If earlier the outflow of customers from Chinese custom chip manufacturing companies was mainly due to targeted sanctions against the same SMIC, now it has become systemic. Taiwanese competitors are ready to produce chips for former customers of Chinese companies, but the financial conditions for implementing new deals reduce the economic feasibility of migrating to Taiwan itself.
An example of the move away from Chinese products is Dell Technologies’ decision to systematically shift to using only components manufactured outside of China. This brand of personal computers is in demand in the United States, especially by corporate and government customers, and therefore migration along the “correct political vector” can be appreciated by customers in this market, even if there is no objective need for it. Apple and HP Inc. as reported DigiTimesare also preparing to follow Dell’s example.
Migration outside of China is also observed at a lower structural level. Qualcomm has significantly reduced the volume of component orders it places at SMIC’s Chinese facilities in favor of Taiwanese competitors. European and American chip manufacturers, including automotive suppliers, are also reducing products of Chinese origin. Even Chinese companies that do not have their own production facilities sometimes prefer to produce chips abroad.
The winners are Taiwanese companies TSMC, UMC, Vanguard International Semiconductor and PSMC. Of course, TSMC attracts most orders, but when customers aren’t looking for cutting-edge lithography, other players in this segment also have a chance to land new orders. Customers from China itself are said to account for up to 10% of the sales of the Taiwanese company VIS by the end of the year. Like the competing UMC, it received additional orders from Qualcomm for the production of components. Taiwanese contractors are generally interested in entering into long-term contracts, and thus the first “emergency” orders from clients migrating from China are accepted at inflated prices, motivating them to enter into long-term relationships on more favorable terms. As previously mentioned, TSMC has more opportunities to influence its customers in this regard.
In fact, such processes result in semiconductor products becoming more expensive for end users, although for many customers of Taiwanese companies, a phase-out of the services of Chinese competitors is not all that necessary in the short term and is more a consequence of the general hype and political hysteria.