As the world zooms on the outsized role of Taiwan’s semiconductor industry within the global supply chain, most people think of TSMC, the world’s largest semiconductor manufacturer. When it comes to Taiwan’s ODM in the quickly rising EV industry, most think of Foxconn, the world’s largest electronics contract manufacturer, and the Foxconn-initiated MIH Alliance, aiming to be an open platform in the EV sector. Now, a Taiwanese foundry is leading the country’s semiconductor industry to build its own EV alliance, and it might even have TSMC on the board.
Frank Huang, the founder of Powerchip Semiconductor Manufacturing Corp. (PSMC), and also a close friend of Morris Chang, TSMC founder, has recently founded Taiwan Advanced Automotive Technology Development Association (TADA) with the likes of Pegatron Corp., already a Tesla supplier. Huang said that he would soon be in talks with TSMC, a necessary ally to have in order to win over to rally Taiwan’s semiconductor industry behind his project and to win over the global automotive industry.
The semiconductor industry’s answer to MIH Alliance
Despite insisting that it is not a competitor to MIH, TADA places itself as an alternative. The two, however, have started from a similar position: the just-in-time inventory system long taken for granted by the traditional automotive industry can no longer keep up with the fast-paced nature of EV manufacturing. Both Foxconn and PSMC have recognized the gap, and have sought to fill it, convinced that the fundamentally different supply chain set-up of the electronics manufacturing industry fits the EV industry better. Furthermore, both have recognized the opportunity to upgrade Taiwan’s traditional electronics manufacturers into EV components manufacturers and systems integrators, and even replacing traditional Tier 1 suppliers – in the process addressing the chronically low profit margins faced by Taiwan’s contract manufacturing industry.
“Taiwan’s semiconductor industry faces no serious competition in the future,” Huang confidently said. PSMC, owning two 8-inch and three 12-inch wafer fabs, is already a automotive chips supplier, and Huang believes that its experiences in semiconductors makes it better positioned than Foxconn to bridge Taiwan’s electronics manufacturing industry with the EV world. Foxconn is relatively new in the semiconductor business, and only this year has it begun to expand its frontiers in the industry: it has just acquired two fabs this year, and has engaged in various partnerships ranging from chip packaging to making small ICs.
Consequently, TADA seeks to distinguish itself from MIH by emphasizing the empowering role of semiconductors. As Huang argues, members of the MIH Alliance already have certain experiences with car manufacturing, and they are counting on Foxconn’s global connections to continue the ODM model, building white-label cars for non-mainstream automakers worldwide. Despite MIH’s large membership, Huang claims that few members will actually obtain the EV manufacturing contracts they need. In contrast, Huang believes that TADA memberships give the manufacturers with no prior experiences in the automobile industry the concrete chances to profit.
TSMC has nothing to gain in Germany
While the ongoing chip shortage crisis has placed Taiwan’s semiconductor industry under magnifying glass, drawing attention to its indispensable role in vehicle electrification, Huang expresses his concerns toward the re-shoring trend unfolding across the global IC industry. Echoing Morris Chang, Huang sees disastrous consequences for such attempts to reshuffle the global supply chain. In particular, Huang is pessimistic about TSMC’s recent considerations to build fabs in Japan and Germany: the move reminds him of Mitsubishi Electric Corporation’s failed investment in Germany. Despite subsidies from the German government, the Japanese company saw no competitive advantages there and had to eventually withdraw.
Moreover, Huang points out the weak demand for advanced process nodes from European semiconductor industry, a view shared by major European chip makers like Infineon and STMicroelectronics in their doubts toward the EU’s recent chip alliance project. One of TSMC’s core advantages, according to Huang, is in fact the competitive social costs in Taiwan which are hard to be replicated abroad. That, simultaneously, makes Taiwan the most suitable location for semiconductor investments.
Despite all the advantages enjoyed by Taiwan, Huang sees South Korea as the most immediate threat to Taiwan’s EV ambition. The combination of big automakers, such as Hyundai and KIA, and semiconductor heavyweights like Samsung and SK Hynix makes the country a formidable competitor to Taiwan.
Source: Mirror Media