China and the US are strengthening their independence in semiconductor manufacturing amid global shifts in manufacturing capacity
December 14, 2023

China and the US are strengthening their independence in semiconductor manufacturing amid global shifts in manufacturing capacity

On the always slippery ground of semiconductor production, latest reports TrendForce predicts significant changes in global manufacturing capacity by 2027, with China and the United States intensifying efforts to strengthen their independence in semiconductor production.

According to the research results, Taiwan leads in this sector with a share of 46%, followed by China (26%), South Korea (12%), USA (6%) and Japan (2%).

However, anticipating capacity declines in Taiwan and South Korea, fueled by government incentives supporting local production, projections for 2027 estimate a decline of 41% for Taiwan and 10% for South Korea.

This transition is attributed to increased support and subsidies in China and the USA, with the aim of reducing dependence on foreign suppliers and ensuring a tighter supply chain semiconductors.

By 2027, Taiwan plans to concentrate 60% of advanced manufacturing processes while maintaining firm control over key technologies. It currently leads with a global share of 68% in advanced manufacturing process capacity, including 16/14nm technologies and beyond, followed by the US (12%), South Korea (11%) and China (8%). Taiwan's dominance extends to the latest EUV generation process, where it holds almost 80%, especially in technologies such as 7nm and smaller.

No one disputes Taiwan's role as a leader in semiconductor production

Recognizing Taiwan's key role, the US actively encourages major companies in the semiconductor industry, including TSMC, Samsung and Intel. By 2027, the US share of advanced process capacity is expected to increase to 17%, which will be the result of cooperation with TSMC-om and Samsung, which will continue to account for more than half of this capacity.

Japan is also entering the semiconductor manufacturing arena, supporting local company Rapidus in achieving the most advanced 2 nm process. With plans to create a semiconductor cluster in Hokkaido, Japan is offering subsidies to foreign companies, including Japan Advanced Semiconductor Manufacturing (JASM) and PSMC's Sendai plant (JSMC).

Meanwhile, China is strategically focusing on mature process technologies (28nm and older), aiming to counter export controls on advanced equipment by the US, Japan and the Netherlands. Projections indicate that China's share of mature process capacity will rise to 39% by 2027, supported by government subsidies and successful equipment procurement.

However, as Chinese manufacturers rapidly increase mature process capacity, potential price competition could affect Taiwan-based manufacturing such as UMC, PSMC and Vanguard. The latter, with its diverse product lines, is expected to be particularly affected, while UMC and PSMC will maintain their advantages in certain sectors.

Faced with chip shortages and geopolitical influences, fabless clients diversify risk by collaborating with multiple manufacturers. This strategy, aimed at ensuring a flexible and secure supply chain, can lead to increased IC costs and concerns about duplicate orders.

Chipmakers face these challenges, balancing increased capacity, price competition, profitability, flexibility in adjusting capacity, depreciation pressures on new equipment, and the pursuit of technological leadership in an ever-changing environment.