Taiwan’s chip talent war gets red hot

Hi everyone, this is Nian from Beijing. Taiwan is fighting to keep its lead in chip manufacturing as a talent shortage and technology espionage pose real threats (Big Story and Nian’s top 10). Monday marked the 50th anniversary of Richard Nixon’s historic visit to China, but the two countries are now decoupling as Beijing tries to rid itself of technology dependence (Our Take). Take care and see you next week.

The Big Story — Exclusive

Taiwan’s chip talent shortage is unprecedentedly severe. And most in the industry expect it to get worse, driving up salaries to astronomical levels as the world’s largest chipmakers go on a hiring spree to expand capacity and meet a demand surge, according to this article in Nikkei Asia.

Key developments: The two biggest Taiwanese chipmakers, Taiwan Semiconductor Manufacturing Co and MediaTek, are hiring a total of more than 10,000 employees this year, the majority in Taiwan itself.

United Microelectronics, the world’s number-four contract chipmaker, told Nikkei Asia that it aims to hire 1,500 people on the island this year. Europe’s biggest chipmaking equipment maker ASML said it will take on 1,000 staff in Taiwan in 2022 of an additional 4,000 globally. Other chip tool and materials makers such as Applied Materials, Merck and Entegris will also add hundreds of jobs in Taiwan.

More than 2,000 jobs are open in Taiwan from leading US chipmakers Micron, Intel, Qualcomm, Nvidia and AMD, as well as top Taiwan-based chip developers such as Novatek, Realtek and Phison Electronics, according to sources including company statements, Nikkei Asia interviews and job postings on LinkedIn and local recruitment platforms.

Upshot: The annual package, with bonuses, for graduate students can reach up to NT$2mn ($71,732), up a third since before the coronavirus pandemic, according to one estimate.

Nian’s top 10

1. Exclusive: A Chinese company has made an electric car battery breakthrough, and will produce vehicles with a range of 1,000km from 2024. (Nikkei Asia)

2. Taiwan is updating its National Security Act to fight chip sector espionage from China. (Nikkei Asia)

3. India’s army of rickshaws is going electric. (Nikkei Asia)

4. The semiconductor industry is forecast for a period of sustained growth and low risk of overcapacity. (FT)

5. Despite US sanctions, China’s Hikvision is watching the world with more than 3mn cameras installed globally. (Nikkei Asia)

6. The EU has gone to the WTO alleging patent infringements as companies suffer losses from China’s “power grab” on telecom licensing rates. (FT)

7. In an effort to counter China’s influence in Africa, the EU has pledged a €150bn aid package with a focus on telecoms infrastructure. (Nikkei Asia)

8. Meituan lost $26bn in value on Friday after China’s regulators ordered food delivery platforms to charge restaurants less. (FT)

9. Chinese local governments and state-backed groups are diving into the metaverse craze, financing digital companies. (FT)

10. Leo Lewis tells the story of Takuma Miyazono, the man who “let down the entire human race” by losing out to an artificial intelligence racer. (FT)

Our take

When Washington cut off Huawei’s access to vital semiconductors in 2020, Beijing’s efforts to turn China into a self-sufficient tech powerhouse became a matter of national pride rather than just an obscure industrial policy for technocrats to debate. The nation’s sense of crisis has only grown since.

Today, it is not only the smartphone industry that feels this urgency. The world’s largest carmaking market relies on imports for more than 90 per cent of semiconductor products, most of them designed in the US and manufactured in Taiwan and South Korea. This puts China in a dangerous position as tech decoupling from the US accelerates.

Liu Yan, deputy secretary-general of China Automobile Industry Association, bluntly said that reliance on imported chips “pose[s] a fatal threat to the auto industry and the national economy”. Ramping up subsidies, investment and other efforts helped lift semiconductor output in the country 33 per cent last year, with a record 359.4bn chips produced. But that is still not enough. China imported 432.5bn chips in 2021.

For China, the dependence on foreign producers is especially worrying in terms of cutting-edge chips. China’s national champion chipmaker SMIC still struggles to crank out 7-nanometre technology chips, while Taiwan’s TSMC is preparing for 2nm chips by 2025. TSMC’s planned capital expenditure this year is nine times what SMIC has budgeted, meaning China’s market leader may have trouble ever closing the five-year technology gap that sector specialists have said exists between the companies.

China’s tech giants including Alibaba, Tencent, and Meituan are investing heavily in semiconductor start-ups in a bid to please Beijing. But it is unclear if government strong-arming can lead to real innovation. We do not doubt China’s determination to catch up, but the road will be bumpy.

— Nian

Smart data

McKinsey, the consultancy, has forecast that by 2040, autonomous vehicles will comprise 40 per cent of new vehicle sales in China, generating revenues of close to $1tn in sales of vehicles and $1.1tn from mobility services.

But this transformation conceals a vulnerability. China’s driverless car companies remain dependent on chips designed by foreign companies — mostly US groups Nvidia, Qualcomm and Intel — and fabricated offshore.

The country has a cohort of chip design houses on the rise, including MetaX Integrated Circuits and Biren Technology, and in the first half of 2021, China’s chip industry drew $3.85bn in venture capital, according to Deloitte. Yet they are years behind their US rivals.

Spotlight

Tai Jeng-wu, who is stepping down as chief executive of Sharp next month, has pulled off a remarkable turnround for the electronics company. The Taiwanese boss has nursed a Japanese household name back to financial health, mainly through constant vigilance over costs.

“We laid a foundation on which to build our next 100 years of history,” Tai said of his tenure as chief executive, which started in 2016. He will remain on as the company’s chair.

His fight against waste helped Sharp turn a net profit for the first time in four years in the fiscal year ended March 2018. The company’s stock was also restored to the Tokyo Stock Exchange’s first section following a previous demotion to the second tier.

But his successor, Robert Wu Po-Hsuan, who also comes from Sharp’s Taiwanese parent Foxconn, will face the task of laying out a road map for growth and fattening still-slim profit margins.

Art of the deal

Competition in the Indian food delivery market is getting more intense. One of the market leaders, Swiggy, has begun preparations to raise at least $800mn in an initial public offering early next year, three people familiar with the situation told Nikkei Asia.

Swiggy is hoping to raise the funds to expand market share amid stiff competition with Zomato in food delivery. The company is also battling for space in its newly launched quick commerce business, where it is challenged by Reliance Industries-backed Dunzo, Tata Group’s BigBasket, Zomato-backed Blinkit and Y Combinator-funded Zepto.

Swiggy has raised about $3.3bn since it began operations in 2014 from marquee investors that include SoftBank, Prosus Ventures, Invesco and Accel Partners. The group was valued at $10.7bn this year after it raised $700mn. That valuation was almost double the $5.5bn it garnered last July when it raised $1.25bn. Publicly listed Zomato commands a market capitalisation of about $9bn.