The Supply Chain Matters blog provides a follow-up to a previously published blog, with a separate report specifically predicting the bifurcation of global smartphone and telecommunications supply networks as a result of an announcement by Taiwan Semiconductor Manufacturing Company (TSMC) to build a new state-of-art semiconductor fab facility in the United States.
In a Supply Chain Matters blog commentary published last week, we called reader attention to significant semiconductor supply network developments that would likely accelerate already escalated trade tensions among the United states and China. The specific development was the announcement from Taiwan based semiconductor fab manufacturer TSMC of its intention to build and operate a five-nanometer wafer fabrication plant in the United States. At the same time, the Trump Administration renewed efforts to bar U.S. companies from using telecommunications equipment produced by China based Huawei Technologies and further barring foreign semiconductor manufacturers whose operations utilize U.S. based software or manufacturing equipment from shipping associated products to manufacturers posing a national security risk, such as Huawei.
After we published our commentary, several other news outlets, namely Chinese run state newspaper the Global Times, Business Insider, and Nikkei Asian Review each indicated that China’s leaders were prepared to take “forceful countermeasures” against what was termed “unreasonable suppression” of Huawei.
According to Global Times, the proposed countermeasures include launching “endless investigations” against the US firms, placing the companies on a list of “unreliable entities,” and subjecting them to legal scrutiny under China’s anti-monopoly law. Nikkei Asian Review reported that last week, TSMC decided to stop taking orders from Huawei, effectively cutting ties with its second-largest customer, behind Apple.
Business Insider opined: “These developments will push US-China trade tensions to new heights, instigating a bifurcation in smartphone vendor supply chains.” The top contender for alternative supply, according to the report, is China based Semiconductor Manufacturing International (SMIC) which last week received a $2.3 billion investment from the Chinese government for more advanced manufacturing process capabilities.
Further noted: “If smartphone supply chains continue to divide in response to the escalation of US-China trade tensions, then access to consumer markets could become increasingly dependent on the manufacturing alignment of that country. This would significantly diminish the target markets for the top global smartphone vendors, sequestering Apple and Samsung from the likes of Huawei, Xiaomi, and vivo.”
Supply Chain Matters would add that in addition to Apple and Qualcomm, other prominent U>S. based advanced technology providers would likely be targets for added scrutiny by Chinese regulators, effectively disrupting supply agreements with other China or Asian based high tech or smartphone manufacturers over the coming months.
Existing high-tech supply networks and their multi-industry customers, which increasingly include automotive, equipment and other industry supply networks, will have to navigate a highly sensitized set of geo-political tensions and potential political mine fields over the coming decade.
Apple and Qualcomm will likely not escape untouched despite their prior abilities to appease country combatants.
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