ShreeMetalPrices: US Restricts China’s Semiconductor Exports: India and Vietnam may see benefits


The newest upheaval is the U.S ban on semiconductor exports to China. Which is driving manufacturers to consider moving part of their chipmaking capacity to nearby countries India & Vietnam .
However, experts told that it is unlikely that the global competition for chipmaking dominance will be disturbed by the Biden administrations and restrictions on China’s semiconductor exports.

According to Walter Kuijpers, A Singapore based partner at KPMG. The number of recent questions from clients and prospects about increasing chipmaking capacity across Southeast Asia jumped by 30% to 40% compared to before the pandemic.

While having a reliance on any single country, Companies are starting to perceive benefits from segmenting their supply chains.

Current geopolitical developments are anticipated to speed up these already-in-motion measures, Kuijpers stated.

The United States started approving companies who seeks licences in October to exporting advanced chips or related manufacturing machines to China. Additionally, if those companies want to employ USA equipment to produce particular high end chips for export to China, also Washington must give its consent.

Companies making semiconductors began to look for the solutions.
According to reports, the leading Taiwanese chipmaker TSMC & its South Korea competitors Samsung & SK Hynix were grant one-year exemptions to keep delivering U.S chipmaking machines to the facilities in China.
The advanced semiconductor fabrication factories (fabs). In China cannot receive some services from Dutch semiconductor tool maker — ASML’s US employee said.

Chipmakers Moving away from china

Chipmakers who once determined to China’s ability to produce chips at a low cost have recently had to struggle with increased labour costs. There, supply chain interruptions brought on by Covid-19 constraints, and an increase in geopolitical risks.
The $600 billion global chip industry has experienced a number of changes, the curbs being the most recent.

These chipmakers in China are now finding additional impetus to replicate their production elsewhere. The biggest expense for these wafer fabs is depreciation of the equipment.

As a result, they want a nearby location for efficient yields and maximum production. According to Jan Nicholas, an executive director at Deloitte says while focused on the semiconductor sector.
According to him, Southeast Asia has emerged as a logical choice for factories considering to transfer them outside of China.

When you make very major investment decisions for the company with such a prolonged lifespan, you tend to avoid riskier scenarios“….. The bigger the uncertainty, the more these businesses will seek adequate confidence “Nicholas stated.

Due to its apparent neutrality amid on-going trade disputes between the China & US Southeast Asia may possibly be consider as more attractive that semiconductor manufacturing behemoths like South Korea and Taiwan.
According to Sarah Kreps, director of CUTPL “South Korea & Taiwan ca n’t hide themselves. But nations like India, and Singapore, Vietnam are promoting themselves as a third option, a neutral link between two powers.”

1. Semiconductors in India

According to Kuijpers from KPMG, India is also starting to emerge as a manufacturing hub for the chipmakers due to the country’s expanding skill resource in the design of memory subsystems, microprocessors, and analogue chips.

In India, he continued, labour is abundant and labour wages are cheap as well. The absence of manufacturing capabilities, reduces the country’s attractiveness.
India has attempted to establish Semiconductor units in past years. He added, But those efforts have run into many difficulties, including significant capital expense for setting up costs.

2. Semiconductors in Vietnam

For international semiconductor manufacturers, Vietnam has become an alternative to China’s as a Manufacturing hub. Major chipmakers are attracted to the country – Result of billions of dollars’ worth of investments in research and educational facilities.

The largest memory chip manufacturer in the world, Samsung, reportedly agreed to invest a further in the Southeast Asia this year by $3.3 billion investment. By July 2023, The South Korean company wants to start making chip components.

Kreps said “Companies with manufacturing facilities in China. For example Samsung, can expand its production alternatives that offer many of the same advantages but only without the political repercussions.”

China in Lead to Global Semiconductor Industry

Asia’s growing attractiveness for Chip manufacturers, experts notes that China continues to outperform regional countries in terms of chipmaking competitiveness.

According to KPMG’s Kuijpers, the country’s domestic chip market is also benefiting from the rising demand for chips used in applications like artificial intelligence (AI), 5G and autonomous driving.

China continues to be a big player and semiconductor producer today, especially for lower end devices. Some Data Shows, China is the world’s third-largest producer of semiconductor chips. Accounting for around 16% of total worldwide semiconductor production capacity; it ranks above the US but below South Korea & Taiwan.

The country created the foundation for technological independence in chip manufacturing with the “Made in China 2025” blueprint, which was announced in 2015.

Not everyone concurs that US sanctions against Beijing will directly benefit Vietnam or India.

“It’s uncertain that Vietnam or India will benefited from US export restrictions on China since they lack manufacturing base,” said Yongwook Ryu. The East Asia international relations analyst at National University of Singapore.

In contrast, he continued by stating that “a country or a company that can produce high quality chips with competitive pricing — in other word, a country or company that can substitute China or Chinese chip producers — can spring up as a significant winner in the future