Russia Sanctions: Taiwan's TSMC Joins Western Ban on Technology For Moscow

[Riaz Haq]

Taiwan Semiconductor Manufacturing Company (TSMC) will no longer fabricate computer chips for Russia, according to media reports. The ban will particularly affect Russia's Elbrus and Baikal processors, unless China agrees to step in to manufacture these chips, and risk additional US sanctions itself. Both Russian processors use mature 28 nm technology. The world's most advanced TSMC fabrication technology today is 5 nanometers. The best US-based Intel can do today is 7nm technology. China's SMIC (Semiconductor Manufacturing International Corporation) has the capability to produce chips using 14 nm technology.  Semiconductor chips form the core of all modern systems from automobiles to airplanes to smartphones, computers, home appliances, toys, telecommunications and advanced weapons systems.  

Top 10 Semiconductor Chip Producing Countries. Source: Comtrade Dat...

China is the world's biggest producer of semiconductor chips, according to data from the United Nations. The electronics value chain, which includes consumer electronics and ICT, has been regionalized over the years, and China has become a major global production center for microelectronics, according to a report in Opportimes. Other major producers include South Korea, Singapore, Malaysia, the United States, Japan, Germany, the Philippines, the Netherlands, and Thailand. In particular, the statistics for China add up the production of Hong Kong and Macao. 

Russia's Semiconductor Imports. Source: WSJ

While China is the  biggest volume producer of semiconductor components in the world,  the Chinese design centers and fabs rely on tools and equipment supplied by the West to deliver products. Western companies dominate all the key steps in this critical and highly complex industry, from chip design (led by U.S.-based Nvidia, Intel, Qualcomm and AMD and Britain’s ARM) to the fabrication of advanced chips (led by Intel, Taiwan’s TSMC and South Korea’s Samsung ) and the sophisticated machines that etch chip designs onto wafers (produced by Applied Materials and Lam Research in the U.S., the Netherlands’ ASML Holding and Japan’s Tokyo Electron ), according to the Wall Street Journal. 

East vs West Economic Output. Source: Wall Street Journal

There is no question that the current western technology sanctions can seriously squeeze Russia. However, overusing such sanctions could backfire in the long run if the US rivals, particularly China and Russia, decide to invest billions of dollars to build their own capacity. This would seriously erode western technology domination and result in major market share losses for the US tech companies, particularly those in Silicon Valley. 

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[Riaz Haq]

India’s high-stakes bid to join the global semiconductor race
Chipmaking could be fantastically lucrative but precision engineering has not been a traditional national strength

https://www.ft.com/content/cbd50844-853e-4435-8028-f581d536a89a


The complexity of semiconductor production and supply chains means that manufacturers in a handful of east Asian countries, led by China, Taiwan and South Korea, have been responsible for much of global supply.

That is now changing. In July, the US passed the Chips and Science Act that includes $52bn of grants to support chipmaking and research and development. Meanwhile the EU is looking to build semiconductor resilience with its own €43bn Chips Act. 

While India does not yet make microchips commercially, it does contribute to the design of semiconductors because of its strong software base, says Mahinthan Joseph Mariasingham, a statistician and researcher with the Asian Development Bank.

“When it comes to manufacturing, India has lagged behind many of the other countries, partly because of its lack of facilitating infrastructure,” he says. “It was easy for them to get into the software market because it doesn’t require elaborate physical infrastructure.” 



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The factories outside Chennai, in India’s southern state of Tamil Nadu, are home to an array of global corporate names that lend credibility to Prime Minister Narendra Modi’s “Make in India” campaign, which aims to turn Asia’s third-largest economy into a workshop to the world.

The state’s industrial parks host international investors such as Renault-Nissan and Hyundai, which have large car factories; Dell makes computers there and Samsung produces TVs, washing machines and fridges. There are enough suppliers to Apple (including Taiwan’s Foxconn and Pegatron, and the Finnish contract manufacturer Salcomp) that people in Tamil Nadu’s business community commonly refer to the American tech group, which does not discuss its suppliers, as “the fruit company”. 

Now India wants to take a step up the manufacturing value chain, with a high-stakes bid to begin making semiconductors. The Modi government has put $10bn of incentives on the table to tempt manufacturers to set up new “fabs” (semiconductor fabrication plants) and encourage investment in related sectors such as display glass. One plant is being planned in Tamil Nadu.

India’s ambition to enter the chipmaking business comes at a time of growing trade and geopolitical tension as western economies have pushed to decouple their supply chains from China, which has invested heavily to become a leader in the semiconductor industry.

The Covid-19 pandemic and Beijing’s draconian lockdowns have disrupted global chip supply and sent companies and governments on a hunt for alternative sources of production. India, which has cracked down on Chinese social media apps and phone producers against the backdrop of a long-running geopolitical dispute, is offering itself as a democratic alternative tech hub to China. 



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“From a geopolitics point of view, India is attractive . . . We are increasingly one of the largest consumers of semiconductors outside of the US and traditional markets,” says Rajeev Chandrasekhar, India’s minister of state for electronics and information technology.

Manufacturers are now lining up to take up the $10bn offer. Singaporean group IGSS Ventures has signed a memorandum of understanding with the Tamil Nadu state government for what its founder and chief executive Raj Kumar says will “very likely” be a wafer factory it wants to build within three years. The Israeli group ISMC, a joint venture between Israel’s Tower Semiconductor and Abu Dhabi-based Next Orbit Ventures, has signed a letter of intent with the state of Karnataka, home of India’s tech capital, Bangalore, to build a $3bn semiconductor chipmaking plant. And Foxconn has teamed up with Indian group Vedanta to build a semiconductor plant, surveying sites in the western Indian states of Gujarat and Maharashtra. 

[Riaz Haq]

#Apple to use #TSMC’s next 3-nm #semiconductor chip #technology in iPhones, Macs next year. There is a cost increase of at least 40% for the same area of silicon when moving to 3-nm chips from the 5-nm family, which includes 4-nm chips. #computers #phones https://asia.nikkei.com/Business/Tech/Semiconductors/Apple-to-use-T...

TAIPEI -- Apple aims to be the first company to use an updated version of Taiwan Semiconductor Manufacturing Co.'s latest chipmaking technology next year, with plans to adopt it for some of its iPhones and Mac computers, sources briefed on the matter told Nikkei Asia.

The A17 mobile processor currently under development will be mass-produced using TSMC's N3E chipmaking tech, expected to be available in the second half of next year, according to three people familiar with the matter. The A17 will be used in the premium entry in the iPhone lineup slated for release in 2023, they said.

N3E is an upgraded version of TSMC's current 3-nanometer production tech, which is only starting to go into use this year. The next generation of Apple's M3 chip for its Mac offerings is also set to use the upgraded 3-nm tech, two sources added.

Nanometer size refers to the width between transistors on a chip. The smaller the number, the more transistors can be squeezed onto a chip, making them more powerful but also more challenging and costly to produce.

N3E will offer better performance and energy efficiency than the first version of the tech, TSMC said in a recent technology symposium in Hsinchu. Industry sources said the upgraded production tech is also designed to be more cost-effective than its predecessor.

As TSMC's largest customer and the biggest driver for new semiconductor technologies, Apple is still its most loyal partner when it comes to adopting the latest chip technology. The U.S. tech giant will be the first to use TSMC's first generation of 3-nm technology, using it for some of its upcoming iPads, Nikkei Asia reported earlier.

Previously, Intel told TSMC that it would like to secure 3-nm production by this year or early next year to be among the first wave of adopters like Apple, but it has since delayed its orders to at least 2024, three people told Nikkei Asia.

However, 2023 could mark the second year in a row that Apple uses TSMC's most advanced chipmaking technology for only a part of its iPhone lineup. In 2022, only the premium iPhone 14 Pro range has adopted the latest A16 core processor, which is produced by TSMC's 4-nm process technologies, the most advanced currently available. The standard iPhone 14 range uses the older A15, which was used in the iPhone 13 and iPhone 13 Pro models released in the second half of 2021.

Meanwhile, the race is on among chipmakers to roll out ever more advanced production tech. TSMC and Samsung each hopes to be the first to put 3-nm tech into mass production this year. This technology is suitable for all types of central and graphics processors for smartphones, computers and servers, as well as those used in artificial intelligence computing.

Apple, meanwhile, is likely to use the different levels of production tech to introduce greater differences between its premium and nonpremium models, according to Dylan Patel, chief analyst with Semianalysis. Previously the biggest differences have been in screens and cameras, but this could be expanded to include processors and memory chips, he said.

According to the analyst's estimate, there is a cost increase of at least 40% for the same area of silicon when moving to 3-nm chips from the 5-nm family, which includes 4-nm chips.

TSMC, Intel and Apple declined to comment.

[Riaz Haq]

Foxconn and Vedanta to build $19bn India chip factory

https://www.bbc.com/news/62873520


Foxconn and Vedanta have announced $19.5bn (£16.9) to build one of the first chipmaking factories in India.

The Taiwanese firm and the Indian mining giant are tying up as the government pushes to boost chip manufacturing in the country.

Prime Minister Narendra Modi's government announced a $10bn package last year to attract investors.

The facility, which will be built in Mr Modi's home state of Gujarat, has been promised incentives.

Vedanta's chairman Anil Agarwal said they were still on the lookout for a site - about 400 acres of land - close to Gujarat's capital, Ahmedabad.

But both Indian and foreign firms have struggled in the past to acquire large tracts of land for projects. And experts say that despite Mr Modi's signature 'Make in India' policy - designed to attract global manufacturers - challenges remain when it comes to navigating the country's red tape.

Gujarat Chief Minister Bhupendrabhai Patel, however, said the project "will be met with red carpet... instead of any red tapism".

The project is expected to create 100,000 jobs in the state, which is headed for elections in December, where the BJP is facing stiff competition from oppositions parties.

According to the Memorandum of Understanding, the facility is expected to start manufacturing chips within two years.

"India's own Silicon Valley is a step closer now," Mr Agarwal said in a tweet.

India has vowed to spend $30bn to overhaul its tech industry. The government said it will also expand incentives beyond the initial $10 billion for chipmakers in order to become less reliant on chip producers in places like Taiwan, the US and China.

"Gujarat has been recognized for its industrial development, green energy, and smart cities. The improving infrastructure and the government's active and strong support increases confidence in setting up a semiconductor factory," according to Brian Ho, a vice president of Foxconn Semiconductor Group.

Foxconn is the technical partner. Vedanta is financing the project as it looks to diversify its investments into the tech sector.

Vedanta is the third company to announce plans to build a chip plant in India. A partnership between ISMC and Singapore-based IGSS Ventures also said it had signed deals to build semiconductor plants in the country over the next five years.

[Riaz Haq]

#Japan's #Toyota to stop #automobile #production in #Russia due to #supplychain disruption amid #UkraineWar & western #sanctions. "After 6 months, we have not been able to resume normal activities and see no indication that we can restart in the future". https://asia.nikkei.com/Politics/Ukraine-war/Toyota-to-terminate-au...

NAGOYA, Japan -- Toyota Motor said Friday it will exit from automobile production in Russia, citing difficulties supplying key materials and parts in the country amid the war in Ukraine.

The automaker suspended operations at its plant in St. Petersburg on March 4, after the Russian invasion began.

"After six months, we have not been able to resume normal activities and see no indication that we can restart in the future," Japan's top automaker said.

A protracted disruption would hurt Toyota's ability to support its employees, leaving it no choice but to end production in the country, it said. Mounting geopolitical risks in the region are believed to have contributed to the decision as well.

Toyota had continued to pay its factory workers after suspending production, reassigning them to maintenance and other tasks instead. Details regarding the termination process and treatment of employees at the St. Petersburg plant will be ironed out at a later time.

Toyota holds a larger market share in Russia than any other Japanese automaker. It produced 80,000 vehicles and sold 110,000 in the country in 2021.

It began locally producing vehicles in 2007 at St. Petersburg. The plant's lineup included the RAV4 sport utility vehicle and the Camry sedan in 2021.

Nissan Motor, another Japanese automaker, has extended its production freeze at its St. Petersburg plant to the end of December from the end of September.

[Riaz Haq]

State Department Urges Silicon Valley to Aid National Security Effort
New cyber ambassador notes private sector has strengthened Ukrainian defense

https://www.wsj.com/articles/state-department-urges-silicon-valley-...

WASHINGTON—The State Department is expanding its outreach to U.S. technology firms to get them more involved in some of the world’s top national security challenges, from the war in Ukraine to growing competition with China, U.S. officials said.

Secretary of State Antony Blinken will travel to Silicon Valley starting Sunday as part of the push to make cybersecurity among the State Department’s leading priorities. He will meet with corporate leaders “to highlight the key role for technology diplomacy in advancing U.S. economic and national security,” according to the State Department.

Presidential administrations of both parties have long sought to forge strong ties with Big Tech, urging the companies to share cyber-threat intelligence, secure agreements on the production of advanced technologies or quietly cooperate on surveillance programs.

At the State Department, cybersecurity has in years past often been seen as a second-tier priority ceded to other federal agencies, a perception a new dedicated cyber office is trying to change, current and former officials have said.

“We have a profound stake in shaping our technological future, and American diplomacy has a key role to play in bolstering and drawing on our country’s unique strengths—one of which is our industrial and innovation base,” Mr. Blinken said in a statement to The Wall Street Journal ahead of his trip.

Last year, the State Department established a new bureau of cyberspace and digital policy, and Mr. Blinken named former technology executive and former Marine Corps officer Nathaniel Fick to lead it. The bureau’s budget in the 2022 fiscal year was $41.2 million, including a diplomatic engagement budget of $18.2 million.

Mr. Fick, the nation’s first ambassador-at-large for cyber, said the war in Ukraine underscored the need for greater alignment of cyber defensive capabilities among countries in the North Atlantic Treaty Organization. The government must be a better intermediary between U.S. tech firms and foreign governments in need of their services, he said.

“There’s a lot of capability out there in the private sector that is being deployed to strengthen Ukraine’s digital defenses,” said Mr. Fick, who was confirmed by the Senate in September.

Since the start of the war in Ukraine, large U.S. tech firms like Microsoft Corp. and Alphabet Inc.’s Google unit have been sharing cyber insights with Kyiv and the public about the activities of suspected Russian hackers. Major Western tech companies have suspended operations or withdrawn from the country. Twitter, Inc., Meta Platforms Inc.,’s Facebook, and Alphabet’s YouTube and Google have cracked down on fake feeds and hackers, while Elon Musk’s Space Exploration Technologies Corp., also has been providing satellite internet access.

The Biden administration has treated the cyber threats—especially ransomware—as a top-tier national security issue, with waning global digital freedom, and disinformation sponsored or deployed by adversary nations among other concerns.

U.S. officials also have sought to faster declassify and disseminate intelligence on cyber threats to tech companies and operators of infrastructure such as hospitals, election systems and energy providers. The administration also has created minimum cybersecurity requirements on natural gas and oil pipelines following the Colonial Pipeline ransomware attack last year, and has implemented or is working on similar rules for other business sectors.

[Riaz Haq]

Are young Taiwanese prepared to fight mainland China?


https://www.wsj.com/articles/taiwan-china-ukraine-russia-hong-kong-...


“A lot of young people who signed up for the four-year volunteer force decided to pay a penalty and dropped out early because they say they had come for the money—not to fight and not to die,” said Alexander Huang, the Kuomintang’s director of international affairs.

Taiwan’s troubled history with its own armed forces is part of the reason. The Kuomintang-led army and government led by Chiang Kai-shek escaped to Taiwan when Mao Zedong’s Communist forces ousted them from the Chinese mainland in 1949. Chiang’s military dictatorship attempted to suppress Taiwan’s sense of identity, seen as tainted by decades of Japanese rule over the island, and engaged in decades of what has since been called a “White Terror,” during which thousands of dissidents were killed.


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TAIPEI, Taiwan—People in Taiwan have been following every twist of the war in Ukraine. But, while their sympathy for the Ukrainian cause is near-universal, the conclusions for the island’s own future widely diverge.

To some, the takeaway is that even a seemingly invincible foe can be defeated if a society stands firm, an inspiration for Taiwan’s own effort to resist a feared invasion by China. Others draw the opposite lesson from the images of smoldering Ukrainian cities. Anything is better than war, they say, and Taiwan should do all it can to avoid provoking Beijing’s wrath, even if that means painful compromises.

These two competing visions will play out in Taiwan’s presidential elections, slated for January, and shape how the island democracy revamps its defenses as China’s military might expands. The soul-searching inside Taiwan, and the determination with which it will strengthen its armed forces, is also bound to affect the extent to which the U.S. will get involved militarily should Beijing try to capture the island, home to 24 million people—and most of the world’s advanced semiconductor production capacity.

While Taiwan has been living under a threat of invasion ever since China’s Communist Party took control of the mainland in 1949, the Russian thrust into Ukraine drove home to many Taiwanese that war can erupt with little notice. Chinese leaders have intensified their rhetoric around Taiwan, repeating that they won’t rule out using force to achieve what they call “national reunification.” Beijing has also ramped up naval and air probes around the island that wear out Taiwanese defenses. The U.S. Central Intelligence Agency estimates that Chinese leader Xi Jinping has set 2027 as the deadline for his military to be ready to take the island.

“What Ukraine has underscored is that it’s not a remote possibility that an aggressive neighbor can unilaterally decide to take action against you. It’s a wake-up call,” said Enoch Wu, founder of the Forward Alliance, a nongovernmental organization that has started training Taiwanese civilians in emergency response and first aid. “The threat that we face is an existential one, and so our defense mission has got to involve the entire society.”

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The main opposition Nationalist Party, known as the Kuomintang, holds a different view. “We want to talk to the Chinese. We believe that we can have a dialogue with the Chinese. That will certainly de-escalate the tension, to make sure no accidental war, and for sure no intentional war, happens,” Kuomintang vice chairman Andrew Hsia said in an interview before departing on a trip to China in June, his second this year.

Ukraine’s tragedy has made an outreach to Beijing even more vital, he added: “In the past we talked about war, but now for the first time we saw in our living rooms, on television, all this destruction. Are we ready for that? I don’t think we are, I don’t think we are that resilient.”

The Kuomintang’s presidential candidate, Hou Yu-ih, pledged this week that he would return the compulsory military service length to four months after improving ties with Beijing.

[Riaz Haq]

India can aim lower in its chip dreams

https://www.reuters.com/breakingviews/india-can-aim-lower-its-chip-...


BENGALURU, July 5 (Reuters Breakingviews) - India’s semiconductor dreams are facing a harsh reality. After struggling to woo cutting-edge chipmakers like Taiwan Semiconductor Manufacturing (2330.TW) to set up operations in the country, the government may now have to settle for producing less-advanced chips instead. Yet that’s no mere consolation prize: the opportunity to grab share from China in this commoditised but vital part of the tech supply chain could pay off.

Prime Minister Narendra Modi wants to “usher in a new era of electronics manufacturing” by turning India into a chipmaking powerhouse. So far, the government has dangled $10 billion in subsidies but with little to show for it. Mining conglomerate Vedanta’s $19.5 billion joint venture with iPhone supplier Foxconn (2317.TW) has stalled; plans for a separate $3 billion manufacturing facility appear to be in limbo, Reuters reported in May. In a small win for the government, U.S.-based Micron Technology (MU.O) last week announced it will invest $825 million to build its first factory in India in Modi’s home state of Gujarat, though the facility will be used to test and package chips, rather than to manufacture them.

Even so, the Micron investment could pave the way for the country to move into the assembly, packaging and testing market for semiconductors, currently dominated by firms like Taiwan’s ASE Technology (3711.TW) and China's JCET (600584.SS). It’s not as lucrative as making or designing them but global sales are forecast to hit $50.9 billion by 2028, according to Zion Market Research.

An even bigger opportunity awaits in manufacturing what are known as trailing-edge semiconductors. Recently, New Delhi expanded fiscal incentives for companies to make these lower-end products in the country. It’s a far more commoditised part of the market but there’s much to play for. Analog chips, for example, are vital for electric cars and smartphones. Last year, sales grew by a fifth to $89 billion, per estimates from the Semiconductor Industry Association, outpacing growth for memory, logic and other types of chips.

The majority of the world’s trailing-edge semiconductors are currently made in Taiwan and China. So rising geopolitical tensions between Washington and Beijing, as well as worries of military conflict in Taiwan, will make India an attractive alternative for companies like U.S.-based GlobalFoundries (GFS.O) that specialise in this segment. Booming domestic demand is another factor: the Indian market is forecast to hit $64 billion by 2026, from just $23 billion in 2019.

Aiming lower could be just what India’s chip ambitions need.

Follow @PranavKiranBV on Twitter

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Refiles to add link.)

U.S. memory chip firm Micron Technology on June 28 signed a memorandum of understanding with the Indian government to build a semiconductor assembly and testing plant, its first factory in the country.

Construction for the $2.75 billion project, which includes government support, will start in August, according to Ashwini Vaishnaw, India’s minister of electronics and information technology in an interview with the Financial Times published on July 5, with production expected by the end of 2024.

[Riaz Haq]

Terry Gou, the billionaire founder of Foxconn, announced his candidacy for Taiwan's presidency in January elections. Gou said he wants to unite the opposition and ensure Taiwan does not become "the next Ukraine". He said he will bring 50 years of peace to the Taiwan Strait and build a foundation for mutual trust. Gou also criticized the governing Democratic Progressive Party (DPP) for policies that have put Taiwan at risk of war with China. China claims Taiwan as part of its territory.

Gou says he can use his experience working in China to protect Taiwan's security. He said he will not allow Taiwan to become "the next Ukraine". However, a researcher at National Chengchi University in Taiwan said Gou's candidacy could make it harder for an opposition leader to defeat the DPP.