American silicon dominance
The tone of comment on Intel's July announcement that the company was considering outsourcing manufacturing was that it marks the end of an era in which both the company and the United States dominated the semiconductor industry. The move could reverberate far beyond Silicon Valley, affecting global trade and geopolitics.
The California company from Santa Clara has been the largest manufacturer of integrated circuits for several decades. This brand combines the best developments and the most modern processor plants. Notably, Intel still had manufacturing facilities in the US, while most other US manufacturing companies chips closed or sold domestic factories many years ago and outsourced component production to other companies, mostly in Asia. Intel argued that the retention of manufacturing in the US proved the superiority of its products over others. Over the years, the company has spent tens of billions of dollars upgrading its factories, and this was seen as a key advantage that kept the company ahead of the rest in the industry.
However, recent years have been a series of unpleasant events for Intel. The company failed the preparation process silicon wafers with 7 nm lithography. It is not known how long it will take to find defects, but it will have to be produced. The first 7nm products produced in our own factories on a larger scale are expected in 2022.
According to media reports, Taiwan Semiconductor Manufacturing Co (TSMC), currently the world's leading semiconductor manufacturer, will manufacture the Intel chips (1). Issues with the transition to 7nm, as well as manufacturing efficiency in other processes, led Intel to contract with TSMC to manufacture some of these chips in the 6nm process. What's more, reports say TSMC will be good for Intel as well. processors, this time in 5 and 3 nm manufacturing processes. These Taiwanese nanometers are considered slightly different, for example, TSMC's 6nm is considered to be about the same packing density as Intel's 10nm. In any case, TSMC has no production problems, and Intel is under constant competitive pressure from AMD and NVidia.
After CEO Bob Swan Intel said it was considering outsourcing, the company's share price fell 16 percent. Swan said the location where the semiconductor is made is not that big of a deal, which is 180 degrees different from what Intel had previously said. The situation has a political context, as many American politicians and national security experts believe that the delegation of advanced technologies abroad (indirectly to China, but also to countries that China influences) is a potentially huge mistake. for example chipped xenon Intel SA is the heart of the computers and data centers that support the design of nuclear power plants (see also: ), spacecraft and aircraft operate in reconnaissance and data analysis systems. So far, they've mostly been made in factories in Oregon, Arizona, and New Mexico.
The development of smartphones and other mobile devices has changed the semiconductor market. Intel took on projects assembly of mobile chipsetsbut never made it a priority, always prioritizing computer and server processors. When did it start smartphone boom, phone makers used processors from companies like Qualcomm or developed their own, like Apple. Year after year, Taiwan's TSMC's large chip factories crowded out other components. While Intel, TSMC produces over a billion a year. Due to scale, the Taiwanese company is now ahead of Intel in manufacturing technology.
By offering to outsource the production of silicon components to the public, TSMC has irrevocably changed the industry's business model. Companies no longer need to invest in production lines, they can focus on developing new chips to perform new functions and tasks. This used to be a significant barrier for many companies. Systems engineering is an investment of millions, and an investment in own production is billions. If you don't have to take on the latter, you're more likely to have a successful new project.
To be clear, Taiwan is not an enemy of the United States, but the proximity and lack of a language barrier with the PRC raises concerns about the possibility of leakage of secret equipment. In addition, the very loss of US hegemony is also painful, if not in the design of processors, then in the field of production methods. AMD, an American company, the largest competitor to Intel in the laptop market and in a number of other segments, has been manufacturing products at TSMC factories for a long time, the American Qualcomm cooperates without problems with manufacturers from mainland China, so Intel symbolically represented the American tradition of chip production in the country.
The Chinese are ten years behind
Semiconductor technology is at the heart of the US-China economic rivalry. Contrary to appearances, it was not Donald Trump who began imposing restrictions on the export of electronic components to China. Bans began to be introduced by Barack Obama, introducing an embargo on the sale, including Intel products. Companies such as ZTM, Huawei and Alibaba are receiving massive funding from the Chinese authorities to work on their own chips. China is pooling government and corporate resources for this. There are incentive programs aimed at attracting specialists and the most talented engineers from other countries, especially, which is important in the light of the above information, from Taiwan.
The US Department of Commerce recently announced that after semiconductor chips manufactured using equipment manufactured by US companies cannot be sold to Chinese Huawei without its prior approval and license from the US Department of Commerce. The victim of these sanctions was the Taiwanese TSMC, which was forced to abandon production for Huawei, which will be discussed later.
Despite trade wars America remained the world leader and largest supplier of semiconductors, while China was America's largest buyer. Prior to the 2018 pandemic, the United States sold $75 billion worth of semiconductor chips to China, about 36 percent. American production. Industry revenue in the US is highly dependent on the Chinese market. Paradoxically, U.S. government sanctions could end up destroying the Chinese market as the Chinese manage to create their own comparable products, and in the short term, chip suppliers from Japan and Korea will benefit from willingly filling the void left by the U.S.
As we mentioned The Chinese are investing a lot in research and development in this industry.. Many centers are being set up, such as on a university campus on the outskirts of Hong Kong, where a team of engineers led by Stanford-educated Patrick Yue is designing computer chips for use in a new generation of Chinese-made smartphones. The project is partially funded by Huawei, the Chinese communications and telecommunications giant.
China makes no secret of its desire to become technologically self-sufficient. The country is the world's largest importer and consumer of semiconductors. Currently, according to the industry organization SIA, only 5 percent. participate in global semiconductor market (2) but they plan to produce 70 percent. all the semiconductors it uses by 2025, an ambitious plan spurred on by the US trade war. Many are skeptical of these plans, such as Piero Scaruffi, a Silicon Valley historian and artificial intelligence researcher, who believes that the Chinese are now about 10 years behind the top manufacturers when it comes to silicon technology, and three to four generations behind them. companies like TSMC. in the field of production technologies. China has no experience production of high quality chips.
2. Shares in the global semiconductor market according to the SIA report published in June 2020 ()
Although they are getting better and better at designing chips, US sanctions have made it difficult for Chinese companies to enter the market. And here we return to the cooperation between TSMC and Huawei, which has been suspended, which makes the future of Chinese chips adapted to work in the 5G Kirin(3) network unclear. If Qualcomm does not get US government approval to supply snapdragons, the Chinese will only contributions . Thus, the Chinese company simply will not be able to offer smartphones with chipsets of the appropriate level. This is a colossal failure.
So for the time being, it looks like the Americans are failing, such as the need to transfer production by the flagship processor manufacturer Intel to Taiwan, but the Chinese are also under attack, and the prospects for their forging in the silicon market are far and fuzzy. So maybe this is the end of American absolute dominance, but that doesn't mean any other hegemon will emerge.
