The Global Race for Semiconductor Dominance.

One of the highlights of my 4 years in engineering was the significant amount of time I spent in the Electronics lab. It quickly became my favorite part of the entire experience :)

As an electronics engineer, I was exposed to a wide range of topics, starting from the basics of semiconductors and their build to the various applications they are used in.

A miniature model for anyone who has worked with semiconductors will be with a PCB (Printed Circuit Board). I still remember soldering those .47 uFd capacitors or 220-ohm resistors or 74xx series integrated circuit (IC) chips to these designed circuit PCB boards. However, connecting them to a signal generator in order to witness the resulting outputs is a different level of experience. There's no better thrill than the joy of experiencing it :)

Anybody working close to these experiments will easily realize the power and potential of chips and integrated circuits.

But to what extent it will change the world was uncertain.

And I must say in a way it is revolutionary!

So, What Are Semiconductor Chips? 

Google Definition. It's Complex. Don't you think?

In simple terms, semiconductor chips play a vital role in enabling the functionality of the systems and products we rely on every day for communication, automobile, entertainment, game controllers, etc. They are an essential component in most electronic devices, spanning various industries. A semiconductor chip, also known as an integrated circuit (IC) or microchip, is a small electronic device made from a semiconductor material such as silicon. And fascinating part is they can handle multiple tasks such as processing, memory, storage, logic control, digital communication, sensing & detection, and power management.

Whether it's your child's monitoring devices, game controllers, or even household appliances like laundry machines, these chips are integral to their operations.

Google Image. Added Text by Anishia.

Now that you know what a semiconductor chip is, Let's understand how are semiconductor chips globally manufactured. Like massive production!

For that, you need to understand the semiconductor supply chain.

The global semiconductor supply chain can be divided into 3 major areas: 1) Designing, 2) Manufacturing, and 3) Packaging/Assembly.

In terms of designing semiconductors, the United States takes the lead, while Japan excels in manufacturing, and China specializes in packaging and assembly.

The complexity of designing semiconductor chips arises from their small size, often reaching up to approximately 10 nanometers (nm).

To visualize this, consider that a single human hair strand is roughly 50,000 to 100,000 nanometers thick. So, the features in a 10 nm chip are significantly smaller than the width of human hair!!!

Besides that, the design process requires expensive machinery, such as photolithography equipment, which can cost around $250 million USD. This significant investment explains why many countries and companies hesitate to venture into semiconductor chip design. Of course, there are numerous other factors contributing to this reluctance to take on the risky endeavor.

Well, Anishia, it's not a major hurdle. The countries that are capable of investing and funding this costly process will dominate semiconductor manufacturing.

Wouldn't you agree?

Yes, That’s correct.

 But there is a twist in the plot … the Year 2020/2021.Yep !

Semiconductor supply chain bottlenecks dominated news headlines in 2021.

Disruption to the semiconductor industry received perhaps the most publicity, after all these tiny little computer chips have such a wide-ranging application over all other industries.

The global chip shortage that emerged in 2021 (followed by 2022) was a result of the pandemic's onset. Large automotive companies canceled chip orders due to a sudden drop in consumer demand, as the world went into lockdown. Consequently, chip manufacturers retooled their plants to cater to the increased demand for consumer electronics, personal computing, home fitness machines, and other related products. However, as stay-at-home orders were gradually lifted, global automobile demand surged, catching chip manufacturers off guard. They were unable to keep up with this sudden increase in demand, leading to a massive chip shortage during that time.

Image Google News

The catastrophic global supply chain shortage of chips in 2020/2021 served as a wake-up call for nations worldwide, prompting them to take necessary actions.

 These actions included:

·       Increasing semiconductor chip manufacturing capacity.

·       Implementing legislation and bills that support domestic investments.

·       Striving for self-sufficiency and boosting domestic/international manufacturing and designing capabilities on a large scale.

·       Strategically considering the sanctioning and un-sanctioning of new chip partners.

·       Encouraging chip manufacturers to not only focus on mass production but also to think long-term and invest in futuristic chips, including those for AI and quantum computing.

·       Constructing new facilities, sourcing new raw materials, and reducing overall manufacturing costs.

And in 2022...

US Senate passed the "Chips and Science Act". It was a monumental moment in history. The "Chips and Science" act was aiming to provide approximately $52 billion in government subsidies for US semiconductor production and includes an investment tax credit estimated to be worth $24 billion for chip plants. It was an optimistic move from the US and partner countries.

Chips and Science Act of 2022.Refer https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-strengthen-supply-chains-and-counter-china/

This transformative shift in the industry was not limited to the US alone.

Astronomical investment plans, combining both public and private sectors, are now being announced with the aim of reshaping the global semiconductor landscape. Countries such as India, China, Japan, Korea, and various others also took action in response to this opportunity.

Let’s take the example of a few of them that are running the race for semiconductor dominance today.

• Samsung Electronics (South Korea), a global semiconductor giant, plans to invest US$234 billion in constructing five cutting-edge semiconductor fabs(fabrication facilities) in Yongin, Gyeonggi Province, South Korea. Additionally, Samsung is proceeding with the construction of three fabs in Pyeongtaek, Gyeonggi Province. Furthermore, it has committed to investing US$192.1 billion in building 11 fabs in Texas, United States, by 2034. Refer http://www.businesskorea.co.kr/news/articleView.html?idxno=111438

• Intel, a leading American semiconductor company, has announced its intention to invest up to US$210 billion globally in the semiconductor sector. The company's plans include a US$100 billion expansion in Ohio, United States, and US$80 billion investment in Europe to significantly expand production facilities. Refer https://www.cnbc.com/2022/01/21/intel-plans-20-billion-chip-manufacturing-site-in-ohio.html

• Micron Technology, an American chip manufacturer, has revealed plans to invest up to $825 million in establishing its first chip assembly and test facility in Gujarat, India. This move aims to reduce America's reliance on China for semiconductors. The total investment, with support from the Indian central government and the state of Gujarat, is anticipated to reach $2.75 billion. The collaboration between India and the U.S. in the semiconductor sector serves as a strategic response to counter China's dominance in cutting-edge technologies. Refer https://www.reuters.com/technology/micron-signs-preliminary-agreement-india-chip-facility-2023-06-28/

• The Japanese government, through the Japan Investment Corporation, has proposed a $6.3 billion acquisition of JSR Corporation, a major company in the semiconductor supply chain in an area known as photoresists, where Japan is one of the world leaders. Japan's focus on strengthening its position in chip fabrication aligns with its commitment to maintaining its status as a nation that excels in building advanced technologies. Refer https://www.cnbc.com/2023/06/26/japan-backed-fund-to-buy-semiconductor-firm-jsr-for-6point3-billion.html

• China, aiming to establish itself as a semiconductor powerhouse, has embarked on an ambitious investment spree. Between 2021 and 2022, Chinese semiconductor industry research firm JW Consulting recorded a staggering investment of over US$290.8 billion in semiconductor-related projects across 25 provinces and regions. The allocated funds were primarily directed towards semiconductor equipment and materials. The surge in investment projects highlights China's ongoing efforts to bolster its semiconductor industry, with consistent year-on-year growth in new and continuing projects. Refer https://www.digitimes.com/news/a20230627VL205/china-ic-manufacturing-semiconductor-chips+components.html

The global race for semiconductor investment and future dominance has reached unprecedented levels, with major players such as Samsung Electronics, Intel, Micron Technology, and other companies investing billions of dollars to solidify their positions.

Simultaneously, several countries are implementing strategic plans to secure their semiconductor fabrication capacities and reduce reliance on other nations.

This intense competition is set to reshape the semiconductor industry and determine the global balance of power in cutting-edge technologies.

The race has officially begun! 

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the perspectives or opinions of the author's employers.

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