Concerns for Taiwan's Semiconductor Industry in China.

The 2024 Taipei International Computer Show in China came to a successful close, yet the fervor surrounding AI topics did not dissipate with it. Instead, it injected new vitality into the semiconductor industry, driving revenues to continuously soar and stock markets to reach new highs. This flourishing scene inevitably raises curiosity: just how long can such a development momentum last?

A series of data revealed the answer to this question at the "2024 Taiwan Manufacturing and Semiconductor Industry Outlook Press Conference" held by the Industrial Technology Research Institute of Taiwan on June 12th. It is estimated that the overall manufacturing output value of Taiwan will reach an astonishing 23.1 trillion New Taiwan dollars this year, a year-on-year increase of 6.47%. This growth not only reflects the strong recovery of the manufacturing industry but also highlights the tremendous impetus of technological progress on industrial development.

Among them, the semiconductor industry, as an important part of the technology field, has performed particularly well. Benefiting from the continuous rise in the heat of AI topics, the demand for the semiconductor supply chain remains strong. It is predicted that the output value of Taiwan's semiconductor industry will break through the 5 trillion New Taiwan dollar mark for the first time this year (approximately 154.5 billion US dollars), reaching 5 trillion 113.4 billion yuan, with a year-on-year growth rate of 17.7%. This data not only demonstrates the strong growth momentum of the semiconductor industry but also indicates that the industry will continue to maintain a high-speed development trend in the future.

Shih Chintai, a professor at Tsinghua University in Taiwan who once served as the director of the Industrial Technology Research Institute and assisted in the establishment of companies such as United Microelectronics Corporation and Taiwan Semiconductor Manufacturing Company, observed that the growth of Taiwan's semiconductor industry is accelerating. "Before 2014, the output value was only over 1 trillion, between 2014 and 2019 it was 2 trillion, in 2020 it became 3 trillion, and after 2021 it has been maintained at 4 trillion. Recently, with the discussion of AI, it suddenly became 5 trillion."

Shih Chintai further said that this is because the momentum of Industry 4.0, the acceleration of digital transformation during the pandemic, and AI have driven such growth, further solving people's needs in work and life.However, amidst the recent optimistic atmosphere, there are two particular concerns that have drawn attention.

Concern 1: Excessive concentration of industries in Taiwan, China, should prevent small and medium-sized enterprises from falling behind.

Wang Jianquan, the acting dean of the Taiwan Economic Research Institute, stated that recently, there has been an "unbalanced recovery" among various industries in Taiwan, China. Industries related to semiconductors and AI, such as communication optics, electronic information, and heat dissipation, have performed well. However, fields like chemical biotechnology and metal machinery are relatively weaker. From a global perspective, the world economy is weak, and the growth of the United States in the first quarter also declined. Currently, there are mainly urgent orders, and long-term orders are still scarce. Whether the recovery can be sustained still needs to be observed.

Wang Jianquan also pointed out that in recent years, the industrial development in Taiwan, China, has been more inclined towards semiconductors. Semiconductors account for nearly 40% of Taiwan's total exports and 13% of GDP, but only 7% of the employed population. It is suggested that the connection between semiconductors and other industries should be strengthened to make the overall economic development of Taiwan, China, healthier.

Shi Qintai pointed out that in the past, Taiwan, China, has always been dominated by small and medium-sized enterprises. It is necessary to consider more than 90% of small and medium-sized enterprises to maintain their innovative and resilient strength. In particular, it is not easy for small and medium-sized enterprises to move their supply chains outward.

Concern 2: Developing AI requires a large amount of energy and long-term policies are needed.

The huge demand for electricity brought by AI computing has attracted attention. Recently, Huang Renxun, the CEO of NVIDIA, also talked about the energy issue of developing AI in a global media and analyst Q&A session.

At that time, Huang Renxun emphasized that using AI should employ accelerated computing technology, not general computing technology, in order to save money, time, and energy. He suggested that countries should establish power plants and AI data centers, and deploy AI inference models close to the market, thereby making full use of land resources and reducing energy consumption.Shi Qintai also directly pointed out that "the Achilles' heel of AI is energy." Currently, the whole world is discussing topics such as net-zero transition and ESG (Environmental, Social, and Governance), which makes the technology of the manufacturing industry must break through.

Under the background of current globalization, the challenges faced by enterprises are increasingly complex and diverse. In addition to dealing with common problems such as market competition and technological innovation, geopolitical pressures and resource demand issues are also gradually highlighted, forcing enterprises to consider the strategy of global layout. This transformation not only means that enterprises need to cross borders but also need to find suitable land, electricity and other resources globally to meet their growing operational needs.

Geopolitical pressure is one of the important factors affecting the global layout of enterprises. With the complexity and variability of international relations, the business environment of enterprises in different countries and regions also faces great uncertainty. For example, trade wars, tariff barriers and other policy measures may lead to enterprises facing market access barriers and the risk of rising costs. In addition, geopolitical conflicts may also lead to supply chain disruptions, a deterioration of the investment environment and other issues, which have a serious impact on the normal operation of enterprises.

On the other hand, the demand for resources such as land and electricity is also an important driving force for the global layout of enterprises. As the scale of enterprises expands and the scope of business expands, the consumption of resources is also increasing. To meet this demand, enterprises need to find resource-rich and reasonably priced areas for investment and production globally. This can not only reduce the operating costs of enterprises but also improve their competitiveness and market share.

The Industrial Technology Research Institute (ITRI) IEKCQM forecast team pointed out that with the stabilization of the job market, the slow decline of inflation, and the alleviation of supply chain issues, the global manufacturing industry has gradually warmed up. Under the promotion of increased international demand, the growth of consumer spending continues, the willingness of private investment is stronger, coupled with new business opportunities for AI servers and the stock market reaching new highs, the economic performance is expected to be moderate and stable.

However, the ITRI team also pointed out that due to the withdrawal of fiscal support policies in various countries, geopolitical tensions, and the intensification of climate risks, there are still challenges to the medium and long-term economic growth of the world.