South Korea and Taiwan will still be key semiconductor hubs in years to come, even as pressure to diversify supply chains leads to new competition from places such as the US and Germany, according to the chief executive of US chipmaking equipment supplier MKS Instruments.
John TC Lee, president and chief executive of MKS, added that the current slump in the chip market was just a cyclical downturn, and that the industry was still on track to grow at a “healthy rate” in the medium to long term.
“We’ve been through [this] many times,” said Lee in an interview with Nikkei Asia. “Maybe the chip industry capital spending would go down to $70bn in [2023] from 2022. But you know, I’ve been in this industry a long time. Ten years ago that number was $35bn, and that was a good year. Now we say $70bn is a bad year.”
MKS is a provider of electronics subsystems, including radio frequency (RF) power sources and lasers used in chipmaking and other fields, and has top global semiconductor equipment makers as customers, including Applied Materials and Lam Research.
Chipmakers rely on MKS’s RF power sources to etch extremely fine transistors, especially for cutting-edge processors and 3D NAND flash memory chips. According to the company’s estimate, 85 per cent of the world’s chipmaking equipment uses its technologies.
On the question of supply chain shifts, Lee expects South Korea and Taiwan will still be important centres of chipmaking in the future despite major economies pushing to onshore vital areas of production.
“As long as Samsung, SK Hynix and TSMC remain chip leaders, I think Korea and Taiwan will continue to be important countries for semiconductor manufacturing,” Lee told Nikkei Asia. He said for most advanced chip plants, the core technologies would probably develop close to the leading players’ headquarters and later be deployed to other places if needed.
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But the chief executive said more such chip “hubs” would probably emerge, especially in the US and European countries such as Germany. “It’s maybe not as efficient in the beginning but I think once a hub is established, it gets pretty efficient. And once you have multiple fabs [fabrication facilities] in one area, the infrastructure is now supporting multiple fabs, not just one.”
The overarching trend of devices needing ever more chips would also help more hubs to flourish, he said. “The number of chips will definitely continue to grow in years to come,” the CEO added.
But the semiconductor industry is no longer a place for small companies, he cautioned, as the bigger players will only get bigger. “In the 1990s, companies that had $20mn or $30mn in revenue were fine,” he said. “Now you can’t do that because the problems that we have to solve now are so difficult. That requires a lot of engineering, and a lot of sustained engineering over multiple years.”
MKS has made several acquisitions over the past few years to expand its product portfolio and scale. In 2021 it acquired Photon Control, a supplier of optical sensors for temperature control used in chipmaking. The following year it bought the speciality chemicals company Atotech.
The acquisitions not only help MKS expand the scope of its business but also its manufacturing footprint, Lee said. The company has production sites in the US, China, Mexico, Singapore, Malaysia, Thailand and other countries around the world.
Lee added that the unprecedented supply chain constraints of the past two years made people realise how important chips and their ecosystems were.
“The supply chain constraints woke up everybody. There’s a lot of ecosystems and support that go all the way back to your mining of minerals . . . When you start investigating where’s the constraint, you keep going down and down [the supply chain] and you realise, ‘Wow, the entire world economy has something to do with making a chip’,” Lee said.
A version of this article was first published by Nikkei Asia on January 30 2023. ©2023 Nikkei Inc. All rights reserved.
