Financial Times: With three-quarters of production capacity, East Asia is becoming the global chip manufacturing center

Jiwei.com reported that decades of investment migration from high-cost to low-cost, high-efficiency regions has changed the geographical pattern of the world's manufacturing industry. East Asia is becoming the global manufacturing center for semiconductor chips.

According to the Financial Times, the United States' share of global semiconductor production capacity has dropped from 37% in 1990 to 12% last year, and Europe's share has also dropped from 35% to 9%. China's market share has increased from almost zero to 15%, and this figure is expected to grow to 24% in the next decade.

Currently, three-quarters of the world's chip production is concentrated in East Asia, with Taiwan's TSMC, China's SMIC, and South Korea's Samsung Electronics jointly dominating global production capacity.

Although the recent severe shortage of automotive semiconductors has prompted the United States and the European Union to work to increase their domestic manufacturing capabilities, these initiatives are costly.

The Semiconductor Industry Association and the Boston Consulting Group estimate that the cost of building and operating a semiconductor plant in the United States for 10 years would be about one-third higher than in Taiwan, South Korea or Singapore.

The report also pointed out that with government incentives, China's foundry costs are 37% to 50% lower than those in the United States. Driven by technology and cost, China has become a major semiconductor investment destination in the world.

According to data from FT database fDi Markets, about 84 greenfield investment (FDI) projects have been announced in China's semiconductor industry since 2015, of which 44% are manufacturing projects. During the same period, the United States attracted 45 foreign semiconductor projects, followed by India (37), the United Kingdom (36) and Taiwan (29).

It is worth mentioning that China is not only the chip manufacturing industry, but also the world's largest automobile market. At the same time, China also supplies automotive parts to OEMs in South Korea and Japan. According to IHS Markit, China's parts exports to Japan increased by 17% to US$3.2 billion between 2015 and 2019. As the automotive industry continues to move towards electrification, East Asia may benefit further.