According to the investment bank Morgan Stanley, foundries like TSMC will likely face a drop in orders as quickly as Q4 2021, largely attributed to an overestimation of chip demand. The pandemic-stricken Malaysia plays a crucial role in the process.
The Southeast Asian country accounts for 7% of the global semiconductor trade, and 14% of the global capacity when it comes to assembly and packaging. Leading IDMs such as STMicroelectronics and Infineon have all set up production lines in Malaysia. As COVID-19 cases surged in the country, Malaysia has entered a partial lockdown since June, leaving only 47% of its chip assembly & packaging capacity operational.
Now, according to Morgan Stanley, suppliers in Malaysia are expecting a partial restoration of production capacity by November and December, adding that the demands for ICs used in smartphone, TV and computers have already shown signs of weakness. If the forecasted trajectory turns out to be true, TSMC’s spare capacity might have implications for Taiwanese IC designers who, owing to their small-to-medium sizes, are often at a disadvantage when competing for production capacity against global IDMs.