Earlier this month, the semiconductor industry association of America (SIA) and Boston Consulting Group (BCG) jointly released a research report, through more than 20 charts, to analyze and present the distribution characteristics of global semiconductor supply chain in detail.
The 53 page report “strengthening the global semiconductor supply chain in an era of uncertainty” mentioned that in the next 10 years, the entire semiconductor supply chain will need to invest about US $3 trillion in R & D and capital expenditure, and semiconductor companies will need to continuously invest more than US $90 billion in R & D every year, equivalent to about 20% of global semiconductor sales, to develop more and more complex chips.
Distribution of core competence of global semiconductor supply chain in 2019
According to the report, Japan, Korea, Taiwan and China Chinese mainland are currently concentrating about 75% of the semiconductor manufacturing capacity around the world. Chinese mainland is expected to become the largest semiconductor manufacturing base in the world in the next 10 years.
Its analysis data shows that to build a fully self-sufficient semiconductor supply chain, we need to increase the initial investment of at least US $1 trillion, which will eventually lead to an overall increase of 35% ~ 65% in semiconductor prices; If Taiwan’s Fabs are permanently shut down, it will take at least three years and $350 billion to build enough alternative capacity in other parts of the world.
In addition, the report also shows the global semiconductor supply chain R & D and talent status. At present, in the field of semiconductor research, China and the United States are each other’s largest research partners. China has the largest number of papers and patents submitted each year, and the average number of semiconductor patents cited in the United States is the highest. Many semiconductor technology breakthroughs in the United States have contributed to overseas talents.
Global wafer manufacturing capacity distribution by Region in 2019
In the next 10 years, China is expected to become the largest semiconductor manufacturing base in the world
According to the report, the share of the United States in global semiconductor manufacturing capacity has dropped from 37% in 1990 to 12% at present. If the current trend continues, the share may drop to 6%.
In contrast, in the next 10 years, China is expected to increase about 40% of its new production capacity and become the world’s largest semiconductor manufacturing base.
A key factor behind this is the economy. The 10-year total cost of ownership (TCO) of building a new chip factory in the United States is about 25% – 50% higher than that in Asia.
About 40-70% of the total cost of ownership is directly attributable to government incentives, which are much lower in the United States than in other places.
10 year total cost of ownership (TCO) estimates for reference Fabs by Region
According to the report, the US federal government’s US $50 billion investment in domestic semiconductor manufacturing industry is expected to reverse the declining trend of us chip production, and build up to 19 advanced logic, storage and analog semiconductor manufacturing plants or wafer factories in the US in the next 10 years.
This will directly create 70000 high paying jobs and indirectly create about 350000 additional jobs in the whole economy, that is, more than 400000 direct and indirect jobs in total.
Distribution of us semiconductor consumption in 2019
To build a fully self-sufficient semiconductor supply chain, we need to increase the initial investment by at least US $1 trillion
According to the report, no company or even the whole country can achieve complete vertical integration at present.
Semiconductor supply chain is truly globalized. In 2019, the six regions (the United States, Korea, Japan, mainland China, Chinese mainland, Taiwan and Europe) contributed to or exceeded 8% of the total value added of semiconductor industry.
Distribution of expenditure and contribution of different regions in different semiconductor supply chain links in 2019
In the global semiconductor supply chain, different regions show different advantages and depend on each other. The typical history of semiconductors involves most of these regions.
Example: the global history of a Smartphone Application Processor
The United States is in a leading position in R & D intensive industries, such as electronic design automation (EDA), core IP, chip design and advanced manufacturing, which benefits from its world-class universities, huge engineering talent pool and market driven innovation ecosystem.
East Asia (Korea, Japan, Taiwan) has obvious advantages in wafer manufacturing, with large-scale capital investment supported by government incentives, strong infrastructure and skilled labor force.
The Chinese mainland is leading in the field of equipment, packaging and testing, and is actively investing more.
Assuming that the hypothetical alternative of building a fully self-sufficient local supply chain in each region will require at least US $1 trillion (US $900 billion to US $122.5 billion) of incremental upfront investment, and lead to an overall increase of 35% to 65% in semiconductor prices, eventually leading to an increase in consumer electronic equipment costs.
Increased R & D and capital expenditure for a fully “self-sufficient” localized semiconductor supply chain
Specifically, according to the regional distribution, if we want to meet the semiconductor self-sufficiency, the US needs to invest 3500~4200 billion dollars in the initial investment, and Chinese mainland needs to invest 1750~2500 billion dollars.
To achieve a fully “self-sufficient” localized semiconductor supply chain, the distribution of increased expenditure cost required by each region
Assuming that it will take at least three years and US $350 billion to replace Taiwan’s fabs
There are more than 50 regions in the whole semiconductor supply chain, one of which has more than 65% of the global market share.
One region accounts for more than 65% of the global share
For example, about 75% of the global semiconductor manufacturing capability, and many key materials such as silicon chips and photoresists, are concentrated in Chinese mainland and East Asia. These areas are vulnerable to high seismic activity and geopolitical tensions.
In addition, 100% of the world’s most advanced semiconductor production capacity (i.e. below 10nm) is currently located in Taiwan (92%) and South Korea (8%).
A large global trade flow network supports the geographic specialization of semiconductor supply chain
There is a potential risk that these areas may be disrupted by natural disasters, infrastructure closures or international conflicts, and may lead to serious disruption of basic chip supply.
Under extreme assumptions, if Taiwan’s OEMs are completely interrupted for one year, they will lose us $42 billion in revenue, which may lead to the shutdown of the global electronic supply chain, and even affect the revenue of US $490 billion in different electronic equipment application markets, resulting in severe global economic disruption.
If this hypothetical disruption is to be made permanent, it may take at least three years and $350 billion of investment to build enough capacity in other parts of the world to replace Taiwan’s fabs.
The United States and China are the largest semiconductor markets in the world
Semiconductors can be divided into three categories: Logic (accounting for 42% of revenue), memory (accounting for 26% of revenue), and discrete, analog and other (Dao, accounting for 32% of revenue).
In the field of mobile phones, analog semiconductors account for the highest proportion; In the fields of consumer electronics, PC and ICT infrastructure, Logic Semiconductor accounts for a high proportion; In industrial and automotive applications, Dao accounts for a higher proportion.
Distribution of semiconductor sales in different application areas
Among them, the advanced processes below 10nm are all logic semiconductors, while Dao accounts for a high proportion of mature process capacity.
Capacity distribution of global semiconductors in different chip process nodes in 2019
From the perspective of geographical distribution, there are three different ways to measure the sources of semiconductor demand: the first is the headquarters of electronic equipment manufacturers, the second is the manufacturing and assembly sites of equipment, and the third is the location of end users who purchase electronic equipment.
Geographical distribution of global semiconductor demand
It can be seen that the United States and China are the largest semiconductor markets in the world.
The report estimates that in 2019, the value of semiconductors included in equipment purchased by Chinese consumers and enterprises accounts for about 24% of global semiconductor revenue. Almost equal to the United States (25%) and higher than Europe (20%).
As China’s domestic market will grow by an average of 4% – 5% more than the rest of the world in most electronic equipment categories, analysts expect China’s share of global semiconductor consumption to continue to grow in the next five years.
Distribution of R & D & capital expenditure in seven links of semiconductor supply chain
The industrial supply chain involved in semiconductor creation and production is very complex and globalized. It is supported by an ecosystem composed of seven links: research, design, front-end manufacturing, back-end packaging and testing, EDA & core IP, equipment & tools and materials.
Semiconductor supply chain includes seven different links
The report estimates that in 2019, the global R & D investment in semiconductor industry will be about US $90 billion, and the capital expenditure will be about US $110 billion, accounting for almost 50% of the global semiconductor sales (US $419 billion) in the same year.