The second part of our discussion with Stephen Rothrock, ATREG’s CEO & Founder and Pierre Cambou, Principal Analyst at Yole Intelligence, part of Yole Group, centers around how to ensure chip supply amid growing geo-political tensions and economic realities affecting semiconductor production.
As highlighted in last week’s article, new competitors entering the global marketplace are slowly shifting the geographic focus of the semiconductor industry while U.S. and European governments are implementing measures to encourage local chip production with their own CHIPS Acts.
The significant investments made to increase domestic chip manufacturing capacity will mean re-shoring or “friend-shoring” as partnerships are established to ensure supply.
Yole Group’s analysis is based on the following annual products: Overview of the Semiconductor Device Industry – Status of the Power Electronics Industry – Status of the Compound Semiconductor Industry – Status of the CMOS Image Sensor Industry – Status of the MEMS Industry – Status of the Memory Industry -Focus on Kioxia, as well as the Wafer Fab Equipment Market Monitor.
“By 2028, the U.S. will have gained more control over its semiconductor production,” explains Cambou. This will be either U.S.-based production through re-shoring or added chip capacity via “friend-shoring,” mainly produced in the EU through high subsidies to U.S. players. Samsung will invest much more than TSMC and should expand quicker, creating more competition.
The EU will gain secure supply chains, but will not own them, Cambou points out. TSMC will be less of a duopoly with Samsung, with Intel likely to become the second and third man in an open foundry market, which also counts GlobalFoundries, UMC and SK Hynix as players.
Foundries of all sizes are a factor to be reckoned with. “GlobalFoundries has moved up significantly since their IPO and they are set to expand market share in the U.S., Europe, and Singapore, taking advantage of the incentives on offer in a once in a decade race to more scale,’ notes Rothrock.
Can countries really become self-sufficient?
Stephen Rothrock ATREG’s CEO & FounderThe global semiconductor ecosystem is so interconnected and intertwined that even with the most massive investments, it is practically impossible for any country, or even region, to be self-sufficient when it comes to hosting an entire semiconductor supply chain providing everything needed around a wafer fab,
Global car makers have figured this out following the Covid pandemic during which they saw their manufacturing plants grind to a halt due to the shortage of electronic components. They have formed direct alliances with chip makers (for example, Ford and GlobalFoundries or Volkswagen and STMicroelectronics) to secure their chip supply chain and the production of electric vehicles that are in high demand.
Infrastructure-rich semiconductor clusters will be crucial to success. “As part of the U.S. CHIPS Act, we anticipate that at least two U.S.-based manufacturing clusters will be built to produce the most advanced types of logic chips, as well as facilities for other chip kinds, with complex supply networks to support them,” Rothrock adds.
But, in order for the clusters to support the complex needs of newly built greenfield fabs, endemic fab ecosystem issues first need to be addressed. “We need to curb rising inflation impacting the cost of materials and solve fundamental supply chain issues,” explains Rothrock. “There needs to be regional support for the creation of highly skilled fab jobs as well as reform for the permits, certifications, and entitlements that are slowing down fab construction in the U.S. If a fab in Taiwan can be built in less than 24 months, why couldn’t we do the same?”
Other actions will be required to solve challenges exacerbated by the Covid pandemic – increasing geopolitical tensions, rising capital and operational expenditures, shorter product and demand cycles, longer lead times for components and equipment, doubling fab construction costs, and sustainability issues.
Advice for chip makers
Rothrock urges global semiconductor companies to consider every alternative available to ensure capacity. “Leave no stone unturned when it comes to considering manufacturing options. Greenfield fabs with CHIPS Act funding is one, but it will take years to come online and yield, plus the competition for those public funds will be fierce” he says. “The other alternative to consider is brownfield as these fabs are already operational, fully staffed, and most time come with a long-term supply agreement,” he adds.
Although legacy fabs are few and far between at any one-time, operational fab assets will become available on the market as chip makers wishing to go fab-lite or fabless transition their production out to foundries. “Companies in compound semi, GaN, GaAs, SiC, and MEMS in particular are looking to purchase brownfield fabs to ensure their supply chain resilience,” concludes Rothrock.
The dynamics of certain device markets such as power electronics are in fact contributing to rethink the semiconductor landscape. Existing semiconductor hotspots will benefit from the surge in investment, but not only.
Pierre Cambou Principal Analyst at Yole Intelligence, part of Yole GroupWe see the opportunity for the emergence of new semiconductor clusters in the United States as well as in Europe, the Middle East and Asia.
Local has become a very global concept in the world of semiconductors.
For more information about Yole Group and ATREG’s activities, do not hesitate to contact us: firstname.lastname@example.org
About the authors
Stephen Rothrock founded ATREG in 2000 to help global advanced technology companies divest and acquire infrastructure-rich manufacturing assets, including wafer fabs and cleanrooms. Over the last 24 years, his firm has completed more than 100 transactions, representing over 40% of all global operational fab sales in the semiconductor industry for operational, warm, and cold shells.
Prior to founding ATREG, Stephen established Colliers International’s Global Corporate Services initiative and headed the company’s U.S. division based in Seattle, Wash. Before that, he worked as Director for Savills International commercial real estate brokerage in London, UK, also serving on the UK-listed property company’s international board. He also spent four years near Paris, France working for an international NGO. Stephen holds an MA degree in Political Theology from the University of Hull, UK and a BA degree in Business Commerce from the University of Washington in Seattle, USA.
Pierre Cambou, MSc, MBA serves as Principal Analyst in the CTO Office of Yole Intelligence, part of Yole Group. His mission is dedicated to market and technology analyses of the semiconductor industry.
At Yole, Pierre has authored more than 20 Yole Market & Technology reports and 16 Quarterly Monitors. Acknowledged as an expert in the semiconductor industry, Pierre is regularly interviewed and quoted by leading international media. Previously, Pierre held several positions at Thomson TCS, which became Atmel Grenoble (France) in 2001 and e2v Semiconductors in 2006. In 2012, he founded a semiconductor start-up that was later acquired by Wx Solutions.