A little ago, I was looking at the top20 semiconductor companies in the world and was surprised to see a couple of large companies in Taiwan and South Korea garnering >34% of total sales (See – Look who is Leading the World Semiconductor Business). This time it’s another surprise, when I look at IC Insights report on global 300mm fab capacity. Is this semiconductor business, considered to be a top high-tech and capital intensive area, becoming the forte of Asia Pacific, more specifically East Asia region? Look at this bar chart representing the share of worldwide 300mm wafer capacity based on fab location as well as fab’s headquarter location –
If we combine the share of Japan, South Korea, Taiwan and China, the combined share of fabs by location sums up to 74% and that by their headquarter location sums up to 72%; that’s massive. Europe’s share looks miniscule compared to others.
South Korea and Taiwan look interesting. Just two companies, Samsungand SK Hynix, in South Korea, not only have 28% share in their home land; they also have fabs outside Korea. In Taiwan, most of the fabs have their headquarters there only. Similarly Japan has 14% fabs with headquarters and 17% fabs located there.
In North America, a wide contrast is visible; while 28% of fabs are owned there, only 15% are located there. The reason is obvious – cost other than fab expertise available in other specific regions; Semiconductor fabrication in one business which cannot be done without requisite long-run expertise, North America gets that with added cost benefit by setting up fabs in other regions.
Again, if we look at the capacity utilization, Bill Jewell’s blog tells the story. The capacity is only rising, TSMCand UMC remaining between 80% to 90% and more utilization. What can explain their capacity utilization being higher than the world average? The foundry services, specifically by the foundries in Taiwan, for the rising world of fabless companies across the world. Today TSMC provides fabrication of chips to its design house customers at top-notch process nodes.
When economic, business and technical forces combine together for a particular domain, then that creates a critical work force, ecosystem and leadership around that domain in the particular region. Are we seeing East Asia at the leading edge of semiconductor fabrication and semiconductor business in general for the next 5-10 years?