Taiwanese fab UMC has made significant new partnerships this week, signaling shifts in the global supply chain after the Biden administration raised the tariffs on Chinese semiconductors by 100%. However, as foreign demand turns to Taiwan, China continues to draw ever more insular with no signs of being wounded.
According to Taiwan's Economic Daily News, UMC started new long-term relationships with Texas Instruments and Infineon this week. UMC is the world's third-largest pure-play semiconductor foundry, falling just shy of China's SMIC and sitting well behind TSMC's commanding lead. UMC also received massive restock orders from MediaTek and Realtek, existing UMC customers sourcing their WiFi 6/6E chips from the fab. The Economic Daily News and TrendForce both believe these new deals signal global trends that will see international business turn increasingly to Taiwan rather than China for chip-making.
The news of renewed success for UMC is a major boon for the fab after SMIC's recent announcement that it made $1.75 billion in revenue in Q1 2024, putting SMIC ahead of UMC despite crushing U.S. sanctions. The Chinese fab grew by 19.7% year-over-year, as U.S. sanctions have had a dual impact; while foreign partners have left Chinese fabs, China's growing industries have become increasingly insular. As China's semiconductor and EV manufacturing industries grow, American trade war moves have bolstered Chinese domestic production.
The U.S.-China trade war, known colloquially as the "Chip War," has become a predictable cycle in recent months. The United States doles out restrictions — often citing military concerns — which inadvertently help China grow its domestic production and harm U.S. interests or companies like Nvidia. China is usually the lone voice in opposition, but lately, U.S. trade leaders have begun to criticize the Biden administration's heavy-handed doling out of sanctions.
When the new semiconductor tariff and potential China-made GPU/motherboard tariff were announced, David French, an executive VP for the National Retail Federation, said, "As consumers continue to battle inflation, the last thing the administration should be doing is placing additional taxes on imported products that will be paid by U.S. importers and eventually U.S. consumers." The likelihood that the U.S. government will decide to heed these calls for a trade-war ceasefire is very low, so expect continual coverage of the Chip War for the foreseeable future.
