Taiwan eating Japan's chip lunch

Japanese chipmakers have fallen so far behind their global rivals, and the pace of deterioration has increased so much, that soon Japan may have to turn to sources outside of Japan for future semiconductor needs.

That's the assessment of the US-Taiwan Business Council which noted that Japan’s Great Tohoku earthquake and tsunami on March 11, 2011 caused widespread fears of global chip industry disruptions, "but surprised everyone with how little impact it actually had."

Instead, the horricic natural disaster exposed and revealed how much Japan’s once proud chip industry has deteriorated.

"The former chip giant has lost its way," the Council noted, while asking " How much outsourcing might be on the way to Taiwan companies?"

The market and manufacturing shift across the Taiwan Straights now underway suggests a major adjustment in the global semiconductor supply chain, one that strongly favors Taiwan,  "the nation that based its national survival on electronics after being abandoned by the world at China's behest." according to the documentary Silicon Shield.

Increasingly, Taiwan is becoming the jugular vein of the semiconductor supply chain, an idea that U.S. semiconductor interests worry about a lot. The very controversial documentar film Silicon Shield

The potential appears huge. Japan’s Keiretsu have been getting rid of their chip divisions in order to shore up their finances. Chip factories cost billions of dollars, a financial burden they can no longer afford. Outsourcing is a good alternative. Taiwan chip executives expect the coming wave of outsourcing from Japan to be in high-end and low-end chip fabrication and in chip assembly, but nobody is able to give any estimates for how much or how fast it might come.

Details here: Taiwan Semiconductor Report - Third Quarter 2012.pdf

SOURCE: US-Taiwan Business Council