Global chip-makers in China are now dealing sternly with augmenting labor prices, the imbalance of supply chain because of COVID-19, and the increasing geopolitical tensions
After the USA’s tough regulations and export banning on China, several experts have now concluded that the US’s strategy are the latest reshuffle forcing global companies to shift their manufacturing and other units from China and form their bases in Vietnam and in India. Amid this scenario, a couple of experts exclusively opined to CNBC that the Joe Biden’s government’s banning of semiconductors and key technologies to China is not going to disrupt the international semiconductor manufacturing ecosystem.
As per a CNBC report, Walter Kuijpers, a Singapore-based partner at the professional services firm stated that the chip manufacturing potential across Southeast Asia has escalated to 30 percent to 40 percent compared to the time prior to COVID-19. This survey is based as per some recent queries to KPMG from several clients across the globe. “Corporates are seeing merits in segregating supply chains rather than having a single point of reliance … Recent geopolitical developments are expected to accelerate these strategies that are already in motion,” said Kuijpers.
A couple of months back, the US government also urged all its companies to get licenses for the purpose of exporting top-notch semiconductors or associated manufacturing equipment and technology to China. In fact, if the companies want to produce cutting-edge chips by utilizing American equipment for sale to Chinese firms, then they must obtain proper sanctions from the White House. In fact, SK Hynix, Samsung and TSMC have been reported to have obtained one-year waivers for sending American chip making equipment to their units in China. ASML, the Dutch semiconductor toolmaker, told the media that its employees in the US are restricted from providing specific services to advanced semiconductor fabrication plants in China.
The point to be noted is that chipset makers who were once magnetized to China’s manufacturing ecosystem because of its strategy and incentive policies are now dealing sternly with augmenting labor prices, the imbalance of supply chain because of COVID-19, and the increasing geopolitical tensions. Hence, the global firms have now found other options to shift their manufacturing to somewhere else mostly in India and Vietnam. According to the experts, equipment depreciation is the highest cost for these wafer fabs.
Vietnam along with India has turned out to be a manufacturing hotspot for the international semiconductor companies. Of late, the former has invested billions of dollars to begin education and research centers, thereby magnetizing the key chipset makers to begin their manufacturing base there. KPMG’s Kuijpers also added that India’s design talent pool is rapidly increasing mostly in microprocessors, memory subsystems, and analog chip design. More skilled laborers can be found in India at a very affordable wage. But, the country really needs to perk-up its manufacturing capabilities.
