Northeast Asia accounts for three quarters of world semiconductor manufacturing

The global semiconductor manufacturing landscape

Northeast Asia accounts for three quarters of world semiconductor manufacturing. As a result of relatively low-tech, capital-intensive semiconductor supply chain activities such as packaging and testing, China dominated the global semiconductor market, followed by Taiwan and Malaysia.

It is the United States that leads the world in the most knowledge-intensive areas of semiconductor production. In 2019, half of the top 20 chip design companies ranked by revenue are headquartered in the United States; four of the top five semiconductor EDA companies that have core intellectual property are headquartered in the United States ranked by revenue.

While China and the United States excel in packaging, testing, and chip technology design, they rank fourth and fifth among wafer manufacturing companies. In terms of overcoming the bottleneck of semiconductor material production - advanced process management for wafer manufacturing - Taiwan and South Korea play a crucial role. According to data, Taiwan's TSMC and South Korea's Samsung account for 100% of global innovation capacity in researching 7 nm and 5 nm chips (with an approximate split of 92% for Taiwan and 8% for South Korea). This market domination means that any natural disasters, issues with basic education infrastructure, or geopolitical conflicts could result in a global shortage of chips due to their dependency on these two countries.

Currently, Taiwan is facing increasing challenges with its electricity and water supply. Reports have indicated that in March 2022, the entire island experienced a major power outage. Along with these issues with infrastructure, the semiconductor industry in the area has also voiced concerns about brain drain in recent years. As one practitioner in Taiwan stated, "The scarcity of semiconductor engineers here is compounded by the aging out of older generations and the younger generation seeking higher pay opportunities in China, where there is also a shortage of semiconductor engineers." This trend persists despite efforts by the Chinese government to limit immigration into their country.

A global chip shortage will be avoided in the wake of the COVID-19 pandemic if China and the United States prioritize onshore semiconductor manufacturing capabilities over the next decade. There are risks to the semiconductor supply chain from uncontrollable factors, such as natural disasters, international political crises, and wars, and both countries are putting their own plans in place.

manufacturing landscape increasing challenges

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