The “World of Semiconductors” has had a tremendous impact on the development of personal lifestyle, convenience and safety over the last decades, driven by the innovation capabilities of this industry. At the same time, the drive of semiconductor growth has directly or indirectly impacted the global economy so significantly that it is not surprising that this industry enjoys special attention and is supported by the governments of the world. How can this support efficiently drive and guide further economic growth over the upcoming decades? Which countries have the right recipes for this? Here are some views and opinions from the author, taking a broader look at the worldwide landscape of this industry.
The semiconductor industry has gone through unprecedented long-term growth development over the last 50 years, fuelled by three distinctive acceleration factors:
- The continuing demand of generations of consumers and industrial users, with the expectation to have access to a practically unlimited flow of innovation.
- The continuous development of capabilities and capacities of semiconductor technologies, paced by what we call Moore’s Law – which is feeding the hunger for these permanent and disruptive technology advances, and is enabling an exciting and rewarding innovation progress for many different industry segments.
- Growth in this industry is also strongly driven by governments, who want to win a major share of the overall pie to support their GDP growth.
Government support is one of the enabling forces for this “multibillion dollar jackpot”. To analyse the economic and strategic power stemming from national industry and technology support schemes, it is essential to understand what is the underlying interest of governments that causes them to place their stake in an industry which is extremely capital-demanding yet is not predictable in terms of ultimate rewards; an industry which operates with high volatility and cyclic risks and is for most of its products famous for its very low margin business. The answer to this “why” is simple but still diverse: Besides the strategic importance of the manufacturing and product technologies to avoid dependency on foreign capabilities and currencies for critical core technologies, the semiconductor industry is a giant job creation machine. It – in growth cycles – implements thousands of high value-added jobs with high-profile skills. One single job created in the operations of a wafer fabrication facility creates multiples of jobs in the ancillary industries – the suppliers, service and maintenance companies, infrastructure builders, training providers and recruitment agencies. Anyway, an industry which is going to generate half-a-trillion dollars of worldwide revenue within the next decades is hard to ignore for any national industry and technology development strategy, which wants to maintain or steer for a healthy trade-accounting balance.
When looking at recipes on how the semiconductor industry could benefit from a smart and continuous government support, it is useful to look into the success factors of some of those other countries, which have developed their fortune in this industry:
- Singapore. Singapore’s overall economy has been growing steadily over the last 50 years, accelerated or most often driven by the progress of its Electronics manufacturing cluster. Interestingly, its GDP growth profile resembles in some sense the curve of Moore’s law – including the observation that continuous growth needs disruptive changes in strategy and technology. Singapore, with its very pro-business environment, focuses on building a knowledge and innovation-based economy in order to provide high-added-value jobs and to avoid competing with low-cost-manufacturing economies in the region. For this, part of Singapore’s plan is to have six (6) national universities by the end of 2013; of which two of the existing ones are already consistently ranked amongst the top 50 universities worldwide.
- Taiwan. Taiwan is a good role model to start with. Taiwan’s comprehensive value chain, which provides from the wafer manufacturers to the OEM all value steps for many of its verticals, is one of the country-specifics, praised by many of the analysts. Taiwan by itself represents more than 70 per cent of the worldwide IC foundry revenue and more than 55 per cent of the worldwide assembly and test businesses. Taiwan has stepped up the complete value-chain of manufacturing within a few years, using success factors.
- Israel. Israel has a truly unique profile in the semiconductor industry. When looking at the landscape of the amount spent on R&D relative to the overall GDP of the country and comparing this to the number of scientist and engineers relative to the people, you will see that Israel has a really outstanding position. It ranks in the top of the world ranking in terms of R&D budget, but it is one of the lowest in terms of jobs allocated to R&D. This gives a good impression on how Israel’s government high R&D focus, which attracts national and international funding as result of a progressive government policy. Nevertheless, it seems that these funds do not turn into many jobs for engineers and scientists, although Israel has many high-profile R&D companies and academic institutions also in our industry.
- China. China follows strictly a government-steered road of success for its industrial growth, including its electronics and semiconductor progress. The government has injected a good share of money into the rise of China’s waferfabs and it has created a huge increase in demand through government stimulus programs in times when the national and global economy stagnated. China’s industry support in the last years has always found its way into competitive enterprises and many new jobs created. Cheap land, skilled labour, reliable infrastructure, tax benefits and a big domestic market will allow further growth which sometimes feels unlimited, but in reality is everything else but that.
First, it is important to understand that Government roadmaps and policies need to be designed in close collaboration with the representation of the industry to reap the best harvest from government seeds. Local industry experts such as SSIA provide an excellent opportunity and a very competent platform for this kind of alignment.
Secondly, progress and “KPIs” for the deployment of a nation’s growth program need to be monitored carefully and continuously. Deviations from the plan need to be managed well. Progress in the right direction needs to be further incentivised. In an industry where building of a waferfab will cost you a few billion dollars of investment, you can expect that one likes to know exactly where the money that has been injected goes.
Contributed by Ulf Schneider, the President of Singapore Semiconductor Industry Association and Managing Director of Lantiq Asia Pacific.