Taiwan’s semiconductor business will nonetheless preserve its benefits within the subsequent three years, and may take note of the challenges introduced by “non-differentiated” mature course of producers
On January 16, 2023, South Korea’s “Chosun Ilbo” not often revealed an article in its editorial titled “Taiwan’s TSMC is over-prosperous, whereas South Korea’s chips have begun to stagnate”, discussing the expansion and decline of the semiconductor business in South Korea and Taiwan. The article particularly talked about that in contrast with the earlier yr, Samsung Electronics’ consolidated monetary report working earnings elevated by 8% final yr, however its working revenue decreased by 16%.
As well as, on January 9 this yr, South Korea’s “Central Day by day” additionally reported in a particular article that Samsung Electronics’ working revenue fell sharply within the fourth quarter of final yr, a lower of 69% in contrast with the identical interval of the earlier yr, and additional mentioned the opportunity of chip competitors between Taiwan, america, Japan, and South Korea. Adjustments, which in flip created an enormous fear that it will be detrimental to South Korea.
These two newspapers are a very powerful newspaper teams in South Korea, and so they have their very own causes for making feedback one after one other. The principle motive is that the semiconductor business accounts for 20% of South Korea’s general exports and is a vital engine for the nation’s financial development. If the semiconductor business begins to say no, its financial improvement will undergo a significant affect.
However, my nation’s semiconductor business is one other new scene. Regardless of advanced elements such because the Russia-Ukraine Battle, the COVID-19 (extreme particular infectious pneumonia, new coronary pneumonia, Wuhan pneumonia) epidemic, and the Sino-US know-how commerce battle, the demand for world semiconductor merchandise has declined within the second half of final yr. It started to say no quickly, affecting main producers on the planet, and even forcing these main producers to take layoffs to outlive the chilly winter. However typically talking, most producers in Taiwan nonetheless preserve spectacular outcomes.
For instance, TSMC’s consolidated income final yr was 2.25 trillion yuan, an annual enhance of 42.6%, and its working revenue was 1.12 trillion yuan, an annual enhance of 72.51%. As well as, its gross revenue price was 59.56%, its revenue margin was 49.53%, and its earnings per share had been 39.2 yuan. Each hit file highs. Final yr, UMC’s income was 278.705 billion yuan, an annual enhance of 30.84%, its after-tax web revenue was 87.198 billion yuan, an annual enhance of 56.3%, and its web revenue per share was 7.09 yuan. MediaTek, an IC design producer, didn’t quit an excessive amount of. Final yr, its income reached a brand new excessive of about 548.796 billion yuan, a rise of 11.2% year-on-year, surpassing the five hundred billion yuan mark for the primary time.
As well as, the “Nationwide Statistical Bulletin” issued by the Accounting and Accounting Workplace of the Government Yuan of my nation on January 4 this yr identified that from January to November final yr, the whole worth of my nation’s built-in circuit exports reached 169.2 billion US {dollars}, rising yr by yr and rising steadily, which has surpassed the earlier yr. The annual whole worth elevated by 20.3% over the identical interval of the earlier yr, accounting for 38.1% of the whole export worth.
The above information are exhibiting that in contrast with South Korea, my nation’s semiconductor business has certainly carried out comparatively nicely prior to now yr. Because of this, all the main media in our nation are speeding to report, stuffed with joyful, joyous and comfortable scenes of an excellent harvest.
Regardless of the turbulent political and financial state of affairs and the treacherous and ever-changing market surroundings, Chinese language producers can nonetheless obtain success repeatedly, which is absolutely admirable. That is the laborious work of those firms for a few years of laborious work and laborious work. We’re pleased with the excellent efficiency of those excellent home producers. If there isn’t a main change available in the market, it’s anticipated that within the subsequent three years no less than, my nation’s semiconductor business as an entire ought to be capable of preserve these benefits.
However, there are nonetheless some challenges sooner or later improvement of the semiconductor business. The next are some observations made by the creator on the present state of affairs and improvement of mature course of producers, which needs to be worthy of consideration.
Consideration needs to be paid to the challenges led to by “non-differentiated” mature course of producers
The British “Economist” journal revealed an article ” After a turbocharged growth, are chipmakers in for a supersized bust? ” in July final yr . It’s identified that among the many new fabs added by business gamers in numerous nations prior to now few years, a complete of 34 new fabs will begin development all over the world in 2020 and 2021, and 58 new fabs are scheduled to begin development from 2022 to 2024.
Though there could also be a slight hole between the specified funding and the precise development of factories, primarily based on issues about unpredictable modifications in geopolitics and U.S.-China wrangling, resulting in the rise of protectionism and the regionalization of provide chains, many nations are enthusiastic about planning crystal factories. Spherical factories are inevitable.
There are excessive limitations to entry to attain a aggressive and robustly worthwhile fab. A number of the above-mentioned producers could stagnate on account of lack of adequate funds and assist to proceed to construct factories; some could delay the institution of factories primarily based on rational pondering because of the decline in market demand; Failure; some could withdraw from the market on account of lack of in-depth core capabilities, resulting in weak competitiveness; nonetheless, there should still be some challengers who’re sufficient to disrupt the market and even have an effect on the market.
Though the creator isn’t as pessimistic because the article in The Economist, the output of a well-operated and mature 12-inch fab is astonishing. Within the case of large-scale enlargement or development of worldwide semiconductor producers, producers ought to instantly assume and discover face the doable affect of extra chip provide sooner or later. Amongst them, those that are most straight affected needs to be producers whose principal enterprise areas are “much less differentiated” mature manufacturing processes.
The “distinction” referred to on this article doesn’t check with the 2 choices of “distinction” or “no distinction”, however refers back to the diploma of distinction, and the “much less differentiated” could face extra challenges.
After all, we aren’t comfortable to see the sharp melancholy talked about by The Economist, however these “much less differentiated” mature course of producers are more likely to face a value battle that isn’t simple to take care of in historical past, and can also face income and income. Within the battle to defend market share, it’s even crucial to chop again on meals and clothes or modify the dimensions of the group to deal with the extreme take a look at.
Semiconductor particular course of know-how
Actually, completely different producers ought to pay kind of consideration to the difficulty of differentiation, however the outcomes could also be completely different. Fortuitously, the event path of related producers in my nation in recent times has invested within the improvement of particular processes with extra variations, and a few producers have already achieved concrete and visual outcomes.
The particular course of isn’t the identical because the mainstream chip improvement technique, which goals to proceed to pursue additional shrinkage of the dimensions, however to skillfully use or combine completely different applied sciences and new supplies to provide chips with distinctive properties, and apply them in particular functions. part.
Particular course of is likely one of the sources of differentiation for producers. If a particular particular course of can be utilized to provide chips for purchasers, even when a mature course of of twenty-two or 28 nanometers is used, the producer can nonetheless create its uniqueness and procure distinctive advantages.
For instance, Molsentech, a Chinese language producer, cooperated with semiconductor producers, mixed biotechnology and semiconductor know-how, and developed a quick screening chip to interrupt by way of the PCR bottleneck. The detection time solely takes 5 minutes, and the accuracy price can attain 95%. It’s a resolution to enhance the power of early fast detection, which is likely one of the functions of particular course of.
Correct understanding of buyer wants
Producers utilizing particular processes concentrate on particular market segments and produce merchandise primarily based on buyer wants.
To attain such an anticipated objective, the producer must work together extra carefully with clients to realize an in-depth understanding of buyer wants, with a view to customise its chips for purchasers, enhance its product efficiency, and create excessive worth for purchasers. If you wish to keep away from value wars, this needs to be a future improvement alternative for mature course of producers.
Amongst them, the core know-how, capabilities and strategic assets owned by the producer are extraordinarily necessary. What’s displayed exterior is the general distinctive capacity of the producer. It isn’t simple for outsiders to mimic, and it’s not simple to be taught. If a producer can obtain such a state and create excessive worth for purchasers on the similar time, its clients are more likely to change into extremely depending on the producer, and even be locked in by the producer (luck-in), thereby rising the producer’s gross revenue margin and bringing for higher earnings.
It’s value noting that the worth generated by this distinction lies not solely within the self-improvement and affirmation of the producer itself, but in addition in whether or not it could meet buyer wants and clear up issues for purchasers. In different phrases, investing in analysis and improvement is necessary, however as a result of assets are extraordinarily restricted, producers ought to focus extra on whether or not they can receive actual worth than analysis and improvement for the sake of analysis and improvement, and this is dependent upon the necessity to carefully combine with clients. That’s to say, we must always concentrate on particular market segments and alternatives to maximise the effectiveness of producers’ restricted information, know-how and assets.
Deepen particular core applied sciences and capabilities, and strengthen strategic assets
Even so, if producers wish to obtain the objectives delivered by these clients, there are specific technical limitations to entry, and it’s really not simple. It might must develop new applied sciences and processes, combine completely different numerous applied sciences, and even develop completely different new supplies (akin to silicon carbide or gallium nitride) and use them correctly with a view to efficiently full the duty. In different phrases, producers nonetheless must proceed to enhance, deepen particular core applied sciences and capabilities, and strengthen strategic assets with a view to steadily discover and develop particular manufacturing processes.
For instance, TSMC was invited to arrange a three way partnership with producers akin to Sony and Denso in Kumamoto Prefecture, Kyushu, Japan. It’s anticipated to formally function on the finish of 2024. Different producers assume and be taught. Though the plant’s present planning is a mature course of of twenty-two to twenty-eight nanometers, it has been capable of totally produce the chips wanted for Sony’s present picture sensors.
Picture sensors are key elements of video cameras, digital cameras, and monitoring gadgets. In accordance with information launched by Omdia market analysis company in January this yr, Sony’s picture sensor market share reached 51.6% within the third quarter of final yr. , whereas the second place is Samsung Electronics with 15.6%. In an effort to compete with Sony and enhance market share, Samsung Electronics is actively increasing its funding.
For Sony, TSMC not solely has the wonderful capacity to provide the high-quality chips it wants, but in addition can receive adequate manufacturing capability by way of a three way partnership with it. As well as, with the assist of TSMC, there isn’t a want to fret about the necessity to enhance the method capability sooner or later. In different phrases, Sony mixed with TSMC’s power will be capable of extra successfully help it in opposition to Samsung Electronics with a view to preserve its market main place within the extremely aggressive industrial surroundings.
Actually, in numerous software situations, picture sensing chips with completely different traits needs to be used. For instance, in contrast with 3C merchandise, the chip within the automobile could need to face a comparatively harsh surroundings. It not solely wants to resist excessive temperature, but in addition must be extra proof against shock or excessive stress. Due to this fact, simply the product of the picture sensor could have completely different particular processes to attain the efficiency below completely different software situations, in order to satisfy the due requirements and specs.
If TSMC will be near the native market, it could serve clients straight, scale back communication and coordination obstacles, enhance operational effectivity, and totally meet the particular wants of consumers. Sony Semiconductor Options is situated in Kumamoto Prefecture, which needs to be the rationale why TSMC lastly selected to construct a manufacturing unit there. As well as, “Nikkei Information” reported final December that Sony may even construct a picture sensor manufacturing plant subsequent to TSMC’s new plant, which totally demonstrates the shut interplay and cooperation between the 2.
For TSMC, along with the massive subsidy from the Japanese authorities, this three way partnership undertaking can also be a invaluable studying and development alternative. With probably the most direct suggestions from clients, the cooperation between the 2 will additional promote the progress of picture sensor chips and create a win-win outcome. For instance, this cooperation could develop a particular new course of, or develop a particular new materials, or produce a picture sensor chip with increased high quality and extra steady efficiency, which can additional deepen TSMC’s particular course of capabilities.
In different phrases, if mature course of producers can proceed to deepen particular core applied sciences and capabilities, strengthen strategic assets, and steadily discover and develop particular processes, they’ll be capable of present particular clients with extra distinctive companies, after which eliminate the disaster of value wars.
Consideration needs to be paid to the affect of market dimension on prices
Though producers with non-differentiated mature manufacturing processes as their principal working power can use the above viewpoints to consider the doable adjustment path of the group, however as a result of the sort of operation focuses on area of interest markets, it’s crucial to concentrate as to whether the market section is adequate. dimension. Even when it’s a area of interest marketplace for producers, if the market dimension isn’t massive sufficient, it might enhance working prices and result in a decline in earnings, and producers can solely receive restricted worth in the long run.
Extending the above examples, the picture sensor market has excessive development momentum because of the gradual improvement of assorted software merchandise. Furthermore, Sony is the main producer of picture sensors, and its fast development will drive TSMC’s income to rise concurrently.
From this viewpoint, the market locked by TSMC, on the one hand, is usually to make good use of its current information, know-how and assets to reorganize and remodel, slightly than investing large R&D funds like R&D on 3 or 5 nanometers; Judging from the event pattern of autonomous driving, pictures, and surveillance gadgets, this can be a market with nice potential for improvement, and it is extremely more likely to create a substantial income contribution for TSMC. It’s a particularly smart funding.
If the producer can base on the developed particular course of (i.e. implicitly personal particular core know-how, functionality and distinctive assets), make a number of completely different modifications and changes, and additional derive completely different distinctive processes, which will be prolonged to Totally different market segments will be capable of exert higher synergy and reasonably scale back R&D prices. On this manner, the issue of small area of interest markets could also be prevented. For instance, modify and develop the aforementioned picture sensor chip in accordance with completely different situations, and apply it to completely different fields akin to medical remedy or power.
Usually this course of could require the mixing of information throughout items or domains, so you will need to have senior administration concerned. If the staff will be led by senior executives, a easy and efficient working mechanism will be constructed to advertise adequate communication and coordination inside the group, easily combine completely different applied sciences or develop new supplies, and clear up sudden sudden issues to attain expectations Goal.
epilogue
Though the worldwide affect of my nation’s semiconductor business has been acknowledged internationally in recent times, it nonetheless faces some completely different challenges. Among the many above-mentioned new factories, solely a comparatively small quantity are primarily based on superior manufacturing processes. If this example develops, it’s anticipated that after two years, there will probably be doubts concerning the oversupply of large-scale development and enlargement of semiconductor factories.
Chinese language producers basically construct factories primarily based on long-term wants and have their very own established plans; nonetheless, with a view to keep away from price-cutting competitors from opponents sooner or later, mature course of producers ought to take into consideration deploy as quickly as doable. Amongst them, constantly enhancing the distinction and rising the proportion of particular processes to acquire distinctive worth is likely one of the necessary methods that may be adopted. Even, if competitors intensifies sooner or later, producers could think about whether or not they need to steadily abandon the undifferentiated product strains which might be steadily turning into unprofitable at an acceptable time.
With the continual improvement of the world, the longer term software of semiconductors will enhance considerably, and the particular course of functions within the fields of electrical automobiles, Web of Issues, AI, and medical remedy may even change into extra numerous. It’s worthwhile for producers to consider distinctive improvement instructions primarily based on their core capabilities. In accordance with the creator’s preliminary expertise in collaborating in numerous R&D tasks, it typically takes time to speculate, and it’s not simple to finish shortly, so it must be deliberate and carried out early.
I hope that the above-mentioned doubts about a considerable amount of oversupply are simply the extreme worries of The Economist, and the affect on mature course of producers isn’t as severe as imagined. Besides, the fierce competitors within the business won’t cease. Underneath the circumstances of unfavorable circumstances, attempting to enhance the aggressive benefit is the constructive motion that producers ought to take. We earnestly sit up for these producers with mature manufacturing processes as their principal operations, giving full play to their benefits and persevering with to attain new successes within the worldwide market.
