The chips that move the world are in just two hands
- Taiwan and South Korea account for 81% of the global semiconductor manufacturing market | Dependency agitates tension between China, the US and the EU
Far far away, behind the word mountains, far from the countries Vokalia and Consonantia, there live the blind texts. Separated they live in Bookmarksgrove right at the coast of the Semantics, a large language ocean.
Without semiconductors, there are no computers.
But neither cars, airplanes, video game consoles, the most diverse and advanced health technologies and a quasi-infinite etcetera, either when making these products or in their final version.
Semiconductors are that tiny heart that gives oxygen to 21st century technologies and they are barely physically manufactured or melted, according to industry slang, in two countries located in one of the hottest areas of the world, Taiwan and South Korea. But especially in Taiwan.
Because on this island whose sovereignty is claimed by Beijing. 25% of its territory, a space slightly more limited than Asturias, concentrates 75% of its entire population, over 17 million people. And this is the manufacture of 63% of semiconductors from all over the market in the world.
It's only followed by far south Korea, with 18%. Between them they reach 81% of the total. A quasi-duopoly. Because then China appears with only 8% according to trendForce's final 2020 data. Europe and the U.S. are testimonials. And that's despite the fact that much of their economy and lifestyle depend on them.
"The concentration of highly complex products such as high-end chips in some regions is not a strange thing. And it is precisely the result of the idea that their topical knowledge is not easy to transfer and is usually grouped together," says Cludia Canals, chief economist at CaixaBank Research.
It is seen, for example, in American technology companies, highly concentrated in Silicon Valley. But in the case of wafers at the base of 21st century technology, sheets most often of silicon in which microscopic and colorful processes draw microcitrites by almost imperceptible photolithography (the latter, of two nanometers, which is equivalent to dividing the thickness of human hair into 50,000 parts and picking upjust two) , are in just two hands. And most of the time, in addition, in two private companies: TSMC (Taiwan Semiconductor Manufacturing Company) and Samsung.
The Taiwanese TSMC occupies 54% of the market for chips that allow operations to be carried out at the speed of light and memorize millions of bits of information. The Korean Samsung 17%, according to the data of 2020 that continue in this 2021. Between both, 71% of the market. And both in the East China Sea. In front of Beijing. Hence today the fear in the West of its implications for the supply chain of these components.
Because although the West co-leads the development of component designs (TSMC mostly uses photolithographic equipment from the Dutch company ASML, for example), Taiwan and South Korea dominate the manufacture of chips and their innovations. Even though it was Intel, based in Silicon Valley, California, that released the first microprocessor in 1971; today it has practically disappeared from the foundry business. Among the customers of these companies in the Far East are, in fact, the world's largest factoryless chip companies (or fabless, as they are known in the industry) such as Qualcomm, Broadcom, Nvidia or AMD. Specialist companies in its design and design that later license.
And hence the doubt:
- "Why have they made this concentration possible?"
- “Since the 80s the circuits have been miniaturized and a factory that is capable of integrating transistors whose minimum size is around 10nm has a very high cost. To make it profitable, it is necessary to sell on a large scale, not only own products but also those of other companies, which is only achieved in consumer markets. On the other hand, the sale prices have fallen in recent years in a very important way. This has led to specialization ”, responds to La Vanguardia Susana Patón, tenured professor of electronic technology at the Carlos III University of Madrid.
The key to the foundry business is to never compete with customers and to keep intellectual property a secret
Electronic Engineering Specialist and Vice President of National Yang Ming Chiao Tung University
The costs of starting up a single factory are estimated at around 10 billion euros. "Without electronic chips, the economy would go back half a century, but installing a modern plant can cost 16,000 million euros, more than a nuclear plant or manufacturing an aircraft carrier," said Xavier Ferràs, a professor specialized in innovation at Esade. "There will be no quick response from the industry to compensate for the over-demand," he concluded.
And Taiwan has clearly taken advantage of this. And more than anywhere else in the Hsinchu Technology Park, south of Taipei, on the island's west coast. There they have their headquarters TSMC and the vast majority of the companies that physically manufacture the chips in the country.
- "And why don't you reply?" He asks himself again.
- “The key to the foundry business is to never compete with customers and to keep intellectual property a secret. Taiwanese companies have done this very well while others in the world thought of developing their own products. In addition, this business requires an accumulation of experience and discipline in business management to guarantee high performance. And Taiwanese companies have both, ”says Kuan Neng-Chen, an electronic engineering specialist and vice president of the Taiwanese National Yang Ming Chiao Tung University.
Thus, it does not matter if the chips sometimes take the form of microprocessors, sometimes memory chips, often graphics cards, and more. This tiny product, which goes unnoticed on a day-to-day basis and is more often than not marketed by other brands, is basic in around 70% of the world's technological products, according to the consulting firm Deloitte. Whether they are from Apple or Alibaba. From Volvo, Airbus or Nintendo. And they merge in few countries and companies.
Wayne Huang, vice president of operations at Fairphone, a Dutch company for the manufacture of smartphones with sustainability as a guide, assumes it in the first person in conversation with this newspaper: “We employ a similar product development strategy, because investing in manufacturing has many more risks than building an engineering team. For example, in initial capital investment, which especially for foundries is huge. While TSMC and Samsung are advancing their R&D and reducing their costs by producing more chips of a fixed size, the others grapple with even higher costs. It is not a wise business decision to continue with its foundry business. "
The decision of what to do, with everything, is also one of national security.
The US has identified a possible choke point in dependence on Taiwan and KoreaJames A. Lewis
Director of the Strategic Technologies Program and Vice President of the Center for Strategic and International Studies
Because with Taiwan at its center, the dilemma about the consequences of locating in what The Economist called the "most dangerous place on earth" resurfaces. For having the US behind the People's Republic of China. And for being in the middle of a game between powers the epicenter of an indispensable and "strategic" product, in the words of the Foreign Committee of the US Senate.
- "How can it affect global security?"
- “When China seemed like a friendly country, everyone felt comfortable with a global supply chain centered on the Pacific coast. But with the pandemic, governments are nervous and the US has identified in dependence on Taiwan and South Korea a possible choke point where China could try to exert a damaging influence. How it operates in Hong Kong, Xinjiang and the South Seas is very worrying. There is no immediate danger, but Washington and Brussels are not willing to take the risk, ”says James A. Lewis, director of the strategic technologies program and vice president of the US Center for Strategic and International Studies.