The race to redraw the semiconductor industry map in Asia

Years ago, Taiwan, South Korea, Japan and other places in East Asia typically handled front-end processes in the global semiconductor industry, while Southeast Asian nations and India hosted factories for the back end. Now, chip giants are starting to adjust amid tensions between the US and China.

Building a successful stepping stone model

In 2021, India approved a 760 billion rupee ($9.14 billion) program to support domestic semiconductor and display manufacturing.

At the opening ceremony of the SemiconIndia 2023 industry event, Prime Minister Narenda Modi announced that he would leverage the country's strengths to "contribute" to the global chip industry.

India is ambitious to gain a foothold in the new global semiconductor supply chain.

In June 2023, US chipmaker Micron Technology announced it was building a manufacturing plant in the Indian state of Gujarat, expected to be operational by 2024. Meanwhile, Taiwan's Hon Hai Precision Industry, or Foxconn, is said to be partnering with US chip equipment maker Applied Materials to manufacture semiconductor machinery in the state of Karnataka.

Noboru Yoshinaga, executive vice president of Disco, a Japanese semiconductor equipment maker, said that despite concerns about the South Asian nation’s infrastructure, such as its power grid, the fact that American companies are rushing to set up shop there shows that the “wind has changed direction”.

Ashwini Vaishnaw, India’s minister for electronics and information technology, said the country is planning to attract semiconductor investment and develop a local supply chain. “It is important that we have some initial successes that can be used for subsequent projects.”

New Delhi also announced a strengthening partnership with Tokyo, calling on businesses strong in end-to-end processes and chip foundry equipment to invest. In July 2023, the two governments signed a memorandum of understanding to promote cooperation in the semiconductor supply chain.

Antoine Huchez, senior manager of growth strategy at US consultancy Frost & Sullivan, said that India has strong ambitions in attracting chip projects and the country has great advantages for growth.

Increase preferential tax reduction period

In Thailand, Narit Therdsteerasukdi, who oversees foreign investment policy as secretary-general of the Board of Investment, has called semiconductors one of the most important commodities today. At the same time, the government has adopted a neutral foreign policy to avoid being caught up in US-China tensions.

Smaller countries are looking to attract semiconductor investment through a variety of tax incentive programs.

Bangkok has eased corporate tax breaks for chip companies. Specifically, a supply chain company entering Thailand will be exempt from corporate tax for up to 13 years compared to the previous eight years.

Thailand is focusing heavily on attracting companies involved in back-end processes such as semiconductor design and wafer etching, which are considered more technically advanced than back-end processes such as chip cutting and packaging.

The country is also developing a local industry, bringing together electric vehicle assembly plants and component suppliers, because electric vehicles typically contain more semiconductors than gasoline-powered cars.

The "melee" to attract investment

Singapore and Malaysia are leading the way in attracting manufacturing facilities. Singapore, which has had a semiconductor industry since the 1960s, will open a $4 billion foundry by U.S. semiconductor maker GlobalFoundries in September.

Southeast Asia benefits from the global semiconductor manufacturing shift.

The Singapore government has helped GlobalFoundries purchase land and clear the site. In addition, Applied Materials and Soitec of France have also decided to expand their operating capacity in the island nation.

Looking to Malaysia, German giant Infineon Technologies announced plans to spend €5 billion ($5.45 billion) to expand its existing facilities, with the investment going towards manufacturing next-generation silicon carbide power semiconductors. Technology giant Intel pledged to invest $6.49 billion over 10 years to 2031 in its back-end processes in the country.

Elsewhere, Vietnam has manufacturing and research facilities for leading companies such as Samsung Electronics and Intel. In July 2023, during a working visit to Hanoi , US Treasury Secretary Janet Yellen conveyed the message that Washington wants to cooperate closely with Vietnam in semiconductor manufacturing.

“Asia is currently witnessing a chaotic battle” to attract semiconductor businesses, said Daisuke Yokoyama, consulting director at KPMG.

(According to Nikkei Asia)

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