Chip giants bet on Southeast Asia

The global shortage of semiconductor chips has become a focus over the past two years. On the other hand, the supply chain shock and unprecedented demand caused by the pandemic have triggered shortages globally and in some key industries, so chip giants have taken actions to prevent and alleviate such shortages. Southeast Asia is becoming a "treasure place" for chip giants to bet on.

Southeast Asia has a unique neutral regional positioning, has a complete and diverse semiconductor ecosystem, and is deeply integrated into the global value chain. When looking at various countries in Southeast Asia, Singapore's human capital, infrastructure and friendly business environment make it a natural port of call. The Philippines, Malaysia, Thailand, Vietnam and Indonesia have a skilled labor and talent base that can support back-end manufacturing of complex chips. Countries in Southeast Asia have welcomed diversified investments from chip giants.

Singapore is an important semiconductor manufacturing base. It is home to Micron's global operations headquarters, three memory fabs, and an assembly and test facility. It is also home to Infineon's Asia Pacific headquarters, which manages key functions including R&D, supply chain, sales and marketing. At the same time, GlobalFoundries and UMC both have wafer fabs in Singapore, producing chips with up to 40nm processes. Large OSAT companies including ASE and Changdian Technology also have assembly and testing plants in Singapore.

Global chipmakers are investing close to US$200 billion in Singapore to reduce risks and improve supply chain resilience, according to July estimates from The Business Times. The major investments made by major factories this year include:

French wafer manufacturer Soitec said in July 2022 that it would invest 400 million euros to expand the scale of its Pasir Ris factory in Singapore. The addition will enable Soitec to produce 2 million 300mm wafers by 2026, accounting for 10% of its global production capacity. of two-thirds.

U.S. wafer foundry GlobalFoundries announced an investment of US$4 billion to expand its manufacturing capabilities. In June this year, GlobalFoundries said it had begun moving into its new factory. The factory is expected to reach full capacity in early 2024 and will expand its production capacity in Singapore. Increase to 1.5 million 300mm wafers per year.

Taiwanese semiconductor company UMC said in February 2022 that it would invest US$5 billion in a new factory in Singapore to produce 22- and 28-nanometer chips to capitalize on demand for 5G and automotive electronics. The facility, located next to the existing 300mm wafer fab in Pasir Ris, is expected to have a monthly production capacity of 30,000 wafers when production begins in late 2024.

Penang, Malaysia, known as the Silicon Valley of the East, has successfully transformed into Malaysia's leading electrical and electronics (E&E) center. According to SEMI data, Penang, Malaysia accounts for approximately 8% of the back-end output of the global semiconductor industry, making it the world's leading microelectronics company. Assembly, packaging and test areas.

On November 10, 2022, ASEM broke ground on its new chip assembly and testing factory in Penang, Malaysia. ASEM's new factory will include 2 buildings (Factories 4 and 5) with a construction area of ​​982,000 square feet , located in the Bayan Lepas Free Industrial Zone, the core focus of the plant is on high-demand packaging product types, including copper clips and image sensors.

Reference images of ASEM’s new building in Bayan Lepas Free Industrial Zone (Photo: Business Wire)

In addition to the field of packaging and testing, Malaysia also has some major components and power semiconductor manufacturers.

Taiyo Yuden, a major MLCC manufacturer, announced on September 21, 2022 that because it is optimistic that the demand for MLCCs will continue to expand in the future, it will invest approximately 18 billion yen in its subsidiary "TAIYO YUDEN (SARAWAK)" in Sarawak, Malaysia. ) SDN. BHD." will build a new MLCC factory. The new factory is expected to be completed in March 2023.

Currently, Bosch is building a new semiconductor testing center in Penang, Malaysia. By 2023, the center will be used to test finished semiconductor chips and sensors.

2022年7月15日，英飞凌科在马来西亚居林新建的最先进晶圆厂举办了奠基仪式，该工厂投资超过 80 亿令吉，将显著增加公司的SiC和GaN的功率半导体制造能力，预计该工厂将于 2024 年第三季度完成建设。

Lam Research is the first wafer manufacturing equipment manufacturer to set up a manufacturing plant in Malaysia, and it is also the company's largest manufacturing plant. The picture below is a new manufacturing plant built by Lam Research in Batu Kawan, with a construction area of ​​800,000 square feet. The investment amount is RM1 billion. According to semianalysis estimates, more than 1/3 of Lam Research's future manufacturing capabilities will be in Malaysia.

1 billion Lam Research Malaysia factory located in Batuka Bay. (Image source: Lam Research)

However, with the implementation of production expansion and factory construction in Malaysia, a major challenge faced by Malaysia is the shortage of workers. A survey of 80 of its members by the Malaysian Semiconductor Industry Association (MSIA) in November 2021 concluded that the industry urgently needs at least 30,000 workers.

Thailand is the world's 13th largest manufacturing base for electronic products and components. In the printed circuit board (PCB) market, Thailand is the world's seventh largest exporter. Thailand is "loved" by Japanese semiconductor manufacturers in particular. Sony, ROHM, Samsung, Murata, Toshiba, Kyocera, etc. have all established Fabs in Thailand. Thailand is a gathering place for Japanese companies to make long-term investments. In addition, NXP, Western Digital, and Microchip Technology also have factories in Thailand.

Sony is the world's largest image sensor maker, controlling about half of the market. On November 13, 2022, Sony Group will invest approximately 10 billion yen (US$70.7 million) to establish a semiconductor factory at its production base in central Thailand. The factory will begin operations in the fiscal year ending in March 2025 and will mainly use For manufacturing image sensors. Sony, which currently handles much of the front-end and back-end processes for automotive sensors at its Japanese factories, now plans to focus its efforts in Japan on front-end processing and let its Thai operations take over the rest.

Murata is the world's largest supplier of capacitors, the tiny components that store and discharge electrical charges in smartphones and other devices, and is a component manufacturing supplier to Apple. On November 14, 2022, Murata announced that it had begun construction of a factory to produce capacitors in Thailand. This is also Murata's first time to produce MLCC products in Thailand. The new factory costs 12 billion yen and will be put into operation in October 2023. Balancing production between Japan, China and Southeast Asia. Murata previously operated a factory in Thailand that produced sensors and other electronic equipment.

Kyocera, the king of electronic ceramics, announced in November 2021 that the company plans to build a new semiconductor packaging factory in Vietnam, with an estimated investment scale of approximately 10 billion yen. The new plant is currently in the detailed design stage and is planned to be operational between the end of 2022 and early 2023.

Thailand has a large human resource pool, with 750,000 people currently working in the electrical and electronics industry in Thailand, and the government is actively stepping up efforts to improve workforce skills to support rapidly changing technologies. Additional tax benefits are also provided to encourage companies to engage in human resource development. Reducing labor costs is a key factor in achieving competitiveness, so doing business in Thailand, where labor costs are relatively low, will be of great benefit.

Previously, Thailand also introduced incentives for semiconductors. The Thailand Board of Investment (BOI) stated that companies with R&D expenditures of no less than 1% of their total sales in the first three years, or no less than 200 million baht, will receive up to 5 Years of additional corporate income tax exemption, the number of additional years depends on the amount invested in R&D. For companies that increase R&D investment in their main business, the maximum joint tax holiday is 13 years.

Vietnam has become the second choice for manufacturing companies due to its proximity to China. Vietnam is not a newcomer to the semiconductor industry. The country’s first semiconductor factory, Z181, was established in 1979 to produce and export semiconductor components to the Eastern Bloc during the Cold War. The collapse of the Soviet Union and the ensuing trade embargo ended the country’s development. A first foray into semiconductor capabilities.

However, the desire to enter the global semiconductor value chain remains. In order to attract high-tech investment, Vietnam's industrial and technology policies have always given the highest incentives to high-tech projects, including reductions and exemptions from corporate income tax and sales tax, and exemption from land rent. Vietnam also has one of the most open economies in the world, with 15 free trade agreements. For example, in 2015, Vietnam and South Korea signed the Vietnam-Korea Free Trade Agreement (VKFTA). Under the VKFTA, Vietnam has canceled 31 tariff items levied on South Korean electronic products and components, which has also prompted South Korean semiconductor giant Samsung to build factories in Vietnam.

Vietnam's advantage over its regional neighbors also lies in talent. More than 40% of Vietnamese college graduates major in engineering, and Vietnam has ranked among the 10 countries with the largest number of engineering graduates. Semiconductor companies can have young engineering talent at relatively low cost.

However, the weaknesses of Vietnam's investment environment include poor infrastructure, weak intellectual property enforcement, cumbersome procedures, underdeveloped supplier networks and lack of local skills.

Samsung makes semiconductors for the world's largest memory chip maker. Samsung has a total of six factories in Thailand. Earlier this year, Samsung invested US$920 million in its electronic components factory in Thai Nguyen. At the end of August 2022, Samsung plans to invest another US$3.3 billion in Vietnam to continue to expand its business in Vietnam. At the same time, it will test and produce FC-BGA high-performance semiconductor packaging substrates in Taiyuan Province in northern Vietnam, and plans to officially start batch production in July 2023. Production. Some of the $3.3 billion investment commitments have already been realized, including $841 million for Samsung Electronics HCMC CE Complex (SEHC) and $1.187 billion for Samsung Electro-Mechanics (Vietnam) Co., Ltd. -Mechanics).

Korean manufacturer Hana Micron's main business is memory semiconductor packaging and testing, and its main customers are Samsung Electronics and SK Hynix. In November last year, it won orders for DRAM and NAND memory packaging and post-test processing from SK Hynix. According to industry sources, the contract is worth 1 trillion won and will last until 2027. Due to a significant increase in the number of SK Hynix memory semiconductor packaging and testing, Hana Micron has decided to increase the number of employees at its Vietnam factory to 3,000 by 2025.

More and more investors are interested in this sector of the Vietnamese market. Intel is a typical example. When Intel Group CEO Pat Kissinger met with Vietnamese Prime Minister Pham Minh Trinh in May this year, he said that Vietnam is a dynamic economy with a potential market of nearly 100 million people, making it an attractive destination for investors. Intel invested US$1 billion to build a chip assembly and testing factory in Vietnam many years ago. Until now, the factory is still an important production base of the Intel Group. In a recent meeting with Vietnamese leaders, Intel emphasized that it will expand the scale of investment in Vietnam, and the investment amount will be several times higher than before.

At the end of December 2021, Amkor Technology signed an agreement to build a US$1.6 billion semiconductor manufacturing plant in Bac Ninh province. Bac Ninh province is home to global manufacturers such as Foxconn, Samsung and Canon. On Amkor's third-quarter earnings call, Amkor said its factory project in Vietnam is proceeding as planned.

In addition to the above-mentioned companies, EDA software giant Synopsys is also investing in Vietnam and is transferring its investment and engineering training from China to Vietnam. In addition, there are companies such as Renesas, Applied Micro, Splendid, and Sonion, but the project scale is relatively small.

As we all know, India has great advantages in designing chips. Bangalore in India is one of the largest chip design centers in the world and is known as the "Silicon Valley of India".

The expansion of international semiconductor manufacturers in India has not stopped. Applied Materials, a major American semiconductor equipment manufacturer, recently invested US$50 million to establish a research and development facility in Bangalore. Applied Materials has been operating in India for 20 years and now has a team of more than 6,000 people covering product development, operations and information technology services.

Micron, a major memory chip manufacturer, has risen rapidly in India and recently established an Indian research center in Hyderabad. In the past three years or so, Micron's number of employees in India has increased to 3,500. Micron's goal is to expand its footprint in India in the next few years. Reached 5,000 employees.

In recent years, India has intended to join the global chip manufacturing competition. The Indian government launched an incentive package worth Rs 76,000 crore in December 2021 to attract international semiconductor and display manufacturers with a view to establishing the country as a global chip manufacturing hub. India does have some advantages in chip manufacturers. According to the Indian Minister of IT and Electronics, India has nearly 55,000 design semiconductor engineers working for different companies, accounting for 20% of the world's chip designers. Moreover, India is developing into the world's second largest consumer market, with a value of US$27.2 billion in 2021 and will reach US$64 billion by 2026. This is a big temptation for semiconductor manufacturers.

Since then, we have seen many consortiums and companies begin to enter India and establish chip factories.

On September 13, 2022, Taiwanese chip giant Hon Hai Group and Indian mining and manufacturing group Vedanta reached a total US$19.4 billion agreement to build a chip factory in India to mainly produce chips and displays. Hon Hai Group will provide chip production technology to the joint venture, while Vedanta Group, which has a background in mining, will provide financing for the project.

In May this year, ISMC, a joint venture established by Abu Dhabi's Next Orbit Ventures fund and Israeli chip manufacturer Tower Semiconductor, signed a US$3 billion agreement with the Indian state of Karnataka to establish a Semiconductor chip manufacturing plant. In July, Singapore-based IGSS Ventures said it would invest US$3.25 billion to build a semiconductor high-tech park in Tamil Nadu, India, including a wafer fab.

In February this year, Intel announced that it would acquire Israeli chip manufacturer Tower Semiconductor for US$5.4 billion to gain more specialized production capabilities. This acquisition will strengthen Intel's position in the global foundry industry.

In addition to attracting major manufacturers to build factories in India, India is also building local chip factories. Sahasra Semiconductors has invested 7.5 billion Indian rupees to establish a memory chip factory, which is also the first chip factory in India to be built from scratch.

According to an April 2022 report by the Indian Electronics and Semiconductor Association (IESA), India may account for US$85-100 billion of the global US$550-600 billion semiconductor manufacturing market by 2030.

Southeast Asia has entered semiconductor manufacturing over the past few decades by attracting foreign direct investment, promoting exports and integrating into global value chains. Nowadays, riding on the torrent of transformation in the semiconductor supply chain, Southeast Asian countries are continuing to attract large amounts of foreign investment. The future of the Southeast Asian semiconductor ecosystem seems to be full of hope.

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