ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter
Semiconductors

Top chip tool maker sticks with Singapore amid supply chain shift

Kulicke and Soffa says not everyone in supply chain needs to expand overseas

Kulicke & Soffa says staying close to its Asian customers is more important than being part of the global diversification trend. (Photo courtesy of Kulicke & Soffa)

TAIPEI -- The world's leading chip packaging and testing equipment maker is bucking the trend of supply chain diversification by continuing to expand in Singapore, its main production base, even as major chipmakers rush to build factories in the U.S., Europe and Japan.

Chan Pin Chong, executive vice president at Kulicke and Soffa Industries, told Nikkei Asia that the city-state will remain his company's biggest production site for the foreseeable future.

"Singapore has very strong infrastructure, as a simple example," Chong said.

"It has many institutes of higher learning which train and produce engineering talents for the high precision manufacturing industry as well as strong government support."

Singapore has managed the COVID-19 pandemic well, and this has mitigated the disruption to production in meeting customers' and market demands, the executive said.

"The supply chain was not interrupted much. We had some tightening of controls, but overall it was very stable throughout last year." Chong said his company managed to handle these challenges "by having multiple sources, spot buys, [and] keeping inventories and alternative designs amid the pandemic."

His remarks come as the U.S., Europe, China and Japan are urging chip companies to onshore more production. Governments are keen to build more resilient supply chains for national security reasons, and some of the world's biggest companies are heeding their calls.

Taiwan Semiconductor Manufacturing Co., the world's largest chipmaker, is departing from its decadeslong strategy of concentrating production in Taiwan by building a facility in the U.S., as well as potentially in Japan and Germany. Intel is expanding its capacity in the U.S. and said it will build plants in Europe and elsewhere, while Globalfoundries, a smaller rival to TSMC, is increasing its capacity in the U.S., Singapore and Germany.

Unlike chip manufacturers that need to diversify production because of geopolitical factors and to be close to their customers, Chong said it is a different story for makers of chip production equipment.

As an equipment manufacturer, Chong said his company sees no urgent need to expand production to new locations or move it to the U.S. Kulicke and Soffa, he said, can easily ship tools to all of its customers and has room to expand capacity at its current facilities.

"[Singapore] is a good place to continue to grow our business, and it's close to all the Asia customers," Chong said, adding that the city also has "easy access to the rest of Asia."

Singapore is also attempting to attract more chip industry investment as part of its plan to grow its manufacturing industry by 50% by 2030. The government has a particularly strong appetite to boost semiconductor-related segments to catch up with Asian peers such as Taiwan and South Korea.

Founded in 1951, K&S is one of the earliest tech companies to list on Nasdaq. The equipment supplier began manufacturing in Singapore in 2000 and relocated its headquarters there from Pennsylvania 10 years later.

Chong said K&S will continue to expand production capacity at its existing locations in Singapore, the Netherlands and Israel as well as China, where it produces consumable parts instead of whole machine sets. K&S counts the U.S. and Europe as its key research and development bases, while Singapore is its largest manufacturing site.

Southeast Asia is an important hub for the chip tools industry. Applied Materials, the top U.S. semiconductor equipment maker, has its biggest manufacturing center outside of its home market in Singapore.

Lam Research recently opened a manufacturing facility in Malaysia that is rapidly ramping up production, CEO Tim Archer said on Monday, adding that the company will continue expanding its workforce in Asia.

Looking forward, K&S sees strong momentum in semiconductors as artificial intelligence, 5G wireless connectivity technology and electric vehicles take off. The chip equipment maker also expects robust growth in mini LEDs and micro LEDs -- new types of displays based on LED technology. They are being used for TVs, public information and automotive displays, digital signage and consumer electronics devices.

K&S will play a crucial role in addressing the ongoing global semiconductor shortage. Its wire-bonding equipment is an essential tool in the chip packaging process and is also used in the making of power semiconductors, which go into vehicles. Nikkei Asia has reported that delivery times for some chip tools, including K&S's, have lengthened to 12 months or more, creating a drag on the capacity expansion plans of chip manufacturers, packaging and testing service providers and substrates suppliers.

K&S's revenue for its third quarter, which ended July 3, rose more than 180% on the year to $424.3 million, while its net profit jumped more than 900% from the same time a year ago. Its stock price has increased nearly 100% since the beginning of this year.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more