TAIPEI --The global chip industry risks losing out to Chinese rivals who are exploiting generous government subsidies to invest in emerging technologies, according to Morris Chang, retired founder of Taiwan Semiconductor Manufacturing Co.
In his first major public appearance since stepping down from the world's largest contract semiconductor manufacturer in June, the industry veteran warned that only sizable investments in major innovations would guarantee that today's chipmakers would still be relevant tomorrow.
"We see innovative business models heavily subsidized by governments such as China's, even without knowing if they are sustainable," said Chang, in a keynote at the annual SEMICON Taiwan fair on Sept. 5. He identified 3D chip packaging, extreme ultraviolet chip equipment, artificial intelligence and machine learning as among technologies that could create new opportunities for the semiconductor industry.
However, he was upbeat about the outlook for the industry, saying he expected growth to be double that of the world economy over the next 20 years.
"I think global GDP growth will be around 2.5% to 3%, while the semiconductor industry could continue to grow faster, at around 5% to 6% over the next two decades," said Chang.
Chang's sentiments come as the industry finds itself under scrutiny by countries concerned about national security, notably evident in the current U.S.-China trade dispute, which is escalating into a technology cold war between the two powers. China has been using government funds to bolster its semiconductor sector to reduce dependence on foreign chipmakers, a key component of its "Made in China 2025" initiative. The U.S. hopes to curb this through tariffs and by closely monitoring Chinese investments in American tech companies.
But constant innovation was the real key to success, he said. "U.S. chipmaker Texas Instruments and most Japanese chip manufacturers rode the first wave of innovation, but later failed to invest in major new innovations over the years, resulting in their decline," said Chang.
However, Chang said innovation costs have risen exponentially in the past few decades.
Taiwan's vast semiconductor industry, which Chang helped create, is the world's third biggest by revenue after the U.S. and South Korea, and is expected to rack up sales of 2.61 trillion New Taiwan dollars ($84.73 billion) in 2018, up 6% from a year ago.
By 2021, sales could top NT$3 trillion, according to industry association Semiconductor Equipment and Materials International.
More than 230,000 people are employed in Taiwan's chip industry, a number on par with the U.S. The island is also home to the world's largest contract chip manufacturing, packaging and testing sectors, and is No. 2 in chip design.
Taiwan's Premier William Lai Ching-te also spoke at the exhibition, vowing continued support for the island's main industry.
More than 200 executives will speak at SEMICON, which features over 680 exhibitors from around the world and 2,000 booths. About 45,000 visitors are expected to attend this year's gathering.
In 2017, the world's semiconductor market surpassed $412 billion in revenue, with 15% growth forecast for this year, according to the World Semiconductor Trade Statistics.