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TAIPEI (Reuters) – Washington’s decision to cut off U.S. supplies to a Chinese chip-maker spotlights mounting tensions over China’s drive to be a global player in computer chips and the ways in which Taiwan companies are helping it get there.
FILE PHOTO: Men walk past a signboard of chipmaker United Microelectronics Corp (UMC) in Hsinchu, Taiwan January 10, 2006. REUTERS/Richard Chung/File Photo
Shut out of major global semiconductor deals in recent years, China has been quietly strengthening cooperation with Taiwan chip firms by encouraging the transfer of chip-making expertise into the mainland.
Taiwan chip giant United Microelectronics Corp (UMC) (2303.TW) last week halted research and development activities with its Chinese state-backed partner Fujian Jinhua Integrated Circuit Co Ltd, following the U.S. move.
Taiwan firms such as UMC have helped supply China with a steady pipeline of chip expertise in exchange for access to the fast-growing chip market there.
China has faced a shortage of integrated circuit (IC) chips for years. In 2017, it imported $ 270 billion worth of semiconductors, more than its imports of crude oil.
At least 10 joint ventures or technology partnerships have been set up in the last few years between Chinese and Taiwanese firms, according to industry experts, luring Taiwanese talent with hefty salaries and generous perks.
“Such companies will need to also take care to ensure no patent or IP infringement is involved as the U.S. has export control means to restrict support of critical technology,” said Randy Abrams, an analyst at Credit Suisse in Taipei.
Among the most valuable cross-strait partnerships for China would be ones that strengthen its foundry services and memory chip production. Those two sectors require much-needed help from overseas firms due to the complexity of the manufacturing technologies and intense capital requirements, analysts have said.
But the technology transfer between China and self-ruled Taiwan has raised concerns amid the Sino-U.S. trade war and escalating tensions across the Taiwan Strait.
China has aggressively used “market-distorting subsidies” and “forced technology transfers” to capture traditional and emerging technology industries, Brent Christensen, the director of America’s de facto embassy in Taipei, told a business gathering in late September.
“These actions are harming the United States’ economy, Taiwan’s economy, and other economies.”
Taiwan is one of the largest exporters of IC globally and many worry the island could lose a key economic engine to its political foe.
Taiwan’s government views the island’s chipmakers’ cooperation with China cautiously and has implemented policies to ensure Taiwan’s most advanced technology is not transferred.
“When businesses go to the mainland to invest in wafer production, they must accept controls including one that requires the manufacturing technology to be a generation behind,” the economics ministry’s industrial development bureau said in a statement to Reuters.
INTELLECTUAL PROPERTY CONCERNS
Cooperation between UMC and Fujian Jinhua came under scrutiny last month, when the U.S. government put the Chinese company on a list of entities that cannot buy components, software and technology goods from U.S. firms amid allegations it stole intellectual property from U.S.-based Micron Technology. Fujian Jinhua denied the allegations.
Fujian Jinhua now faces big challenges to reach commercial high volume production as expected in 2020, industry observers say.
Last week, both UMC and Fujian Jinhua, which was only founded in 2016, were charged with conspiring to steal trade secrets from Micron in a U.S. Justice Department indictment.
“Taiwanese tech companies need to carefully re-evaluate their positions and supply chain arrangements as the tension between the two super powers escalates,” Bernstein analyst Mark Li said.
While China will need at least six years before it can catch up in chip manufacturing, according to some estimates, the scale of its chip-making abilities is already seen as a threat in other parts of the chip supply chain.
Barely 2-1/2 years after breaking ground on a 12-inch wafer plant in China, Nexchip, a joint venture between the Chinese city of Hefei and Taiwan DRAM maker Powerchip, started producing 8,000 wafers a month. Wafers are thin pieces of material, usually consisting of silicon, used to make semiconductor chips.
Nexchip’s main goal is to produce liquid crystal display driver ICs for flat-panel makers.
Using Powerchip’s resources and Taiwanese talent, which make up a quarter of its 1,200 employees, Nexchip is helping reduce China’s reliance on foreign chip suppliers.
With an aim to become “the world’s No.1 chipmaker for display drivers,” Nexchip plans to build three more 12-inch wafer plants and ramp up its monthly production to 20,000 wafers by 2019, according to a person with direct knowledge of the matter.
After visiting Nexchip late last year, researchers from Taiwan’s chip hub, Hsinchu Science Park, said progress at the Hefei plant was a “breakthrough”.
“This will likely increase Taiwan firms’ needs to invest in the China market, and it will be a test for the (Taiwan) government’s industrial policy.”
Reporting by Jess Macy Yu and Yimou Lee in Taipei
SAN FRANCISCO (Reuters) – Alphabet Inc’s Google introduced audiobooks to its online store on Tuesday, making its smart speakers and virtual assistant more competitive with Amazon.com Inc’s Echo devices and Alexa voice assistant.
Listening to audiobooks is among the most popular nighttime uses for smart speakers, a burgeoning type of home appliance that provides audio streams of music, news and other data based on user commands to an embedded virtual assistant.
But Google’s Home speakers have lagged Amazon Echo in terms of audiobook features. Amazon-owned Audible, the top provider of audiobooks, has not been supported on Home and other speakers with Google Assistant.
Google launching an audiobooks store widens the battle, which has also seen Google’s YouTube unit stop supporting an Amazon product.
Greg Hartrell, head of product management for Google Play Books, listed subscription-less buying as the top selling point for the new audiobooks store.
“You can buy a single audiobook at an affordable price, with no commitments,” he said in a blog post on Tuesday.
Audible offers one-off purchases, but promotes a $ 14.95 monthly subscription that includes one free download and 30 percent off further purchases. Amazon and Audible did not respond to requests to comment.
Google began selling ebooks in 2010. Hartrell told Reuters in a statement that audiobooks are being added because “our users are asking for them.”
About 16 percent of U.S. adults own a smart speaker, according to an Edison Research survey conducted in late 2017. The firm in conjunction with Triton Digital also found last spring that 30 percent of frequent audiobook listeners had used a smart speaker to take in an audiobook in the previous 12 months.
Audiobook sales surged nearly 20 percent annually for three consecutive years, reaching $ 2.1 billion in 2016, according to the latest Audio Publishers Assn. data.
Thad McIlroy, an online book industry consultant, said audiobooks represent the only publishing category with “strong growth” so it makes sense for Google to challenge Amazon despite having a weak ebooks business.
Google-purchased audiobooks can be accessed through Google Play Books on the web, apps for Android and iOS devices or through Google Assistant in speakers, Android smartphones and “soon” cars with Android Auto, Hartrell wrote.
Reporting by Paresh Dave; Editing by Susan Thomas