China's wafer shake-up and the rise of 'Silicon Desert'

Hi everyone! This is Cheng Ting-Fang, your #techAsia host this week.

Greetings from the "Silicon Desert" of Arizona, where I have had the rare opportunity to visit Intel's newest and most advanced facility. Known as Fab 52, it has just begun production of the world's most cutting-edge chips, marking a key milestone for the American chipmaker's tech comeback bid.

Suiting up in a cleanroom gown was an experience. It started with a shower cap, then a full head cover that also covered my nose and mouth. Two pairs of gloves, one rubber and one cotton, to fully seal my hands were followed by shoe covers, cleanroom boots and protective eyewear. This provides a glimpse into the daily routine of a technician working on an ultra-advanced production line. And keep in mind, workers need to wear this gear the entirety of their 12-hour shifts.

Factory manager Michael led us through the factory floor of Fab 52 (pictured below), home to Intel's most advanced 18A chip production.

Machines known as overhead hoist vehicles immediately caught everyone's attention. Moving along tracks on the ceiling, they formed a kind of "multi-story superhighway" connecting all of Intel's fabs across the campus. More than 2,100 of these driverless cars travel along about 30 miles of track, ferrying silicon wafers from one machine to another. We also stopped by ASML's advanced extreme ultraviolet (EUV) lithography machines on the cleanroom floor. The tools are essential for printing the world's tiniest transistor structures - and they are not the only cutting-edge feature of the plant.

"Even the concrete used to build the new factory needs to be specially tailor-made to accommodate new machines and new technologies," the factory manager said. According to Intel, about 600,000 cubic meters of concrete and 75,000 tons of steel reinforcement were used for Fab 52, roughly twice the amount used to construct the Burj Khalifa in Dubai, the world's tallest building.

Outside, under the azure October sky, stretched the sun-baked plains of the desert, dotted with iconic saguaro cacti and agave plants. Rugged mountains loomed in the distance.

About an hour's drive north from Intel's campus in Chandler towers another impressive sight: "Big Red," the largest crane in the U.S. Its presence is a sign that construction remains in full swing at another leading chipmaker, Taiwan Semiconductor Manufacturing Co. The company plans to start installing equipment at its second plant in north Phoenix next year, while construction on a third facility started earlier this year. Several more facilities are slated to follow, as TSMC has committed to investing a total of $165 billion in the U.S.

Arizona is a unique place where two of the world's top chipmakers, Intel and TSMC, are building or plan to make their most advanced chips. Yet many industry leaders note that manufacturing in the U.S. comes with higher costs and a shortage of skilled workers, challenges I witnessed firsthand during my trip.

A simple meal of two sushi rolls with miso soup cost nearly $40, more than double what I would pay in Taiwan or Japan. A basic wash and blow-dry at a hair salon was over $50, with a 20% tip expected as a matter of course. Similar services in Taipei or Tokyo cost about a third. (Though Arizona residents told me that the cost of living in the Grand Canyon State is still much more affordable than in California!)

Even getting around day to day felt slower. An average Uber wait was around 10 to 12 minutes, compared with just 3 to 5 minutes in many Asian cities. Labor shortages were also clear: at two hotels where I stayed, a single staff member handled the entire breakfast shift, taking orders, brewing coffee and preparing everything from avocado toast and fried eggs to bagels.

Still, several of my industry friends say that Arizona and the greater Phoenix area are quickly changing, becoming more vibrant as new investments pour in. They tell me that by the next time I visit, it won't feel like a "food desert" anymore, with well-known Taiwanese restaurants opening branches, plans for mega malls and hotels and a new direct flight from Taipei launching in December.

China makes waves in wafers

China's localization bid for critical materials and components has started to rattle global players. The latest shock is in silicon wafers, the essential base material on which most chips are built.

The market has long been dominated by a few major players: Japan's Shin-Etsu Chemical and Sumco, Taiwan's GlobalWafers and Germany's Siltronic. However, Chinese suppliers are rapidly gaining ground, capturing meaningful market share as Beijing pushes to localize critical semiconductor materials. Silicon wafers have become a key focus in China's drive to strengthen its domestic chip supply chain, Cheng Ting-Fang and Lauly Li report.

China's leading wafer maker, Xi'an Eswin Material Technology, is preparing to go public on the Shanghai STAR Market. The company is led by renowned tech entrepreneur Wang Dongsheng, founder of display giant BOE Technology Group. Eswin has already captured about 7% of the global silicon wafer market as of 2024 and is expected to exceed 10% in coming years. Overall, China's self-sufficiency in using domestically produced wafers among its local chipmakers has already reached 50%, and that rate is expected to rise significantly.

Back in the game

Global investors are tiptoeing back into China's startup world. After a freeze driven by U.S.-China tensions and Beijing's tech crackdown, several of the country's biggest venture capital firms are again raising fresh U.S. dollar funds, write the Financial Times' Ryan McMorrow and Eleanor Olcott.

ByteDance backer Source Code Capital and Pop Mart investor BA Capital have each secured about $150 million, while Lightspeed China Partners has raised over $200 million and Qiming Venture Partners is targeting $600 million for biotech bets.

While the $1.1 billion being raised by the VC groups is a far cry from the $30 billion that was ploughed into China VC in 2021 and 2022, it marks a thaw after global investors retreated in 2023.

VCs say the booming Hong Kong IPO market and a hot robotics and AI scene have reignited global investors' interest.

"The entire robotics supply chain is in China," said Xing Meng of 5Y capital, adding that valuations were a fraction of those earned by startups in the U.S.

Overtaking the pack

U.S. chip investment is projected to accelerate sharply from 2027, outpacing other major chip economies including China, South Korea and Taiwan, Yifan Yu and Cheng Ting-Fang report from Phoenix, Arizona.

According to the latest estimates by SEMI, investment in U.S. chip manufacturing, including equipment purchases and facility construction, is expected to rise from around $21 billion in 2025 and 2026 to $33 billion in 2027 and $43 billion in 2028. The total between 2027 and 2030 is forecast to reach $158 billion.

This surge in domestic chipmaking capacity is largely driven by government policies and a new tariff environment aimed at reshoring chip production, as well as the growing demand for AI computing, a sector in which U.S. chip developers continue to lead the global market

SoftBank gets physical

SoftBank said it will acquire the robotics business of Swiss-based automation solutions provider ABB for $5.4 billion, as the Japanese conglomerate expands its AI investments into a new frontier, Nikkei Asia's Tsubasa Suruga writes. SoftBank founder Masayoshi Son is betting big on "physical AI," or embedding AI into machines such as cars or robots to create autonomous systems capable of acting and making decisions like humans. Adding ABB's robotics business to the group's portfolio is expected to be a major boost for such ambitions.

Son's push echoes that of Infineon's CEO, who said in an exclusive interview with Nikkei Asia that "physical AI," including humanoid robots, promise the most exciting growth opportunities for the emerging technology.

Podcast: Tech Latest

Are smart glasses ready for the big time? The US and China think so

Welcome to the Tech Latest podcast. Hosted by our tech coverage veterans, Katey Creel and Shotaro Tani, every Tuesday we deliver the hottest trends and news from the sector.

In this episode, our host Katey speaks with Silicon Valley correspondent Yifan Yu about how AI glasses are quickly becoming the next must-win battle for Big Tech in both the U.S. and China.

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