Semiconductor Wars Are Spreading --- The next area of the supply chain to become a battleground is chip packaging, where China has heft

"It is getting harder -- both technically and financially -- to make semiconductor chips smaller. The fight for chip tech supremacy has begun to migrate into a new area: how to package chips together to achieve better performance.

The rise of artificial intelligence will further boost demand for advanced packaging technologies -- and create openings for challengers such as China to compensate for weaknesses in other parts of the supply chain.

Ever since Intel co-founder Gordon Moore predicted that the number of transistors on integrated circuits would double roughly every two years -- a prognostication known as Moore's Law -- chip making has progressed by leaps and bounds. But to keep shrinking chips has become much more challenging and expensive.

One way around the problem: Instead of making every part of a chip using the most advanced processes, chip makers can package together different types of components in a more efficient way. That improves performance while keeping costs down.

Taiwan Semiconductor Manufacturing Co., or TSMC, is the global leader in fabricating advanced logic chips themselves. But it also is investing heavily in packaging technology, which shows how crucial that step has become.

TSMC aims to double the capacity of its advanced packaging technology called CoWoS, which stands for chip on wafer on substrate, in 2024. The technology bundles logic and memory chips and improves data-transmission speeds between them. Lack of such capacity has become a bottleneck in meeting demand for artificial-intelligence chips -- in addition to production of the chips themselves.

TSMC is well placed to take advantage of this development, given its cutting-edge CoWoS technology. Makers of equipment for packaging processes, such as Japan's Disco Corp., which makes wafer grinders, also are potential beneficiaries.

But more traditional chip-assembly and testing companies won't necessarily be left behind. Even though their technology may trail the likes of TSMC, they are investing heavily to try to catch up. U.S. firm Amkor Technology, for example, plans to build a $2 billion advanced packaging plant in Arizona, partly funded by subsidies from the CHIPS Act.

Packaging also is an area where China might be able to make strides more quickly. The country already has the biggest slice of the global chip-packaging and testing market. The world's leading packaging companies have set up factories there. Jiangsu Changjiang Electronics Tech, or JCET, is the world's third-largest chip-packaging and testing company, behind only Taiwan's ASE and Amkor.

And packaging technologies aren't currently subject to U.S. sanctions. Given worsening China-U.S. relations, there is a significant risk of that changing -- although any U.S. measures would be complicated by the fact that China's market share in this area is already so large.

The rise of artificial intelligence -- at a time when Sino-U.S. grappling over chips was already intense -- is forcing that competition into every corner of the chip supply chain. Few companies will emerge completely unscathed." [1]

1. Semiconductor Wars Are Spreading --- The next area of the supply chain to become a battleground is chip packaging, where China has heft. Wong, Jacky.  Wall Street Journal, Eastern edition; New York, N.Y.. 28 Dec 2023: B.10.