Every country wants a state-of-the-art semiconductor factory.
Samsung
Electronics’s plan to build one in the US is taking advantage of that. But the company will have to learn to manage the ever-growing relationship between geopolitics and advanced chip manufacturing. It’s an enviable, but not necessarily comfortable, place to occupy the sovereign technological heights of the world’s most important industries in the world’s largest economy.
The South Korean tech giant plans to build a $ 17 billion facility in Taylor, Texas to make advanced chips for its contract manufacturing or foundry business. This is another step in the direction of the Biden government’s goal of promoting home chip manufacturing. Samsung rival
Semiconductor manufacturing in Taiwan
has begun construction of its $ 12 billion Arizona plant, which will go into mass production in 2024. Intel announced in March that it is investing $ 20 billion in two new factories in Arizona.
In part, those large sums only represent the larger and larger expenditures required to manufacture smaller and smaller chips. TSMC plans to spend more than $ 100 billion on chip factories over the next three years. Samsung says it will invest $ 143 billion in logic chips, albeit over a longer period of time – 2019 to 2030 – and much of that will go into research and development.
But geopolitics is the key behind it. Chip manufacturing is focused on Asia. And for the most advanced nodes, TSMC and Samsung are the only players. TSMC, which serves customers like Apple and Nvidia, had more than half of the market for the foundry business in the second quarter, according to TrendForce. Samsung ranks second at around 17% but also manufactures chips for its own use.
The increasing rivalry between China and the US means that setting up so many advanced chip factories in China’s neighborhood is becoming riskier. The pandemic has exposed further weaknesses stemming from geographically concentrated supply chains. China is also investing billions of dollars in building its own chip factories. The Huawei saga stepped up its resolve by disclosing its reliance on foreign semiconductor technology.
The advantage for chipmakers is that governments dying for their technology are willing to offer generous incentives. But that could invite a closer examination. TSMC, for example, lost Huawei as a customer due to the Trump administration’s export controls. Western politicians who urge their constituents to help fund new chip factories – especially foreign-owned ones – may end up trying to enforce more regulation as well.
Samsung and TSMC dominate chip manufacturing. Now they have to learn another form of three-dimensional chess: the increasingly strained geopolitics of high-tech supply chains.
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