The semiconductor shortage continues to be a concern for most organizations around the world. While investments in new plants have been made to help increase supply, there is still a concern that there might not be sufficient skilled employees in the field.

In fact, the demand for skillsets in semiconductor and its related industries have been increasing, especially with new factories being developed. Despite technology enables most of these plants to be automated, the reality is, semiconductor companies need a physical workforce in areas of research and development and such.

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For example, in the US alone, the semiconductor industry will need to hire between 70,000 and 90,000 additional workers by 2025.  Reports also show that countries like Taiwan, which is currently the global powerhouse of integrated circuit manufacturing, has an average monthly deficit of specialized workers of approximately 27,700 employees.

As such, semiconductor companies have been investing and partnering with universities and learning institutes to develop new talents. In Malaysia, Micron Technology has announced an investment of RM1 million to strengthen collaboration, research and development projects with local universities over the next five years. The funding will go towards grants supporting research in the areas of semiconductor materials, smart manufacturing and artificial intelligence which are key to the advancement of tech manufacturing in the country.

“Micron leads the industry in both NAND and DRAM technology and Malaysia is critical to our global manufacturing footprint. We hope the funding and collaboration with local universities will strengthen the local semiconductor ecosystem, advance R&D and deepen science, technology and engineering skills in the local talent pool,” said Amarjit Singh Sandhu, corporate vice president and country manager of Micron Malaysia.

University Sains Malaysia (USM) will be the first university partner to receive funding from Micron. The partnership is set to create new growth opportunities between various institutors and companies. Further to that, the partnership between Micron and USM is also in line with the focus area of the National Fourth Industrial Revolution’s policy,and supported by national policies such as the 12th Malaysia Plan and Wawasan Kemakmuran Bersama 2030.

Amarjit also pointed out that Micron foresees opportunities to accelerate the next level of growth, given the increasing global market demand for memory and storage products. Hence, Micron has already invested in a 52.6-acre Center of Excellence for solid state drives assembly in Batu Kawan Industrial Park, Penang which is scheduled to begin operations by the end of 2022.

“The RM1 million grant funding to local universities by Micron today further reinforces the company’s commitment to using its leadership, influence and resources to create positive change, on top of its relentless efforts in employee wellbeing, sustainability, and corporate social responsibility,” said Chow Kon Yeow, chief minister of Penang, who witnesses the signing ceremony.

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2021 has been a turbulent year for the semiconductor industry. While the demand for the chips increased throughout the year, the semiconductor industry was struggling to ensure they could deliver.

In fact, global shipments for the semiconductor industry in 2021 experienced its worst delays. While COVID-19 was often blamed for the disruption and delays in shipments, there were other factors at play as well.

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This included natural disasters, shipping incidents and trade problems across the world. For example, in the UK, delays in shipments were caused by Brexit policies while bad weather conditions hampered shipment deliveries in the Southeast Asia. The US and China’s trade disputes also contributed to the delays.

According to a report by CNBC, trade credit insurer Euler Hermes foresees the semiconductor industry still being the biggest winners. With logistics being disrupted globally, most companies have moved to decided to invest in new chip factories nearer to them. Some companies have even decided to build their own chip plants and reduce reliance on global chip providers.

Analysts at Euler Helmes said that the current semiconductor cycle has been firing on all cylinders since the industry emerged from its worst recession in 2019. In fact, they predicted that semiconductor sales are expected to grow by another 9% and cross US$ 600 billion for the first time in 2022. That’s on top of the 26% growth to US$ 553 billion in 2021, they added.

The new site of German semiconductor manufacturer Bosch is pictured in Dresden, eastern Germany. (Photo by JENS SCHLUETER / AFP)

Major chipmakers like TSMC, Intel, Bosch, SMIC and others have already announced plans to increase their chip production capacity to meet the increasing demand and sales. However, the reality is, the new facilities and updates could take a long time to come online.

Earlier in December, Euler Hermes’ Global Trade Report predicted global supply-chain disruptions could remain high until the second half of 2022 amid renewed Covid-19 outbreaks around the world, China’s sustained zero-Covid policy and demand and logistic volatility during Chinese New Year. Nevertheless, the trade credit insurer expects trade growth to remain strong through 2022 and 2023, with some clear winners across regions and sectors.

“Overall, we expect global trade in volume to grow by 5.4% in 2022 and 4.0% in 2023, and then gradually return to its pre-crisis average levels. However, this comes at the expense increased global imbalances. The US will register record-high trade deficits (around USD1.3trn in 2022-2023), mirrored by a record-high trade surplus in China (USD760bn on average). Meanwhile the Eurozone will also see higher-than-average surplus of around USD330bn”, explains Françoise Huang, Senior Economist for Asia-Pacific at Euler Hermes.

Analysts from Euler Hermes have listed three factors that have driven up sales so far. They include:

• Demand: “Unusually strong demand” for consumer electronics, such as personal computers and smartphones
• Prices: An increase in prices due to tight supply and demand dynamics
• Improved product mix: Further improvement in product mix for semiconductors as a result of higher priced and new generation chips being introduced.

A new dawn for the semiconductor industry

 The CNBC report highlighted four risks the analysts predicted the semiconductor industry will face in 2022. Firstly, hardware sales are expected to take a larger hit from demand normalization after strong growth in the last two years.

Secondly, supply chain disruptions from the pandemic will have a big hit in manufacturing activity. This can already be witnessed by the recent lockdowns in China’s Xian province. The lockdown has already led to disruption of semiconductor provider Micron Technology and Samsung.

Next, the ongoing loggerheads between China and the US as both countries battle for tech supremacy. Restrictions are still in place for Chinese companies acquiring critical U.S. semiconductor manufacturing tech and equipment.

Lastly, there might just be an “increasing frequency of unusually adverse climatic events” proving to be a major challenge for the semiconductor sector, which relies on optimal capacity utilization for its profitability.

As such, 2022 might just be another turbulent year for the semiconductor industry. But, with more organizations finding solutions to deal with the issues in the industry, the problem may not be as severe as previously experienced.

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Ahead of Apple’s upcoming iPhone launch, A-series chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), reported a 22% surge in quarterly sales.

According to Bloomberg’s calculations from TSMC’s monthly sales data, the latter saw revenue for the three months to September climb to a record NT$356.4 billion (US$12.4 billion), up from NT$293 billion a year earlier.

Apple is one of the chipmaker’s biggest customers and business will often increase in the months before Apple unveils new iPhones and the holiday season, amid solid and growing demand for chips for 5G, Internet of Things (IoT) and high-performance computing applications.

For the first nine months of the year, TSMC reported record accumulated sales of NT$977.722 billion, up 29.9% from a year earlier.

Reports suggest that TSMC is likely to receive a boost during the quarter as its second-largest customer Huawei Technologies raced to stockpile supplies before a US ban on shipments to the Chinese telecom giant came into effect last month. 

Meanwhile, rival chipmaker Samsung Electronics reported recent earnings that beat analyst estimates after it’s mobile and chip businesses benefited from the curbs on Huawei.

Concurrently, Taiwanese chipmakers United Microelectronics Corp. and MediaTek also reported strong sales, suggesting a broad recovery in the industry.

The computer chips made by TSMC aren’t just the brains inside smartphones, laptops, and video game consoles — they’re also core components of almost every kind of electronic equipment in the world, from that used in data centers to F-35 fighter jets. Along with nearly 500 others, Apple, Huawei, Sony, Qualcomm, Broadcom, and HiSilicon are all TSMC’s clients.

Leading companies like Huawei and Apple design but don’t actually manufacture their own chips unlike integrated device manufacturers, such as Intel and Samsung, which design and then make the chips used in their own products.

TSMC’s model is that of a dedicated “pure-play” foundry: it only operates on a contract basis and doesn’t sell devices of its own design. 

Over the last three decades, TSMC has invested in 18 state-of-the-art chipmaking facilities — called “fabs,” for “fabrication facility” — in Taiwan and today the firm accounts for more than half of the US$42 billion foundry segment of the semiconductor industry. In July this year, it raised its 2020 outlook, highlighting that revenue this year will grow by more than 20% in dollar terms. 

TSMC executives also affirmed plans to build a plant in Arizona, saying that the US administration and the state of Arizona closed the cost gap for building the fab. 

The company had previously said the $12 billion facilities will begin construction in 2021, with production targeted to begin in 2024. 

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The attempted Lattice deal is one of the biggest acquisitions ever put forward by a Chinese-backed firm, worth about US$1.3 billion according to reporting by Reuters. There are potential military implications as Lattice produces what are known as “field programmable arrays” which allows custom software to be loaded onto silicon chips.

According to US defense officials, the sale of Lattice could give China access to military-grade technology. Source: Shutterstock

Lattice said that it no longer supplies chips to the US military, but President Trump cut the deal off at the knees anyway with an executive order that forces Lattice and Canyon Bridge to “take all steps necessary to fully and permanently abandon the proposed transaction” within 30 days.”

Lattice and Canyon Bridge are said to have complied with the order, and Canyon Bridge issued a statement expressing their disappointment with the US governments decision. The acquisition, the company said, would have been “an excellent deal for Lattice’s shareholders and its employees.”

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After reporting by Reuters from last November revealed that Canyon Bridge was part-funded by the Chinese central government and had ties to the country’s space program, the US government launched an investigation into the issue which resulted in subsequent comments from US defense officials who expressed concern.

US defense officials subsequently raised concerns about the Lattice acquisition by a firm backed by the Chinese government. Trump’s order jives with similar concerns that have been raised by the Committee on Foreign Investment in the United States (CFIUS), and past actions by former President Barack Obama who blocked several deals by Chinese companies looking to acquire US-based corporations.

New Chinese cybersecurity regulations have many worried that the government is moving aggressively to steal foreign intellectual property. Source: Reuters

On their part, the Chinese have issued statements urging the governments not to prevent foreign investments into their businesses, calling such moves protectionist. Comments by China’s commerce ministry on Thursday – likely in response to Trump’s order – expressed hopes that governments should take objective views on the matter of Chinese firms’ overseas investments.

China vs The World

The blocked deal comes at a time of great regulatory scrutiny on foreign investments, but it’s especially significant as Chinese corporations – those with and without deep government ties – are looking to expand beyond their home territories. Massive Chinese corporations have been investing huge sums of money to open operations or acquire bases through mergers in the US, such as Baidu, Alibaba and LeEco.

Other pending acquisitions include separate attempt by Canyon Bridge to acquire a British semiconductor company, Imagination Technology Group – such a deal would also be subject to scrutiny by US regulators as Imagination owns a US division, MIPS – an Ant Financial proposal to acquire US money transfer business MoneyGram International Inc.; and China Oceanwide Holdings Group Co. Ltd.’s acquisition of US insurer Genworth Financial Inc.

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Western countries have become increasingly wary of China’s aggressive M&A moves, and Brussels is currently working on regulation that would block foreign takeovers of European businesses by the Chinese or any other foreign entities working within shell companies. The draft framework is designed to prevent foreign corporations from evading national vetting procedures, and is aimed at responding to growing public concerns of Chinese encroachment into Europe via investments.

Alibaba’s Ant Financial is working to acquire MoneyGram International, a money transfer business, as it looks to acquire more global clout. Source: Reuters

Recent cybersecurity laws passed by the Chinese government which imposes strict rules on foreign companies and has many worried that they represent moves by local corporations to acquire intellectual property. China currently requires foreign companies to store all data in servers located within its borders, and domestic partners are a must for any corporation looking to move in.

SEE ALSO: China: Upcoming Cybersecurity Law feeds concerns of foreign firms

As China moves further out into the world, global sentiments are increasingly turning to the concern that the country is looking to colonize through financial and industrial means. Critics have pointed to the huge amounts of Chinese investment which has terraformed parts of Africa, as well as aggressive moves by China-backed projects all across Southeast Asia’s technology scene.

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