RIO DE JANEIRO, BRAZIL – The pandemic and the war between Russia and Ukraine are forcing a rearrangement in the global production chain of semiconductors.
The item has become a symbol of the difficulties of a globalized economy with most of its manufacturing concentrated in Asia.
The chips are essential to products ranging from toys and battery-operated radios to supercomputers and autonomous cars.
After a wave of factory closures due to a lack of components, especially in the automotive industry, several governments, such as the United States and the European Union, have opened their coffers to attract new factories or expand existing ones.
The US government expects Senate approval of US$52 billion for this purpose. The EU has already released US$45 billion.
The shortage problem persists and should extend until 2024 or 2025, although to a lesser extent.
For this year and next, 29 factories are scheduled to open. The investments of this group of companies amount to about R$140 billion (US$28.5 billion), according to calculations by Semi, a global association of electronics manufacturers.
Most will be installed in Asia. Eight in Taiwan, eight in China, and two in South Korea. The three countries already concentrate about 80% of world production, but experts expect the deconcentration movement to change this map.
Other major destinations are the US and Germany. “The industries will continue to depend on Asia, but with new capacities also going to other regions,” evaluates Carlos Libera, partner at the consulting firm Bain & Company.
“At least part of the demand will be supplied by the factories emerging in other countries, even for security reasons.”
Intel, one of the giants in the sector, announced this year two new factories in the US and one in Germany.
Carlos Augusto Buarque, Intel Brazil’s marketing director, explains that the group intends to diversify its supply chain. “Our goal is to balance 50% of supply in the Americas and Europe and the other 50% in Asia by 2030.”
Even Brazil, where the activity linked to semiconductors is limited to the final assembly phase, called encapsulation, decided to participate in the movement after several meetings with representatives of sectors such as automotive and electro-electronics.
The Ministry of Economy promises to present a program this month or at the beginning of next month that should contain measures such as tax exemption for the semiconductor production chain, support for research and development, training and qualification of professionals, and facilitation of imports.
The sector currently has about 20 companies, according to the Brazilian Semiconductor Industry Association (Abisemi).
GLOBAL RACE
The expansion of the semiconductor production capacity was already in the plans of large corporations due to the super demand for chips that will come from the 5G technology, electric and autonomous cars, the internet of things, and artificial intelligence.
“Sensors will be the great growth vector of the global industry,” says Marcio Kanamaru, Technology, Media, and Telecommunications lead partner at KPMG in Brazil.
A market report by Semi, a global association of electronics manufacturers, cites that 86 new factories or expansions of already active plants have been announced from 2020 to 2024.
Many of these projects and other new ones announced during the pandemic are being executed earlier than anticipated, says Kanamaru.
Of the plants that have already started operations – such as Bosch’s in Germany in 2021 – and those that are under construction, 15 will be in Taiwan, 14 in China, nine in Europe, eight in the Americas, seven in South Korea, six in Japan, and at least one in India.
A plant takes an average of two years to complete. Some groups have not yet announced the locations of the new units. The pandemic has anticipated several projects.
According to Semi, these new plants should expand the current production capacity by 20% to 40%.
According to Kanamaru, semiconductor executives expect the industry to double its global production capacity in eight to ten years, with more factories or increased productivity.
“This increase is fundamental to feed the new demands for digitalization of the planet,” he says.
There is no data on the installed capacity for semiconductors, but for the production stage called foundry, when the silicon “wafers” are made and then processed and cut into various devices, the increase should be 43%.
A study by Bain & Company shows that they will increase from 90 million units per year in 2021 to 129 million in 2025.
With revenues of US$595 billion last year, the sector projects to reach US$1 trillion by 2030.
Today, semiconductors are the fourth most traded product globally, behind crude oil, vehicles and vehicle parts, and refined oil.
A modern car, for example, has up to 1,500 semiconductors, reports KPMG. An electric car will have around 3,000, says a Ford executive.
The home itself is a big consumer. “All the appliances, refrigerators and microwaves with intelligence, sensors for temperature control, door activation, security and surveillance systems represent a substantial consumption and will grow further,” Kanamaru predicts.
COMPLEX
With nine factories in the USA, Costa Rica, Ireland, Israel, China, Vietnam, and Malaysia, the American company Intel will invest US$38.2 billion in the three new units planned to start operating in 2025.
The two American plants will give rise to a complex that in the future may house up to eight factories, becoming one of the largest semiconductor production sites in the world.
Another US$20 billion is being spent on two new operations in the Arizona complex to start up in 2024. The group has also set aside $600,000 to expand production in the next three years at the Costa Rica plant, a unit Intel negotiated with Brazil in the mid-1990s but ended up choosing the other country in the region.
Bosch opened its second semiconductor factory in the German city of Dresden last July with an investment of US$1.07 billion, the largest amount spent on a single project in the company’s history.
In October, the group announced a further US$428 million for the expansion of this and its oldest plant in Reutlingen. In addition, it is building a test center in Malaysia.
The Korean company Samsung also recently informed that it would build a new semiconductor factory in Texas (USA), a plan estimated at US$17 billion.
Another company that will expand its operations in the American market is TSMC; a Taiwanese group considered the world’s largest outsourced production.
The company plans to spend US$12 billion on a plant in Arizona and has several other projects, especially in Asia.
With information from Estadão