UPDATED. 2024-07-19 07:49 (금)
Taiwan’s compromise with Qualcomm is a lesson for South Korea
Taiwan’s compromise with Qualcomm is a lesson for South Korea
  • JY Han
  • 승인 2024.04.11 10:04
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$700 million investment promise boosted Taiwan's chip packaging sector
It is safe to say that chips are a bigger deal than 5G on anybody's mind today.
It is safe to say that chips are a bigger deal than 5G on anybody's mind today.

“That promise has been kept,” Li Mei, the chairperson of Taiwan’s Fair Trade Commission, told the parliament in December of last year.

They were responding to a question on whether US chip giant Qualcomm kept its promise to invest $700 million in the country.

The company, known for its Snapdragon processor on smartphones, had been hit with a slew of fines in governments across the world for antitrust violations: in 2015 in China; in 2016 in South Korea; and in 2018 by the European Union.

While AI may be the big word in tech today, at the time it was still smartphone, LTE, and 5G. Qualcomm faced allegations that it forced companies to sign unfavorable licensing agreements using its patents on modem chips.

Taiwan took a different approach from most governments at the time. While it did fine Qulacomm in August 2018 a fine of $700 million, this was knocked down to $93 million. Instead, the country secured a promise from the US chip giant to spend $700 million in Taiwan for the next five years to promote domestic industries such as 5G.

While two high-level officials of the Fair Trade Commission resigned in protest, and the decision received a negative reaction from local media, Taiwan was considered to be behind the US, China, Japan, South Korea, and others in 5G at the time, at it could be viewed as a necessary compromise in the government's perspective.

With clearer eyes today, it seems it was the right call. But the boost didn't come to 5G. Instead went to the chip industry.

Today, 5G and mmWave can hardly be called a bid deal in any country. During the past five years, as the industry's focus shifted, Qualcomm instead spent heavily in the chip packaging industry in Taiwan.

Taiwan’s largest chip packaging and testing firm SPIL says Qualcomm bought 500 units of equipment. These kits are dedicated to handling Qualcomm’s back-end needs (as it uses TSMC as the contract chipmaker).

South Korean packaging companies told TheElec that for the past couple of years, it has lost orders from Qualcomm to its Taiwanese rivals. In other words, Taiwan’s leniency on the US chip giant directly helped its domestic packaging industry, though that not might have been the original intention.

Like most of the chip industry, SPIL performed weakly last year during the downturn of the global chip market but from 2018 up to 2022, it saw a stable, steady climb in revenue. Qualcomm isn’t just providing SPIL with equipment and orders. Its engineers work directly at SPIL facilities to check whether its chips are packaged properly. This means SPIL can absorb this expertise.

While Qualcomm does give the order for the packaging of premium chips to Amkor, based in Incheon, South Korea, its close relationship with its Taiwanese packaging partners means they will likely get more opportunities.

The timing of these developments also coincides with Qualcomm giving all its front-end orders for Snapdragon to TSMC instead of splitting it with Samsung Foundry. Conventionally, chips are designed two years before mass production to fit the foundry process it wants. There is a joke in South Korea that the Qualcomm CEO was so moved by Taiwan’s leniency (compared to South Korea’s enforcement of its fine) that it decided to give all its orders to Taiwan. ST Liew, the president of Qualcomm Taiwan & SEA, is considered somewhat of a hero in Taiwan as someone who gives a lot of work to the domestic manufacturing industry, people knowledgeable on the matter said.

It is not just Taiwan. Countries around the world are competing to provide incentives such as subsidies to boost domestic chip production and secure the investment of global chip giants. South Korea must take all this into account in the case of Taiwan to think about what it should do to attract investment from the global advanced semiconductor industry.

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