News Analysts warn China's aggressive chip fab expansion could lead to future price war

[Admin]

China's aggressive fab expansion can create oversupply of mature process technology capacity.

Analysts warn China's aggressive chip fab expansion could lead to future price war : Read more

 

[phead128]

• US: nothing personal, but I can't let you build bleeding edge nodes.
• China: Alright, I'm focused to build legacy nodes, which will reduce global supply shortages I guess
• ....
• US: nnnnnoooo.... I didn't mean like that!! ***Embargo, sanction, tariffs***

This essentially is protectionism through and through, none of this "National Security" bs.

 

[bit_user]

• US: nothing personal, but I can't let you build bleeding edge nodes.
• China: Alright, I'm focused to build legacy nodes, which will reduce global supply shortages I guess

Why do you think they wouldn't flood the market on bleeding edge nodes, too, if they could?

This essentially is protectionism through and through, none of this "National Security" bs.

Agree to disagree.

 

[TCA_ChinChin]

Why do you think they wouldn't flood the market on bleeding edge nodes, too, if they could?

I'd be even happier if they did, since it would mean cheaper higher tech stuff too instead of just cheaper electronics that can rely on older nodes.

 

[phead128]

Why do you think they wouldn't flood the market on bleeding edge nodes, too, if they could?

oh, so you prefer a monopoly or a global shortage of chips with sky high prices instead?

 

[bit_user]

I'd be even happier if they did, since it would mean cheaper higher tech stuff too instead of just cheaper electronics that can rely on older nodes.

But the old playbook applies: corner the market and jack up the price. Once the other fabs go out of business, do you really think China won't raise their prices? It's not like they haven't done it before, in other industries, but I guess people keep getting lured in to their trap by short-term greed.

 

[bit_user]

oh, so you prefer a monopoly or a global shortage of chips with sky high prices instead?

That's a false dichotomy.

 

[bit_user]

if you disagree with the idea that this is, essentially, protectionism, it might be nice to elaborate on that point.

The US has no sanctions against Taiwan or fabs in most countries around the world, whether they're operated by an American company or not. That doesn't fit the definition of protectionism I'm familiar with.

 

[ThomasKinsley]

The US has no sanctions against Taiwan or fabs in most countries around the world, whether they're operated by an American company or not. That doesn't fit the definition of protectionism I'm familiar with.

You're absolutely right. The sanctions being applied against China are because of geopolitics, not protectionism. Arguably the CHIPS Act is a form of protectionism and a desire for greater national security in the event of a Taiwan invasion.

But before this gets too political, I will bring it back to tech by saying maybe now GM will finally have enough chips for their vehicles. They kept making excuses for well over a year saying they could not procure enough chips for heated seats and blind-spot monitoring when other companies (e.g., Ford, VW, Tesla) had more than enough. It's up to American companies to find novel uses for these chips, especially with an ensuing price war that will make them more affordable than ever.

 

[Notton]

Counterpoint: Some companies have already fallen far behind, release trash products, and deserve to disappear.

For instance, I don't want a product that uses...
Mediatek wifi
Killer NIC
AMD bluetooth
InnoGrit IG5236
etc.

 

[Rdslw]

I'd be even happier if they did, since it would mean cheaper higher tech stuff too instead of just cheaper electronics that can rely on older nodes.

I expect a flood of fake tech as well, those nodes make most of the 100TB pendrives on aliexpress.
The problem with china is how unreliable they are as a supplier.
You never know what you are getting in the end, and that is very annoying.

 

[umeng2002_2]

A price war? How horrible for consumers...

 

[evdjj3j]

Chinese companies, which are separate from the Chinese government

I don't think it works like that in China.

 

[bit_user]

I don't think it works like that in China.

They subsidize companies and entire industries, by various means. It doesn't have to be a state-owned enterprise to benefit in one way or another. For instance, all the state R&D funding going into semiconductor manufacturing is R&D money the fabs don't have to spend from their own budgets.

 

[phead128]

They subsidize companies and entire industries, by various means.

Odd that Americans are complaining about subsidies after enacting $53 billion in CHIPS Act. What's your point? Subsidies is bad when China does it, but good when US does it?

The whole world, including EU , Korea, Japan responded to CHIPS Act with their own multi-billion dollar subsidies for chip production. So don't pretend it's only China doing this.

 

[bit_user]

Odd that Americans are complaining about subsidies after enacting $53 billion in CHIPS Act.

Not complaining - just pointing out that not being state-owned doesn't mean you're not a state beneficiary (contrary to what RedBear87 seemed to imply).

The whole world, including EU , Korea, Japan responded to CHIPS Act with their own multi-billion dollar subsidies for chip production. So don't pretend it's only China doing this.

No, I'm not pretending anything. Semiconductors are vital to the economy, therefore I expect nations with the means to do so will try to secure their own supply by one means or another.

Let's be clear about one thing: subsidies (and the potential for "dumping") are a different subject than sanctions. You can argue they're related, but it's not a direct relationship. The sanctions are not due to subsidies, although subsidies might be an indirect response to sanctions.

 

[phead128]

One man's "dumping" is another man's solution to global chips shortage and supply limitations.

 

[bit_user]

One man's "dumping" is another man's solution to global chips shortage and supply limitations.

Dumping is strictly defined as selling at unsustainable prices and usually undertaken to drive competition out of business. There can be some room for debate, depending on the circumstance, but it's primarily not a subjective designation like you claim.

 

[phead128]

Dumping is strictly defined as selling at unsustainable prices and usually undertaken to drive competition out of business. There can be some room for debate, depending on the circumstance, but it's primarily not a subjective designation like you claim.

Odd, the title of article says "future price war" and fabs won't come online in 2027.

Yet, there is accusations of dumping when 2027 fabs aren't even operational yet. It's a bit premature "debate" if you will.

 

[bit_user]

Odd, the title of article says "future price war" and fabs won't come online in 2027.

Yet, there is accusations of dumping when 2027 fabs aren't even operational yet. It's a bit premature "debate" if you will.

It's people looking at capacity buildout vs. demand trends, and spotting a mismatch. Maybe they're right or maybe they're wrong. These are analysts and it's their job to make such predictions.

Again, it's not "dumping" unless they sell at unprofitable prices. So, the mere prediction of overcapacity, doesn't necessarily imply dumping, but tends to create conditions where it could occur.

 

[TCA_ChinChin]

But the old playbook applies: corner the market and jack up the price. Once the other fabs go out of business, do you really think China won't raise their prices? It's not like they haven't done it before, in other industries, but I guess people keep getting lured in to their trap by short-term greed.

But in the real world, the US and many other countries will never allow China to corner the market due to national security concerns. The end result will be increased supply and lower prices regardless of whether China actually dumps, since other countries are gonna subsidize their own production (or reduce Chinese exports) to protect themselves like what is happening now in the US, Taiwan, SK, Japan, the EU as a whole, etc. Similar to what has already happened with solar panels or what could happen with electric cars, its gonna drive down costs ultimately.

 

[phead128]

It's people looking at capacity buildout vs. demand trends, and spotting a mismatch. Maybe they're right or maybe they're wrong. These are analysts and it's their job to make such predictions.

Again, it's not "dumping" unless they sell at unprofitable prices. So, the mere prediction of overcapacity, doesn't necessarily imply dumping, but tends to create conditions where it could occur.

That's my point. It's unfair to call for dumping when the fabs are not even online until 2027. It's disingenuous to claim "bankrupt companies" when it's not even a reality until 3 years later and overcapacity doesn't necessarily lead to a price war. It's just putting the cart before the horse.

 

[ThomasKinsley]

But in the real world, the US and many other countries will never allow China to corner the market due to national security concerns. The end result will be increased supply and lower prices regardless of whether China actually dumps, since other countries are gonna subsidize their own production (or reduce Chinese exports) to protect themselves like what is happening now in the US, Taiwan, SK, Japan, the EU as a whole, etc. Similar to what has already happened with solar panels or what could happen with electric cars, its gonna drive down costs ultimately.

The market to corner is not the West's but rather Africa, Asia, South America, and possibly some of Europe, depending on their tolerance to low-tier chips. That's a rather large market and China could corner all of it.

 

[TCA_ChinChin]

That's my point. It's unfair to call for dumping when the fabs are not even online until 2027. It's disingenuous to claim "bankrupt companies" when it's not even a reality until 3 years later and overcapacity doesn't necessarily lead to a price war. It's just putting the cart before the horse.

Exactly. Even with the graphs and data provided in the article, the overall capacity by region for China shifts from only 29% to 33%. Thats still a significant amount, but I don't believe its enough to perform dumping on a global scale like say China did do with solar panels (prices still went down significantly). Taiwan by itself still holds more sway in 2027 with 42% of the market for mature nodes.

The market to corner is not the West's but rather Africa, Asia, South America, and possibly some of Europe, depending on their tolerance to low-tier chips. That's a rather large market and China could corner all of it.

And western countries/companies would sit still? Not even about talking the capacity distribution, the US and many other countries wouldn't allow it due to geopolitics and how closely tied that is to this area of technology.

 

[Colin Ionita]

In the first place, Chinese companies, which are separate from the Chinese government.

Thats a very surface level view of it. Chinese government has more direct involvement with non-state own enterprises than any westerner would consider separate. They have been known to directly take things in raids from western companies foolish enough to do business there. Qualcomm is a notable example. Any company in china is directly subject to government control should they feel like it. Unlike western companies that actually are. Your statement is as inaccurate as saying the PLA is china's army and not an extension of the communist party. They are separate only on paper.