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Nolan’s Notes: An Evolution

This month, PCB007 Magazine looks at the evolution of advanced packaging from the fabricator’s perspective. This is, as you’re aware, a global topic. Asia harbors nearly all the manufacturing capabilities for the packaging and interposer substrates required for the latest packaging technologies. North America and Europe, buoyed by their respective chip technologies legislation, are working to bring packaging capability back to their home shores. How this plays out remains to be seen.

This is such an important topic that our January issue of SMT007 Magazine focused on it from an assembler’s perspective. In my column for that issue, I cited mainstream media coverage of President Biden’s mid-December visit to the Arizona TSMC semiconductor foundry. In further research, I gained a new perspective from Chinese and Taiwanese voices covering the same visit.

An online piece published by Fortune.com, for example, reported, “TSMC is now building plants in Arizona and Japan amid growing concerns from customers and major governments that the world’s chip production is too centralized in Taiwan.”¹ The pressure for this move off the island is attributed primarily to TSMC’s customers. It’s a true statement. Perhaps not the only true statement, but true, nonetheless.

Now, there are some situations wherein a globally centralized production chain makes sense. In physics class, that would be a lesson starting with, “In a frictionless environment,” and in economics, I suppose the corollary would be, “In an economy without political borders.” For example, the southern portion of the African continent is heavy with diamond deposits, so it makes sense to refine a rare mineral close to that mineral deposit—cut and create finished diamonds close the source. That’s efficient.

Yet that isn’t how it’s done. The world’s finest diamond cutters don’t live near the mines. The skilled staff who know how to turn the raw material into a high value finished product may not be willing to work next to the raw material’s source. They may prefer to be closer to one of several commercial centers, which eases the sale and delivery of the finished product. The production experts move closer to the customer, not to the raw material.

At the moment, it’s true that semiconductor companies are going where the customers are. Fortune reports, “TSMC is constructing new fabs to satisfy its customers’ demand rather than fulfill requests from foreign governments.” Behind the thinly veiled defiant attitude is a concession that getting close to the customer is a very high priority.

Nikkei Asia reports that, in the preceding three decades, “TSMC focused on building up cutting-edge chip production capacity in its home market, a strategy that helped the company keep costs down while continually honing its technological know-how.”² That centralized model worked through economies of scale to deliver goods. But unpackaged semiconductor die are like diamonds in the rough. They’re not yet in the form needed to deliver their greatest value.

I found one of the most impactful comments in the Fortune article was this: “It’s not easy to replicate Taiwan’s chip industry in another country as TSMC’s success was built over more than 30 years with help from its suppliers.” This perspective aligns with the U.S. CHIPS Act and HR 7677 proponents: rebuilding that expertise in this region will be the tricky part.

TSMC offers a case study in how difficult it can be to launch production without sufficient expertise. Nikkei Asia, referring to TSMC’s first plant in Camas, Washington, reports, “’It was, I thought, a dream fulfilled,’ Chang said. ‘But it [the first plant] ran into cost problems. We ran into people problems, we ran into cultural problems. The dream fulfilled became a nightmare fulfilled. It took us several years to untangle ourselves from my nightmare, and I decided that I needed to postpone the dream.’"

However, geopolitical factors are at play here as well. China is in the middle of what appears to be a pressure campaign to reclaim Taiwan as Chinese territory. For the U.S- and European-backed semiconductor companies in Taiwan, this is a risk to their very existence. It seems like a solid survival tactic to start “mining” semiconductors in more stable environments.

Korea is speaking up on the topic. In an online piece published by Fortune (again), a senior Samsung official, Yang Hyang-ja, said: “We’re in a chip war. Technology supremacy is a way that our country can take the lead in any security-related agenda, such as diplomatic and defense issues, without being swayed by other nations.”³

Even inside Asia, efforts are being made to maintain strategic advantage in semiconductor manufacturing.

But to successfully diversify production of semiconductors, printed circuit manufacturing must tuck in right behind. Semiconductors, packaging, board fabrication and assembly services are all equally important to the delivery of a diversified supply chain—independent of any political situations. That is the reasoning behind this issue devoted to the topic of advanced packaging and substrates.

IPC APEX EXPO 2023 will be right around the corner as this magazine publishes. We hope to see you there in San Diego.

References

1. “TSMC CEO warns of weakening trust among countries after U.S. blacklists Chinese companies in computer chips tussle,” by Debby Wu and Bloomberg, Fortune.com, Dec. 17, 2022.
2. “TSMC founder Morris Chang says globalization ‘almost dead,’” by Cheng Ting-Fang, Nikkei Asia, Dec. 7, 2022.
3. “’We’re in a chip war’ Korea’s lead on semiconductors is worried about the country losing chip manufacturing to the U.S.,” by Sohee Kim and Bloomberg, Fortune.com, Jan. 3, 2023.

This column originally appears in the January 2023 issue of PCB007 Magazine.