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Interview

Clean energy and EVs to fuel chip demand: Infineon APAC head

Chua says current shortage will continue 'at least a few more months'

Chua Chee Seong, president and managing director of Infineon Technologies Asia Pacific, speaks with Nikkei Asia in Singapore. (Photo by Weixiang Lim)

SINGAPORE -- The growing adoption of renewable energy and electric vehicles will continue to spur demand for semiconductors, according to the head of Infineon Technologies' regional headquarters in Singapore.

In an interview with Nikkei Asia, Chua Chee Seong, president and managing director of the German chipmaker's Asia-Pacific unit, said there is "structural momentum" beyond the cyclical recovery in the chip industry.

"You can see that countries are investing in clean, renewable energy, like solar panels. They require semiconductors," he said. "Digitization is driving demand, and the installations of servers for cloud data centers, and the rollout of 5G and IoT [Internet of Things] edge computing. These areas will continue to spur demand for semiconductors throughout the year."

Noting that an electric car has twice as many semiconductors as an internal combustion engine car, he said the outlook is positive. "EVs today are only a low single digit percentage of the total car population. Imagine growing 10 times more over the next 10 to 20 years."

With respect to the ongoing chip shortage in the automotive and other sectors, Chua said that "it will continue for a few more months at least," pointing out that production time can run four to six months, depending on the product type and number of steps required to make a chip.

"Capacity expansion is not possible overnight. ... For example, to build a factory, install a clean room, you need about two years. To bring semiconductor equipment into operation, easily 15 months." Now that the industry players are expanding investments, "we will probably see some light towards the end of the year, and of course beginning of next year," Chua said.

Infineon, a leading company for microcontrollers, had been enjoying increased demand from the automotive industry but is now facing a chip shortage.   © Reuters

He noted that Infineon is expanding its production capacity for power semiconductors at some sites, including Kulim, in northwestern Malaysia. For the back-end process -- packaging and testing -- the company "will continue to invest in capacity" at its Melaka site in Malaysia, he said.

Infineon is a major semiconductor maker and has increased its planned capital investment to 1.6 billion euros ($1.9 billion) for the current financial year ending in September, compared with its earlier guidance of 1.4 billion to 1.5 billion euros. The company has not disclosed how much of its investment budget will be spent in Asia.

Excluding Japan and greater China, the German company has operations in nine countries in the Asia-Pacific region, including India, Malaysia and South Korea. The region accounted for 15% of the company's total revenue in the last financial year ended September 2020.

At its regional headquarters in Singapore, Infineon has recently started an artificial intelligence hub initiative that aims to train more than 1,000 employees in the city-state in AI skills and improve its work processes.

The training started in February, Chua said. "It is important to understand what AI is and is not -- what it can do for you, because only then we are able to source ideas from employees -- which part of their jobs they think will gain from [the] application of AI."

The COVID-19 pandemic has disrupted the supply chains of many multinationals, but Chua said his company has not had to alter its own supply chain. Infineon ships finished goods to its regional distribution hub in Singapore to make most of the city-state's links to the rest of the world.

Chua downplayed the effect on the chip industry of the Regional Comprehensive Economic Partnership, a free trade agreement concluded by 15 Asia-Pacific countries in November last year, saying: "The impact to semiconductors is minimal." Chips, he said, are treated as components, which are by and large, not affected by the tariffs imposed on semifinished goods and modules.

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