According to Nikkei, China’s second-largest contract chipmaker Hua Hong Semiconductor told some foreign customers that they would not be able to provide the necessary chip capacity. Hua Hong may even have to drop some orders outside of China next year, due to supply constraints.
The Beijing government wants to build a ‘safe and controllable’ semiconductor supply chain
A Holtek executive confirmed the matter to Nikkei, saying that Hua Hong cannot secure more production capacity in 2022, citing China’s national policy to prioritize production demand. for domestic chip designers. Holtek is the main developer of microcontroller chips in Taiwan, and also a customer of Hua Hong.
China’s huge demand for semiconductors is growing rapidly. The country’s largest contract chipmaker Semiconductor Manufacturing International Corp (SMIC) said in a recent earnings report that it saw demand become overwhelming as local companies, including manufacturers flagship smartphones, are all looking for chips that are “locally made”.
In addition to ensuring chips for domestic demand, industry sources also revealed that the government is giving more support to large local tech companies, such as prioritizing power supply during the recent power shortage. .
“Our power supply is stable, but for that we are negotiating with government officials about the power supply around the end of September,” said the executive of a small supplier. . The executives of several other small companies also shared similar stories with Nikkei: “Some large Chinese suppliers like Luxshare have not had their power cut.”
SMIC during its earnings call told investors that the government had ensured there would be enough power supplies for chipmakers amid China’s rotating power cuts. In addition to foreign technology suppliers, many smaller mainland companies and those that do not play a significant role in the supply chain have been affected by the power outages. Some are only allowed to operate during off-peak hours, others are forced to cut electricity usage three or four days a week.
On November 16, Chinese Premier Li Keqiang told an economic forum that the government had adopted a series of approaches to ensure sufficient energy supply, and said the situation had improved. The decision to prioritize China’s local semiconductor needs comes amid not only a global shortage of chips and components, but also amid tensions with the US.
For its part, the US also stepped up efforts to strengthen the domestic chip supply chain. The Washington government is urging chipmakers to bring more critical manufacturing into the United States, citing national security concerns, and is in the process of passing a $52 billion bill to support the domestic chip industry. .
Notably, the US Commerce Department asked global chipmakers to provide confidential business information to help the government better understand supply chain issues, including how chips are manufactured and sold. end user information. US President Joe Biden recently issued an executive order to stockpile supplies, equipment and raw materials for the defense sector to ensure a continuous supply. The move could exacerbate the global semiconductor shortage, analysts say.
“The number of chips used for defense purposes is small, so it will have a limited impact on overall capacity. However, because it is at a high price, high profit margins, the executive order can still strangle planned output and affect supply priorities,” said Director of the Institute for Defense and Security Studies. Taiwan Su Tze-yun said.