The final stage of the semiconductor provide chain, the meeting, packing, and testing (APT) course of, has come to the forefront of the China-U.S. expertise competitors. The APT course of is important as a result of it provides chips protection to make sure their business functions. But, right now, the USA solely has 3 percent of world APT capability in comparison with Taiwan’s 58.6 percent. Amkor is the one main U.S.-headquartered agency specializing in APT operations, nevertheless it doesn’t have meeting vegetation in North America.
Against this, among the many prime ten APT corporations worldwide, six are Taiwanese, together with ASE, Sigurd, and Powertech. Consequently, regardless of TSMC’s forthcoming production in Arizona, it must ship most of its U.S.-made chips again to Taiwan. U.S. Consultant Jay Obernolte accurately diagnosed the issue: “It wouldn’t matter if we did 100% of our chip manufacturing onshore if the packaging remains to be offshore.”
The U.S. Commerce Division is launching a $3 billion program aimed toward constructing a home APT business. But, the U.S. try to ascertain a home APT cluster is prone to fail. That isn’t solely due to how far behind the USA is on this ever-advancing phase of the availability chain, but additionally due to the shortage of skilled labor within the nation. A brand new survey signifies that 58 percent of the 115,000 new jobs within the U.S. chip business may stay unfilled by 2030.
Behind this rising debate is China’s ascendant APT strength. The US rightfully fears that an growing variety of manufactured chips will find yourself in China to be packaged for business functions, giving Beijing rising clout on this expertise race. But, a extra imminent threat lies within the overconcentration of APT providers in Taiwan, which faces the rising risk of a Chinese language blockade and navy battle. The deteriorating geopolitical setting there makes decreasing U.S. reliance on Taiwan’s APT business an pressing problem.
As a substitute of attempting to construct a home APT cluster from the bottom up, the USA ought to tailor incentive packages to encourage U.S. chip corporations to spend money on Southeast Asia. The member states of the Affiliation of Southeast Asian Nations (ASEAN) have already got an in depth APT community; as a collective, ASEAN instructions a 22.5 percent share of world chip exports, the second largest on this planet. The extra U.S. chip firms broaden their footprints there, the extra Taiwanese APT corporations will be a part of, pushed by the need to make use of geographic concentration to cut back prices, thus diversifying the island’s APT operations.
In reality, main Taiwanese and U.S. chip firms are already becoming a member of forces in Singapore and Malaysia. These two international locations share three traits: mature semiconductor ecosystems, a sustained influx of chip-related FDI, and low geopolitical dangers.
Malaysia, as soon as often known as the East’s Silicon Valley till the technological rise of Taiwan and South Korea, has launched a comeback lately. Situated on the coronary heart of Southeast Asia, Malaysia controls 13 percent of the worldwide marketplace for APT providers. That determine will proceed to rise within the coming years. Intel, for instance, is now constructing its first abroad facility for superior 3D chip packaging within the nation.
ASE, the world’s chief in APT, has been working in Malaysia for over 30 years. The Taiwanese firm plans to additional make investments $300 million within the nation within the subsequent 5 years. On the identical time, Marketech International, a number one Taiwanese tools provider to TSMC and ASML, is finalizing a challenge to construct new manufacturing websites in Malaysia.
Singapore, although extra broadly often known as a monetary hub, can be a classy participant within the semiconductor business. Given its well-developed chip cluster, it has been a first-rate beneficiary of the business’s diversification development. In September, U.S. chipmaker GlobalFoundries opened a $4 billion manufacturing plant within the nation. Vanguard International Semiconductor, an affiliate of TSMC, is planning to construct its most superior manufacturing facility ever in Singapore. Its Taiwanese counterpart United Microelectronics Corporation, the world’s third-largest chipmaker, is constructing a $5 billion plant close by.
Furthermore, Applied Materials, a U.S. semiconductor tools maker, has began development of a brand new $450 million manufacturing facility within the city-state. As a part of its eight-year enlargement plan named “Singapore 2030,” the corporate will improve its workforce there by round 40 % to greater than 3,500.
The 2 international locations’ proximity helps mix and amplify their distinct strengths within the semiconductor business. Basically, Malaysia’s rising APT cluster and Singapore’s growing share in semiconductor manufacturing enable a chip to be produced and packaged for business functions at a detailed distance, therefore insulating these clusters from provide chain disruptions. Moreover, the international locations’ home political stability and relative geopolitical neutrality additional improve their attractiveness as an FDI vacation spot for chip firms.
The Biden administration ought to seize this joint U.S.-Taiwan diversification development towards ASEAN to cut back American dependence on the island’s APT business. It ought to make the most of focused subsidies to incentivize U.S. chip corporations to maintain this influx of FDI into Singapore and Malaysia. A rising U.S. presence there’ll function a magnet to draw different Taiwanese corporations to observe swimsuit, thus diluting the island’s APT focus. Over time, that may improve ASEAN’s attractiveness for different integral chip suppliers, making it a brand new hub of the semiconductor provide chain.
For the USA, it is a extra practical, cost-effective technique to cut back its reliance on Taiwan’s APT cluster than fostering one at residence. For ASEAN international locations, this development can function a vital stepping-stone to climb up the worth chain. For Taiwanese firms, it represents a possibility to mitigate their operational dangers in Taiwan and broaden their enterprise panorama past the island to advertise long-term progress.
