left untouched by the government's intervention. Second is the "support for greater restrictions" camp, which believes that the US government's actions will uphold the competitiveness and interests of American companies. And the third is the "support for limited restrictions" camp, which is concerned about the competitive threat posed by the rise of Chinese companies, but believes that excessive containment measures would instead accelerate their development. Accordingly, the interests of enterprises in the first and third camps are both inconsistent with the US policy direction.

Under the current international reality, China's national interests are aligned with those of enterprises, and both the government and enterprises must inject more resources to accelerate the process of technological independence and market self-sufficiency.

During the show period of Semicon China 2023, the exhibition hall was always crowded with show-goers, although it happened to be the rainy season with unusually hot and humid weather. Just as one of the forum speakers mentioned, the external situation felt "stifling" like the current weather. However, just like the flourishing plants in this season, I also felt thriving vitality of the Chinese semiconductor industry in its efforts to break through the stagnation.

Author's Bio:

Eric Huang is currently vice president of DIGITIMES Asia. He holds a Master's degree in Electrical Engineering from Rensselaer Polytechnic Institute (RPI) and is a Ph.D.candidate in International Business at National Taiwan University. He served as head of the DIGITIMES Research and led several research advisory projects commissioned by government and corporate entities, focusing on the development of Taiwan's industries in the face of changing circumstances.