Taiwan’s lead in advanced chips will speed up computers, phones while turning heads in China
- Semiconductor manufacturing looks to make a big leap forward in the coming three years, but US-led restrictions on exports to China could pose a ‘long-term challenge’
- Analysts expect companies such as Apple, Qualcomm and MediaTek to place the initial orders with Taiwan’s TSMC for highly advanced 2-nanometre chips
Mainland China could find itself left behind as many of the world’s personal computers and cellphones receive a big bump in processing power over the coming few years, while Taiwan’s economy stands to reap a massive windfall from trade with the West.
And some industry experts expect that edge to extend so fast that mainland China will be studying it for ways to compete technologically with Western countries that rely on tech from the self-ruled island.
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Taiwan Semiconductor Manufacturing Company (TSMC) says it will begin mass-producing top-end 2-nanometre chips at its facilities south of Taipei in 2025. CEO C.C. Wei reported “good” progress at an October earnings conference for TSMC, which is the world’s largest contract manufacturer of chips.
The nanometre figure, often abbreviated as “nm”, refers to the size of transistors placed on silicon chips. The smaller the transistors, the faster that devices such as laptops can run without sapping battery power.
The current industry standard is chips with 7-nm transistors, though Apple has begun moving to 5-nm. Last year, IBM unveiled the world’s first 2-nm chips.
A boost to Taiwan’s economy is all but inevitable, analysts say, as only TSMC will be able to mass produce 2-nm chips by 2025 for the world’s major developers of consumer electronics.
Apple will probably be the first customer of TSMC’s 2-nm chips and use them in MacBooks, said Mario Morales, group vice-president of semiconductor research with market research firm IDC.
Yeh also noted how “demand for advanced nodes normally comes from key customers like Apple, which TSMC has maintained strong relationships with, regardless of geopolitics”.
Morales expects that US-based Qualcomm and Taiwan’s MediaTek, both designers of processors for smartphones, would place orders after Apple’s.
Taiwan’s multibillion-dollar tech supply chain ranges from upstream components to the assembly of iPads and iPhones by suburban Taipei-based Foxconn Technology. Contractors in Taiwan particularly supply iPhone camera lenses, metal casings and packaging.
On the whole, Taiwan supplies about 60 per cent of the world’s computer chips.
“TSMC’s ability to mass-produce chips based on the 2-nm process will help Taiwan’s semiconductor industry seize more international orders,” said Cheng Kai-an, a senior industry analyst with the Market Intelligence and Consulting Institute in Taipei.
China will face a long-term challenge as it may not be able to obtain any advanced process chips below 7-nm
The production of iPhones is a boon to Taiwan’s tech sector almost every year. Output value for its integrated circuit sector alone should increase by 15.6 to 20 per cent this year, and the sector is set to be worth US$157.3 billion this year, industry association Semi Taiwan forecasts.
Mainland China is expected to learn from Taiwan by bidding for its talent, by trying to carve out international supply-chain alliances as Taiwan has done, and by striving for advancements in research and development – a hallmark of TSMC since its founding in 1987, when Taiwan’s nascent semiconductor industry was 13 years old.
Companies on the mainland currently lack the know-how or resources to make chips more advanced than the 7-nm process.
“China will face a long-term challenge as it may not be able to obtain any advanced process chips below 7-nm,” Cheng said. “However, the country will likely do all it can to obtain advanced chips and technologies.”
Mainland China aims to “join the ranks of the world’s most innovative countries, with great self-reliance and strength in science and technology”, President Xi Jinping said in an October work report.
China spent a record US$441 billion on research and development last year, up more than 14 per cent over 2020, and that figure is expected to increase in the coming years.
Private-sector research and development spending in Taiwan reached about NT$800 billion (US$26.12 billion) in 2021 after a decade of steady increases. TSMC’s engineers also have a reputation for taking on “longer and more flexible work hours” when the company is working toward chip-process advances, Yeh said.
Mainland tech firms are expected to try hiring away Taiwan’s top talent, analysts say. Tapping into that talent pool would “shorten its learning curve in advanced process nodes”, Cheng said.
Taiwan’s Ministry of Justice Investigation Bureau raided 10 Chinese companies in May on suspicion of using illegal means to poach chip engineers. Other companies have simply offered higher salaries.
Mainland China may learn that it needs an offshore network to pace other countries’ development of advanced chips, said Mark Natkin, managing director with the Beijing-based market research firm Marbridge Consulting.
“With a global ecosystem of this scale and complexity, it’s better to seek alliances rather than to try to go it alone,” he said.
The research and development of the Chinese semiconductor industry is likely to slow down significantly
China’s Ministry of Commerce asked Washington in October to “give fair treatment to enterprises from all countries, including China”, the official Xinhua reported. China has also said it is not a security threat.
A TSMC spokeswoman suggested that her company has no plan to discriminate against Chinese customers who need chips, as TSMC manufactures “according to customer orders”.
But because of Chip 4 and US countermeasures against China, Cheng said, “the research and development of the Chinese semiconductor industry is likely to slow down significantly”.
