Foxconn Enters Into Chipmaking Joint Venture With Yageo

Taiwanese contract manufacturing giant Foxconn has entered into a joint venture with fellow Taiwanese company Yageo, forming a new firm called XSemi that will be churning out semiconductor chips.

Chip supplies have been strained due to the COVID-19 pandemic as well as growing US-China tensions. According to Reuters, Foxconn chairman Liu Young-way said that the semiconductor industry was facing its biggest upheaval in three decades, making strategic partnerships particularly timely now.

Foxconn announced that XSemi would focus on producing semiconductor chips or “small IC” with average selling prices lower than US$2 (~RM8.24). The former claimed that both it and Yageo were holding talks with several global semiconductor firms and would announce more collaborative plans in the industry soon.

Relatedly, the US government is pushing Taiwanese chipmakers to meet the demands of US automakers, which have seen worker layoffs and production delays because of the chip shortage.

“We’re working hard to see if we can get the Taiwanese and TSMC, which is a big company there, to, you know, prioritize the needs of our auto companies since there’s so many American jobs on the line,” said US Commerce Secretary Gina Raimondo at a Tuesday event, Reuters reported.

Raimondo said that the US government was continuously working on that issue, but also noted that the medium- and long-term solution would be to simply make more chips in America.

China Begins Buying Up Used Chipmaking Machines As US Sanctions Bite

Facing US sanctions, China’s chipmakers have resorted to buying up and hoarding used chipmaking machines from other countries. Thanks to their buying spree, Japanese used equipment sellers told Nikkei Asia that prices have risen by 20% from last year.

A source at Mitsubishi UFJ Lease & Finance told Nikkei Asia that almost 90% of used machines appeared to be going to China. Another source at a used equipment seller told the publication, “Machines that were basically worthless several years ago are now selling for 100 million yen (~RM3.8 million).”

According to a Bloomberg analysis of official trade data, Chinese businesses acquired nearly US$32 billion (~RM13 billion) of computer chip-making equipment from Japan, South Korea, Taiwan and elsewhere last year – a notable 20% increase from 2019.

For all intents and purposes, China and the US are effectively in a chip-making arms race. The Trump administration enacted sanctions that cut off Chinese manufacturers from US chip-making technology, and President Biden is unlikely to reverse them, for now.

Warning of China’s dominance, US industry groups and politicians are urging the Biden administration to beef up America’s own chip-making capacity. China itself is more determined to ever achieve chip independence after Trump exposed the country’s dependence on US technology.

That hasn’t been going so well. Beijing failed to hit its target of having China produce 40% of the chips it consumes by 2020, the New York Times said. Now, the government has a new target: 70%  by 2025. But last year, China-based companies produced just 5.9% of the chips the country consumed, IC Insights said.