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As the pursuit of shrinking semiconductor chips becomes increasingly challenging from both a technical and financial perspective, the competition for leadership in chip technology has started shifting towards the realm of optimizing chip packaging to enhance overall performance.
The increasing prevalence of artificial intelligence is expected to drive greater demand for advanced packaging technologies. This trend may also present opportunities for challengers like China to address vulnerabilities in other aspects of the supply chain.
Since the time when Gordon Moore, one of Intel's co-founders, made his famous prediction about the doubling of transistors on integrated circuits every two years, commonly known as Moore's Law, the field of chip manufacturing has seen significant advancements. However, the ongoing effort to further reduce the size of chips has become increasingly difficult and costly.
To address this challenge, an alternative approach is to assemble various components of a chip using different advanced processes, thereby achieving a more efficient packaging method. This strategy enhances performance while maintaining cost-effectiveness.
TSMC, which stands as the dominant global force in manufacturing cutting-edge logic chips, is also making substantial investments in packaging technology. This underscores the growing significance of the packaging phase in chip production.
In 2024, TSMC has set a goal to increase the capacity of its advanced packaging technology, known as CoWoS (chip on wafer on substrate), twofold. CoWoS combines logic and memory chips and enhances data transfer speeds between them. The shortage of this capacity has emerged as a limiting factor in meeting the demand for artificial intelligence chips, in addition to the actual chip production.
Traditional chip assembly and testing companies may not necessarily be left out of the race. Despite potentially trailing behind technology leaders like TSMC, they are making substantial investments in an effort to narrow the gap. For instance, the American company Amkor Technology intends to construct a $2 billion advanced packaging facility in Arizona, with a portion of the funding coming from subsidies provided by the CHIPS Act.
China also has the opportunity to advance quickly in the field of packaging. It already commands the largest portion of the worldwide chip packaging and testing market, with major packaging firms establishing their presence in the country. JCET, Jiangsu Changjiang Electronics Tech, stands as the world's third-largest chip packaging and testing company, following only Taiwan's ASE and Amkor.
At present, packaging technologies do not face U.S. sanctions. However, considering the deteriorating relations between China and the United States, there exists a notable risk of this situation evolving, although any U.S. actions in this regard would be intricate due to China's substantial market presence in this domain.
The emergence of artificial intelligence, occurring amidst the already intense rivalry between China and the U.S. in the semiconductor industry, is pushing this competition to encompass every aspect of the chip supply chain. Few companies are expected to emerge from this unscathed.