Geopolitical impacts and pandemic-induced supply chain disruptions have reshaped the supply chains of past global trading systems, and one possible direction in this regard is regional supply chains.
For the semiconductor industry, which Taiwan relies heavily on to support its economic development, the region’s supply chains can also bring about structural changes. Addressing this shift requires several strategic measures, which are described in this article.
The information technology, automotive, and telecommunications sectors are relatively closely related to semiconductors and are the main application markets for the current and future semiconductor industry.
Long-term service that starts after the car is sold
Taiwan has particularly high expectations for the automotive industry. On the one hand, the automotive semiconductor component market is currently growing at a higher rate than other industries, with semiconductors expected to account for 50% of automotive manufacturing costs by 2030. Taiwan, which has overcome the “engine wall”, has a high possibility of realizing the dream that has been overlooked in the process of industrialization so far.
The automotive industry is much more complex than consumer electronics. The end of manufacturing and sales means the beginning of long-term service. The average lifespan of a U.S. car is about 12 years, and considering the statistical long tail, the repair parts inventory requirement could be as long as his 20 years.
Legislation, infrastructure, recalls, and other key factors affecting market conditions and operational risks require long-term deployments to address and are largely beyond the control of automakers alone. Given its years of effort toward regional expansion, it’s no wonder Toyota feels comfortable facing so many electric and self-driving vehicle start-ups.
Taiwan’s strong foothold in the semiconductor industry certainly encourages expansion into the EV and self-driving vehicle sector, but profiting from this sector is not always a foregone conclusion. Localized Supply His chain requires strong support of local elements, from component manufacturing to product maintenance. With the aforementioned major factors facing the auto industry, if Taiwan wants to establish a regionalized service across the auto industry chain with its own brand, it will be like building a skyscraper from the ground up.
What if you were only in the semiconductor parts business? After all, such components could account for his 50% of car manufacturing costs, and in the long run he could rise to as high as 70%. Even if Taiwan can no longer provide full process services for entire vehicles and its own car brands, the semiconductor components alone are a very large market, perhaps larger than the computer and mobile phone markets combined.
However, some auto parts require customization and the product validation process can take a very long time, while the guaranteed supply period is far beyond what a typical wafer fab would normally be willing to accept. I’m here.
Vertical specialization of automotive semiconductors progresses
From the perspective of a car factory, if most of the main economic value of the product is generated by other industries, the factory is in danger of becoming an assembly plant. Additionally, automakers have suffered shortages of both traditional auto parts and semiconductor components during the pandemic, prompting them to consider extending vertical integration into semiconductor design and manufacturing, especially power devices for EVs. It is For example, Bosch and BYD already have their own wafer fabs to manufacture their own designed power components.
This is a new phenomenon. In fact, similar considerations began as early as the era of mobile phones. For example, Huawei founded Hisilicon to take advantage of the most important value-added chip segment of mobile phones. Tesla and General Motors’ self-driving car subsidiary Cruise have also started designing their own L4 and L5 high-end ADAS (advanced driver assistance system) chips, but are currently still in the chip circuit design stage.
IC design houses and wafer fabs that partner with automakers can significantly reduce chip product verification time by facilitating internal communication during the verification process. In the early stages of development, such design houses and fabs can easily survive under conditions of stable supply and demand, but the downside is that they are less likely to have outside customers and are less likely to have conflicts of interest. It is difficult to avoid the possibility.
Looking back at the history of semiconductor development, many system vendors have gone through stages of vertically integrating the design and manufacturing of system products and semiconductor components. A typical example is RCA (Radio Corporation of America), which was the first to transfer semiconductor technology to Taiwan.
However, most of these vertically integrated fabs eventually dissolved. One of the main reasons is that the aforementioned conflicts of interest impede the growth of economies of scale in the business, which in turn constrains the growth of operating income and available R&D funding. This amounts to a dead end for high-tech industries that require constant capital injections to support their R&D projects.
The electrification and autonomous driving of the automotive industry has created a new fast-growing market for the semiconductor industry. However, regional supply chain trends and phenomena, and the vertical integration of automotive manufacturing and wafer design and manufacturing are also posing challenges to the semiconductor industry, and a strategic response to these two challenges is inevitable.
(Editor’s Note: Albert Rin I got my Ph.D. He graduated with a Bachelor of Science degree in Physics in 1988 and taught at the National Central University before moving into the technology industry. Rin He was a director and vice president of ProMOS Technologies and president of ConDel International Technologies. He was an advisory member of Taiwan Semicon, chaired the Lithography Forum, and chaired the Supervisory Board of the Taiwan Semiconductor Industry Association. now, Rin Visiting Researcher, Department of Physics, National Taiwan University. His main research fields are new materials, new mechanisms, and basic research on quantum information. He is the permanent director of the Taiwan Quantum Computing Information Technology Association. )
https://www.digitimes.com/news/a20230105PD200/automotive-ic-semiconductor.html Semiconductor Industry Opportunities and Challenges in Automotive Applications (1)