Chennai, Jan 18 The increasing geopolitical pressure will have limited immediate effect on semiconductor supply chains but in the longer term, will lead to geographic diversification of production capacity and investments of Taiwanese semiconductor companies, said Moody's Investors Service.
This geographic shift will involve substantial investments and raise economic concerns for Taiwan, and China, which are credit negative for the Taiwanese government and related chipmaking companies, it said.
"Given the substantial investments required and the potential economic concerns for Taiwan, if it were to move a large portion of high-end manufacturing capacity offshore, we do not expect this process to happen swiftly. Still, any disruption to the supply of semiconductors from Taiwan will have effects beyond Asia-Pacific," Moody's Managing Director Michael Taylor said.
China's reliance on semiconductor imports is unlikely to diminish over the medium term given constraints on its advanced chip production.
Rising geopolitical tensions are unlikely to affect the supply of advanced chips for commercial use in China over the next three to five years given the US' focus on restricting China's access to chips in the most advanced fields and limiting China's ability to produce advanced chips, Moody's said.
However, the semiconductor supply chain in China has become increasingly vulnerable to geopolitical disruptions. More restrictions on access to manufacturing equipment for advanced chips will slow the progress of China's plans for semiconductor self-sufficiency; as a result, the country will remain reliant on semiconductor imports.
"We expect cross-Strait tensions to remain heightened, with an increased risk of disruption to the supply of semiconductors manufactured in Taiwan," said Taylor.
Moody's said Taiwan Semiconductor Manufacturing Co Ltd, Samsung Electronics Co Ltd, and SK Hynix Inc, the leading global chipmakers based in Taiwan and South Korea and key suppliers of advanced chips to mainland China, have been granted a one-year exemption from the new US government restrictions.
The exemption will allow them to continue building production capacity in China for the next year, which will limit the immediate impact of the US restrictions. Moreover, most of their manufacturing capacity is based outside of mainland China.
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