Taiwan's semiconductor strength is second only to the United States. You may not know it.
Latest update time：2020-09-23
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Source: Content from Semiconductor Industry Observation Comprehensive , thank you.
According to the Taiwan Economic Daily, the Semiconductor Industry Association (SEMI) released its latest report yesterday (22), pointing out that Taiwan's semiconductor industry chain is becoming more and more important in the world. It is estimated that the global semiconductor industry output value will grow by 3.3% annually in 2020, and Taiwan's growth rate will be even greater, reaching 16.7%. The total output value will reach more than US$102.73 billion, a new high, surpassing South Korea and ranking second in the world, second only to the United States. According to SEMI's point of view, the output value of the global semiconductor industry is expected to increase to US$426 billion this year.
SEMI Global Marketing Director and Taiwan President Cao Shilun pointed out that Taiwan's semiconductor industry continues to drive the overall industry growth through its continuous breakthroughs in technology and strong purchasing momentum. In the past ten years, Taiwan has been the world's largest semiconductor equipment investment region for as many as seven years. The investment momentum in the next decade is expected to be deployed in the direction of advanced processes.
In terms of semiconductor equipment investment, equipment billings of Taiwanese companies in the first seven months of this year increased by 10.6% to US$8.63 billion, ranking third in the world; data showed that from January to July, China was the largest semiconductor equipment market, with an investment of US$9.84 billion, a year-on-year increase of 45.2%; South Korea followed closely behind, with semiconductor equipment investment soaring 54.1% to US$9.49 billion.
The global semiconductor equipment market will climb to $65 billion this year and $70 billion next year, SEMI said, stressing that the forecast does not take into account U.S. export restrictions on Huawei Technologies Co. and potential sanctions on Chinese chipmakers.
SEMI pointed out that Taiwan leads the world in advanced semiconductor processes, with the output value of wafer foundry, packaging and testing ranking first in the world, and IC design ranking second in the world. Among them, TSMC's 5nm has been mass-produced in the second quarter of this year, and the more advanced 2nm layout has also been visible.
Benefiting from the surge in demand for advanced packaging, ASE has maintained its position as the world's leading semiconductor packaging and testing company with a market share of over 21%. MediaTek has successfully entered the 5G mid-range market and has become the world's fourth largest IC design company. Novatek and Realtek have also entered the top ten.
Affected by the epidemic, most terminal markets have been negatively affected this year, except for online services, data centers, and personal computer applications. SEMI estimates that the global semiconductor industry output value in 2020 will be US$426 billion, with an annual growth rate of 3.3%, but it is still optimistic that market demand will gradually improve in the next few quarters. If the epidemic recurs, it may drag down the recovery momentum.
However, the epidemic has also led to new behaviors and business models, driving the outlook for semiconductor equipment to improve. SEMI industry research director Ruiyu Zeng said that cloud and server demand is the main driving force for the growth of the semiconductor market, and demand is expected to continue into the post-epidemic era.
In addition, PC demand is better than expected and is expected to continue until 2021; smartphone and automobile demand was affected by the epidemic and was weak in the first half of the year, but with the release of new mobile phones and the recovery of automobile production capacity in the second half of the year, it will also help drive related semiconductor sales.
SEMI said that although the recent memory market has seen a short-term increase in inventory and price declines due to a slowdown in server memory-related purchases, the price trend is expected to show a downward trend in the second half of the year. However, the indicators worth paying attention to are the recovery of the mobile device market and the continuation of cloud and server demand.
As for the forecast for next year, Zeng Ruiyu said that although the progress of 5G introduction in various countries is expected to be delayed this year, the medium- and long-term outlook is still promising. In addition, the government's revitalization measures will help the economy recover. Under the premise that the trade dispute does not expand, SEMI predicts that semiconductor chip sales, equipment and materials markets will all grow in 2021.
Taiwan's semiconductor industry lineup is expected to grow
In the past, MediaTek was the only one in the chip market for copycat mobile phones. Tsai Ming-kai once said, "Copycat today, mainstream tomorrow," but the market did not follow its footsteps. Later, copycat mobile phones declined, and Chinese brand mobile phones such as Huawei, OPPO, vivo, and Xiaomi rose one after another. MediaTek could only look for business opportunities in the low-end mobile phone chip market.
Over the past decade, MediaTek has lagged far behind Qualcomm in advanced process chips. This time, it released 5G chips before Qualcomm and sold them at a higher price than Qualcomm, which is a very unusual signal. MediaTek's advancement has further consolidated the strength of Taiwan's semiconductor industry. The merger of ASE and Siliconware Precision Industries has been completed. In addition, the heterogeneous integration of the packaging and testing industry is moving forward. ASE will also play an important role, and Taiwan's semiconductor industry lineup will be more prosperous.
After TSMC's market value jumped to NT$8 trillion last year, the power to support the localization of semiconductor equipment manufacturers has become stronger and stronger. The focus of Taiwan's next capital market will be on TSMC's supply chain. The most representative is ASML, a Dutch equipment supplier. EUV masks are required for 7 nanometers, and Taiwan JDT, which manufactures mask boxes, also saw its stock price soar last year due to the mass production of mask boxes.
Judging from the popularity of the global semiconductor equipment supply chain, we can also look back and see TSMC's business opportunities gradually moving from seven-nanometer and five-nanometer processes to three-nanometer processes.
JAT is an example of the rise of many TSMC supply chain members, and the first to rise was Han Tang, which controls electromechanical and special process design in clean rooms. In 2019, Han Tang obtained the third phase of TSMC's 5-nanometer plant in Nanke, and its EPS in the first three quarters reached NT$10.67, and it may challenge NT$14 for the whole year. Before 2017, Han Tang's EPS was around NT$5, but in 2018, with the support of TSMC's new process, Han Tang's EPS reached NT$9.42, and this year it will give back NT$10 in cash to shareholders.
Fanxuan, in which Hon Hai Group has a stake, has also won TSMC's new process order. Its operating profit in the first three quarters of this year increased from NT$151 million, NT$186 million to NT$249 million, and it is expected to challenge the NT$4 EPS record for two consecutive years.
Taiwanese semiconductor equipment manufacturers are gradually growing stronger. Equipment manufacturers such as Xinyun and Hongsu, which focuses on back-end wet processes, are developing rapidly, and Shihe, which is responsible for equipment cleaning, is also growing stronger. Yankee Engineering, which specializes in clean room motors and air conditioners, is waiting for an opportunity in the Emerging Stock Exchange and is expected to maintain high profits in the next few years.
We often say that a grain of rice feeds a hundred kinds of people, and an apple saves Taiwan. If this phenomenon continues, we can see that the capital expenditure of TSMC may strengthen the entire TSMC supply chain. In the past, TSMC's equipment came from overseas, and ASML and Applied Materials were both major suppliers of TSMC. In the future, if the equipment is gradually localized, the equipment factories under TSMC will shine one by one, which is the confidence it brings.
After the US-China trade war started, we can see that Taiwanese companies facing competition from Chinese IC design houses have also improved their competitiveness by relying on R&D fundamentals. The rise of MediaTek is an example of how Taiwanese industries thrive on both sides of the Taiwan Strait. Now MediaTek is accelerating its lead, and its technology level is catching up with Qualcomm, which is also a legend in Taiwan's semiconductor industry.
This year, Hon Hai and Largan Precision have performed very steadily, and with the breakthroughs of TSMC and MediaTek, this is the biggest reason why the Taiwan stock market has hit a new 30-year high. The reputation of Taiwan's Silicon Island is also growing stronger as TSMC and MediaTek strive to improve.
Taiwan's semiconductor industry faces a huge gap! Will it be destroyed if it doesn't innovate?
Facing the challenges of Taiwan's semiconductor industry, Lu Chaoqun, chairman of Etron Technology (5351), said that semiconductor innovation and talent sustainability will be the "generational needs" of the 21st century. The driving force for competition among companies is breakthroughs in manufacturing, design, software, etc., and even the cultivation of leaders who can take a comprehensive view of the overall situation and have both advanced R&D and management. "If there is no innovation in semiconductors, they will be destroyed!"
Semiconductor development is good, why do we need industry upgrades? Lu Chaoqun pointed out that Moore's law is that technology will change every two years. Competitors are all excellent. Manufacturers are all "heavyweights" with money and power. Even TSMC founder Morris Chang described them as "gorillas." Another aspect is the design industry, which uses manufacturing materials to make products. It takes Zhuge Liang's wisdom. "Whoever is careless will become a boxing champion."
Taiwan's semiconductor industry has been struggling for 50 years, but how can this industry avoid becoming a "tragic industry"? Lu Chaoqun said, "If anything is done wrong, it will be wrong, and this is the case with semiconductors." In other words, if there is no innovation in semiconductors, they will be destroyed. Even though Taiwan has been the leader in the recent period, all semiconductor companies in the world are eyeing to defeat Taiwan. Now that they do not have the military force of a gorilla or the intelligence of Zhuge Liang, Taiwanese industry players still have to be nervous.
"The driving force for upgrading comes from constant competition!" Lu Chaoqun believes that if semiconductors do not move forward, they will be destroyed; there are at least three things involved in semiconductor upgrading: manufacturing, design, and talent. The manufacturing industry is preparing to enter the 2-nanometer process, which is the size of two atoms. It is bound to break through many physical, chemical, and material limitations, and talent must be improved; while the design industry and software technology involve the introduction of artificial intelligence (AI), heterogeneous integration, and atomic and molecular level design.
Lu Chaoqun said that the semiconductor industry is facing a huge fault. If Taiwan wants to strive, upgrade and make breakthroughs, it needs talents, but he is worried about the cultivation of talents related to computing and design. Semiconductors need all kinds of talents, including advanced R&D and management leaders who can take a comprehensive view of the overall situation. They must be like Linghu Chong and laugh at the world of martial arts. They will not allow ordinary people to survive. They must use the power of manufacturing to enter the atomic level. "Whether education can do it, whether the industry can do it, this is not just a matter of one generation, but generations of talents." He hopes that everyone will help young people to set their goals, be both talented and intelligent, and achieve the ability to take a comprehensive view of the overall situation and even change the world.
*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.
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