Europe is expected to push for the establishment of cooperative semiconductor supply chains with the help of Taiwanese chip manufacturing oligopolies as tensions between the island and China raise concerns for the stability of Asian chip supply.

As first reported by the South China Morning Post, Europe relies on integrated circuits and microchips for its massive industries, as the continent does not have a domestic chip manufacturing sector as large as Asia.

Taiwan semiconductor manufacturers continue production as supply chain problems persist

(Photo: Annabelle Chih/Getty Images)
HSINCHU, TAIWAN – SEPTEMBER 16: A close-up of a silicon wafer on display at Taiwan Semiconductor Research Institution on September 16, 2022 in Hsinchu, Taiwan. Taiwan’s semiconductor manufacturing capacity is critical to global supply chains, with mega-cap companies such as Apple, Nvidia and Qualcomm relying heavily on the island’s exports. According to media reports, Taiwan accounts for about 60 percent of global semiconductor foundry revenues

“European companies are wary of falling victim to a political dispute, but are monitoring this increasingly sensitive issue and assessing the potential risks very carefully,” the European Union’s China Chamber of Commerce said in its annual position paper.

The chips are being used by companies such as Netherlands-based Stellantis for electric vehicles, while French aerospace company Airbus relies on them for aircraft technologies.

Western Friendly Network

The coronavirus pandemic has boosted demand for electronic devices, but the tech industry struggled to keep up due to a shortage of chips. The problem is now resurfacing for Europe as a result of new geopolitical tensions between the West and China.

About 60% of the world’s semiconductors are produced in Taiwan, and these products have become key in an evolving technical conflict between Beijing and the West, as noted by the SCMP.

Now Taiwanese semiconductor makers are in the midst of a brewing conflict.

According to the British market research firm Strategy Analytics, Europe buys 80 to 95 percent of its chips produced from sources outside the European Union (EU), a majority of which are from Asia.

Analysts expect Europe to restructure its semiconductor import routes so that chips pass through a network of countries and contract manufacturers favoring the West.

Brady Wang, an analyst at Counterpoint Research in Taipei, said this network may also include Malaysia and Vietnam.

The machinery and equipment manufacturing sector in Malaysia is expanding, while Vietnam is the main manufacturing site for multinational technology giants such as Foxconn Technology and Samsung Electronics, both of which are based in Taiwan.

Also Read:Canada shares plans for tech sector investment after China-Taiwan tensions affected microchip manufacturing

“China and Non-China”

Wang added that the best course of action is to stay away from police officers as customers are forced to divide supply chains into “China and non-China”.

Analysts predict that companies like Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics (UMC) will be forced to join supply networks that benefit the West.

UMC, which reported revenue of $6 billion last year, said earlier this month that it plans to develop a “diversified manufacturing footprint” that will help it streamline logistics and provide better service to international customers.

With sales of $61.5 billion last year and the ability to produce some of the most advanced semiconductors on the market, TSMC is the largest contract chip manufacturer in the world.

Related article: Acer: Global chip shortage until 2022 – Laptop, semiconductor manufacturing faces crisis

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Written by Joaquin Victor Tacla

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