At 2021 CONNECT, a Taiwanese tech forum co-hosted by TechTaiwan, Dr. Chih-I Wu, Director of Electronic and Optoelectronic System Research Laboratories of Taiwan’s Industrial Technology Institute, and Dr. Pei-Chen Liu, a leading semiconductor policy expert from Taiwan Institute of Economic Research, gathered to discuss Taiwan’s potential to develop a globally competitive compound semiconductor industry.
Thanks to the rising importance of compound semiconductors driven by the growing market of 5G and electric vehicles, as Dr. Wu pointed out, China is now betting on compound semiconductors to leapfrog in the global semiconductor.
Chinese emphasis on ‘Third-generation semiconductors’
China specifically uses the term “third-generation semiconductors” to distinguish silicon carbide (SiC) and gallium nitride (GaN) from what China terms the first and second generation of semiconductors in which the country currently lags behind – namely Silicon, Gallium Arsenide (GaAs), and Indium Phosphide (InP).
Dr. Wu observed that China did have a significant advantage in this regard, as China was the world’s largest market of compound semiconductors. The position gives China a great advantage to set the relevant standards and control the prices.
Facing the competition from China, Taiwan still has a lot to catch up. According to Wu, while Taiwan leads the world in silicon-based semiconductor, its compound semiconductor industry doesn’t even make it into the global top three. It does have a unique set of advantages, however, such as a complete semiconductor ecosystem covering the design, manufacturing, packaging, and application of semiconductors. The ecosystem has been under development for 40 years, and is unmatched in the rest of the world.
Nevertheless, without overcoming the key chokepoints, Wu indicated that it was hard to fully transform from a Si-based semiconductor industry to one based on compound semiconductors. One of these chokepoints is raw materials. “For example, China has invested a lot in compound semiconductors, but approximately 80-90% of raw materials are still controlled by Europe, the United States and Japan.
‘Crystal growth’ a strategic high ground
Overall, Europe, the US and Japan have a definitive advantage in the compound semiconductor industry. The U.S. company Cree, for example, has been developing SiC products for defense applications as early as 30 years ago. Japan’s advantage in semiconductor materials can also be seen in its recent conflict with South Korea, in which Japan literally choked South Korea’s high-tech industry by restricting the export of certain key materials
In this sense, Taiwan has to start from developing an industry focusing on semiconductor manufacturing equipment and the key materials, according to Wu. Above all, the crystal growth techniques for compound semiconductors are highly strategic for Taiwan, since the process is significantly more complicated than silicon crystal growth. Mastery over this process also contributes to the current Japanese and US dominance in SiC substrates. “Frankly, there’s no ‘leapfrogging’ in semiconductor development,” said Wu, “we have to establish an upstream supply chain step by step when it comes to compound semiconductors.”
Brain drain and fragmented development are long-term issues
Facing competitions from China’s heavily subsidized compound semiconductor industry, the Taiwanese government should refrain from pursuing its own spending spree, according to Taiwan Institute of Economic Research’s Dr, Liu. She suggested the government to instead focus on providing a stable infrastructure for the semiconductor industry, especially when it comes to utilities and securing Taiwan’s own talents.
As China’s semiconductor industry is currently choked by multiple U.S. restrictions, impeding its development through foreign acquisitions, Liu warned that Taiwan’s IC talents had become a target for China. As Taiwan’s semiconductor sector offer salaries below global average, China has been luring Taiwanese IC talents through higher salaries. The brain drain has been put under control only recently. While the Taiwanese government has already taken actions to preserve the nation’s talents, for example through the creation of a semiconductor academy, Liu argued that the private sector also had to respond with higher salaries and more aggressive measures to attract and retain talents.
Finally, Liu also warned that the ongoing “chip nationalism” around the world would likely lead to price hikes in electronics, driven by the global surge of capital expenditure to achieve chip autonomy. “It is highly important for the countries involved to strike a balance between supply chain resilience and efficiency,” said Liu. Echoing TSMC founder Morris Chang’s concerns, Liu is skeptical towards the long-term prospectives of the currently fragmented semiconductor development worldwide.