Supply Chain Matters provides an additional commentary relative to ongoing developments related to global semiconductor supply chain networks.

In our prior published commentary, we provided perspectives relative to announcements this week from Intel and the Biden Administration regarding significant fabrication and associated supply network investments in U.S. based facilities destined to produce the most advanced semiconductor devices domestically.

We now provide perspectives relative added developments in the production of older generation but commodity focused semiconductor chip supply. These are older chip technology generation devices which are reportedly 28 nanometers or wider, and often referred to as micro-chips.

They supply commodity needs related to supporting electronic device or software applications such as automobiles, trucks, equipment devices and other needs. Global capacity constraints came to the forefront during the global wide Covid19 pandemic period, when a global wide shortage of such devices considerably impacted automotive production and other equipment output.

Announced Investment

Last week, India based conglomerate Tata Group broke ground for the construction of a reported $11 billion semiconductor production complex to be located within that country.

According to a published report from The Wall Street Journal (Paid subscription), Tata is partnering with Taiwan based Powerchip Semiconductor Manufacturing Company (PSMC), in producing these devices in volume. Reportedly, the country expects to be supporting the creation of from two to three mature-node chip production facilities within the next five years.

The announcement, made in conjunction with an appearance from India’s Prime Minister Narendra Modi was billed as positioning that country to become a global leader in the production of these devices.

However, as the WSJ report points out, the challenge and backdrop of this announcement stems from China and that country’s ambitions in chip manufacturing, “which have been stymied by U.S. and European export controls and pouring capital into legacy chip making on a breathtaking scale.”

Further stated in this report: “China will add more chip-making capacity than the rest of the world combined in 2024, according to research from consulting firm Gavekal Dragonomics.”

China’s investment actions further come as the global supply of micro-chips is now matching existing demand levels, and reportedly, factory utilization rates have fallen from near 100 percent in 2020 to an estimated 65-70 percent currently.

India is reportedly also facing its own set of infrastructure preparedness challenges related to available water, electrical generation and chemical refining capabilities.

As noted in our prior blog commentary, availability of government standards loom large for both India and China. The report indicates that Tata is expecting to access “billions of dollars’ worth of state funding.”

The report further cites viewpoints that India might be better served in industrial policy in supporting semiconductor chip packaging and testing which lends itself to that country’s lower cost manufacturing and labor availability advantage.

 

Added Perspectives

As noted in both of our Supply Chain Matters semiconductor industry specific commentaries, this is an industry that must plan in strategic timeframe windows, and from a basis of expected global wide demand and industry supply needs.

The first mover advantage is a consideration for positioning overall supply network capabilities for the most advanced, and equally the most profitable chip fabrication supply network capabilities. For older generation but high commodity volume supply of semiconductor devices, availability of lowest cost or most efficient manufacturing and fab infrastructure is a consideration in conjunction with related supply network commodity supply of materials.

The arms race appears to envelope both of these industry areas and the ongoing developments point to a very dynamic set of industry or geo-political developments to come over the forthcoming years.

 

Bob Ferrari

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