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SECTORSSEMICONDUCTORS


Global chips crunch promptswave of FDI


THE SEMICONDUCTOR SECTOR HAS BECOME THE LINCHPIN OF THE GLOBAL ECONOMY, WITH GOVERNMENTS, CHIPMAKERS AND THEIR CUSTOMERS STRIVING TO CONSOLIDATE SUPPLY. ALEX IRWIN-HUNT REPORTS


J


ust as demand in the automotive industry began to recover from the pandemic, it hit a roadblock.


In December 2020, Volkswagen (VW) became the first carmaker to sound the alarmof a chip supply crunch that has forced automakers world- wide to cut or halt production. “We are nowfeeling the effects of


the global semiconductor bottle- neck,” saidMurat Aksel, themember of VW’s board responsible for pur- chasing and procurement, in a state- ment on December 18, 2020. But that was just the beginning.


Other global carmakers, including GeneralMotors, Honda, Nissan and Daimler, have subsequently cur- tailed production due to the chip shortage. In February, consultancy AlixPartners forecast that the global auto industry could see sales fall by up to $60.6bn this year as a result. “The shortage and the Covid-19


pandemic have each demonstrated howmuch we rely on semiconduc- tors,” says Ajit Manocha, the presi- dent and chief executive of Semi, the global industry association for the electronics manufacturing and design supply chain. Mr Manocha points out that


home working, factory automation, sequencing of the Covid-19 genome and the vaccine rollout have all been enabled by chip-based devices and


April/May 2021 www.fDiIntelligence.com


Rainbow connection: GlobalFoundries has announced that it will invest $1.4bn in boosting output at its three factories


technology. As economies reopen, demand for chips is expected to remain strong, withmany semicon- ductor manufacturers planning huge new investments.


Strongchipdemand In 2021, the global semiconductor market is projected to grow by 10.9% to $488bn, as demand formemory, sensors and optoelectronics drives growth, according toWorld Semiconductor Trade Statistics (WSTS). In January alone, global sem- iconductor sales reached $40bn, an increase of 13.2% on the same month of 2020. These strong demand dynamics,


coupled with supply chain con- straints highlighted by the current crisis, has led semiconductor firms to plan significant investment into


manufacturing capacity. Taiwan Semiconductor (TSMC),


the world’s largest contract chip maker,which takes designs from companies like Apple, Qualcomm and Huawei and manufactures them, has the most ambitious invest- ment plans in the industry. The com- pany has projected that it will spend a whopping $25bn-28bn on capital expenditure (capex) this year,which is up to 63%more than in 2020. According to a letter seen by


Nikkei Asia, TSMCchief executive CC Wei told clients that the company plans to invest $100bn into advanced semiconductor technologies over the three years through 2023. “We are seeing a structural and


fundamental increase in underlying demand driven by key long-term growth megatrends including 5G


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