2024-07-30 - tech

The global chip boom may affect the technology supply chain

The United States and Europe are expected to lead the world in chip manufacturing within 10 years.

Efforts in the United States and Europe to increase advanced process chip capacity are on the rise, with market share potentially reaching as high as 45% by 2032. A recent report by Bloomberg Intelligence found that the chip-making capacities of these two regions could approach that of Taiwan, which currently is the core area for the world's leading process nodes. The report indicates that the expansion efforts of the US and Europe could increase their market share from 19% to 45% in less than a decade.

The report also found that the global technology supply chain is ready for "geographical diversification," shifting priorities from profitability and efficiency to supply chain independence. However, for the semiconductor industry, this could present more challenges than opportunities.

Expanding the global footprint may lead to ESG challenges.

Like other parts of the world, as the global demand for artificial intelligence continues to rise, the United States is seeking to address the ongoing chip shortage. In fact, the country has invested over $5 billion in research, development, and workforce related to semiconductors to reduce the time and cost of commercializing new technologies in the face of shortages.

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As the transformation of the technology supply chain expands the industry's global footprint, it may introduce new ESG challenges and hinder companies from achieving net-zero emissions.The report indicates how supply chain diversification will trigger greater ESG issues over the next decade. As an increasing number of electronic product manufacturers relocate to India and Southeast Asia, the report suggests that renewable energy may become less readily available, thereby hindering the energy transition.

Leading wafer foundries such as TSMC are helping to drive advancements in chip manufacturing technology, as the increasing costs of process nodes further promote outsourcing. However, as they expand further into the United States and Europe, this could lead to escalating costs.

Embarrassing Costs of Advanced Process Technologies

As chip process technologies have raced from 28nm to the current 5nm, 4nm, and even the 3nm expected next year, the performance benefits brought by advanced process technologies in the past are gradually diminishing under the reality of the gradual failure of Moore's Law. In their place, there is a surge in costs and disproportionate performance improvements.

This is quite evident in the A16 Bionic processor used in the iPhone 14 Pro series.

Reports suggest that the cost of the iPhone 14 Pro models has risen significantly this year, with the iPhone 14 Pro Max's cost reaching $501, an increase of $60 from the previous generation. The biggest driver of the cost surge in the iPhone 14 Pro series is attributed to the A16 Bionic chip.

According to reports, this chip, which uses TSMC's 4nm process technology, has seen its cost increase by more than 2.4 times compared to the A15 chip, reaching $110.

It should be noted that this is under the reality that TSMC has not significantly raised prices for Apple, a major customer. However, the surge in costs has not brought proportional performance improvements. In fact, the performance enhancement brought by this year's A16 Bionic chip is relatively limited.

At Apple's launch event, although Apple claimed that the A16 Bionic chip is the speed king of iPhones, with nearly 16 billion transistors and a 40% performance improvement over the A13 processor, and a 20% decrease in power consumption compared to the A15 processor.In fact, compared to the A15 processor, this year's A16 Bionic chip has seen an increase of less than one billion transistors. In terms of specific performance, according to the test results released by Baiwen Technology: the A16 chip scored 1887 for single-core and 5461 for multi-core in the Geekbench 5 benchmark, which is about a 12% overall improvement over the A15 chip in the iPhone 13 Pro. In terms of GPU performance, with a 50% increase in memory bandwidth, the A16's off-screen GFXBench test results only showed about a 6% improvement compared to the A15.

Even though the cost of Apple's A16 processor has soared by 2.4 times, Apple has chosen to absorb this additional cost in its Pro series products without raising the starting price of the Pro lineup.

However, it is clear that manufacturers are not willing to long-term absorb cost pressures and reduce profit margins. Moreover, with the advent of even more advanced manufacturing processes, costs are expected to rise further.

This has led to an unprecedented triangular dilemma in the current advanced manufacturing processes—namely, that more advanced processes will inevitably lead to higher costs, but all three parties—chip foundries, manufacturers, and consumers—are reluctant to bear the increased costs.

The direct consequence of this dilemma is that the game between chip foundries and their customers has become more intense.

Faced with TSMC's new round of price increases, an industry insider known as "Mobile Chip Expert" revealed: "Apple has officially refused TSMC's 2023 price increase request, with Apple being more dominant than TSMC." However, information from the Economic Daily suggests that Apple has agreed to bear the cost.

This makes the outcome of the game between TSMC and Apple quite uncertain. When this kind of game comes to the forefront, regardless of who wins or loses in this round, for a company like Apple, which is accustomed to having strong control over its supply chain and is not willing to accept being constrained by it, this may not be a desirable situation.

This can be seen from Apple's previous actions in supporting new forces to balance the dominance of old forces in areas such as whole machine manufacturing and OLED display screens.

Here, perhaps a struggle between whether process technology or orders are king has gradually begun.

However, this kind of struggle has obviously broken the original mutually beneficial and multi-win business model. In fact, it is a disadvantageous existence for all parties involved. But in the competition for cost, profit, and say, this is probably an inevitable choice for manufacturers.China Continues to Advance in Chip Manufacturing

It is noteworthy that China is seeking to shift towards mature nodes, which could lead the country to become the world's largest chip manufacturing market by 2032.

This move is in response to recent U.S. restrictions on China's cutting-edge chips and process nodes. It is claimed that by 2032, China may possess over 34% of the global mature node chip production capacity.

"As more countries strive to relocate their technology supply chains, we are poised to witness significant geographical shifts in the advanced chip market," said Steven Tseng, the primary author of the report. "Even amidst this transformation, China remains in a potential global leadership position, as it could have 34% or more of the world's mature node chip production capacity, which has substantial applications in electric vehicles and industrial automation."It seems like you've accidentally included non-text characters or HTML entities in your request. Please provide the text you'd like translated into English, and I'll be happy to assist you.