Big hopes as Singapore gears up to ride EV microchip boom

Singapore, already a major electronics manufacturing hub, will continue to grow in importance for the global semiconductor supply chain with the bulk of demand for microchips made here increasingly coming from the auto industry.

The presence of silicon microchips – which are the building blocks of everything electronic – in mobile phones, computers, and televisions, is well understood.

But there is less awareness of how electrified and smart cars have become in the past years. And none of that would have been possible without the semiconductor industry.

A typical car, with an internal combustion engine, today uses between 50 and 150 chips to run onboard electronics that manage lighting, fuel efficiency, and even torque vectoring – a performance technology that increases traction and handling in vehicles.

There is an exponential rise when it comes to electric vehicles (EVs) where, as the name suggests, everything runs on electricity or a radio frequency signal that is managed by microchips.

Some of the latest EVs use more than 3,000 chips – conveniently packed in electronic control units (ECUs) that are tucked behind the dashboard or just under the floor.

In fact, the amount of silicon content in most cars is slated to exceed US$3,000 (S$4,020) from the current US$350 soon. For high-end EVs, the chip price tag can go up to as much as US$6,000 per unit in the not-so-distant future.
 

By 2030, every third car on the road will be an EV, according to a 2023 global study by the International Energy Agency.

In the same period, the number of chips in traditional and hybrid vehicles will also double as the competition to produce more efficient and more intelligent cars heats up.

Of course, at the same time, a host of other consumer electronics such as mobile phones, computers, TVs, air-conditioners, and refrigerators will also need more semiconductors.

Singapore Semiconductor Industry Association (SSIA) executive director Ang Wee Seng believes the ongoing chip glut that has lowered sales growth worldwide could have hurt the local industry much harder if not for the steady demand for automotive chips.

“While there is a drop in demand for chips in general, our foundries are still in better shape to an extent because of the ongoing demand from the automobile industry,” he told The Straits Times.
 

Boom and bust

However, Mr Ang and industry experts agree that there are at least two key issues that will continue to challenge the resilience of the industry, which accounted for about seven per cent of Singapore’s gross domestic product in 2023 and provides over 33,000 jobs.

First, more than 80 per cent of all chips go into consumer goods, a highly cyclical industry.

That means that when there are plenty of jobs and wages are rising, people tend to buy new cars, phones and TVs. But if economic conditions turn sour, these are the same items that are axed from the shopping list.

Second, the semiconductor industry is itself very fragmented. The processes involved in making a chip in the shape and form that can be fitted into an electronic device are so complex that no single company can do them all.

Hence, chip firms try to specialise in one or more segments of the value chain.

So, chips are designed to the technological specification of a device maker by companies called fabless chipmakers, because they usually do not own chip fabrication plants, also known as foundries.

Pure-play foundries, also dubbed as contract manufacturers, buy wafer discs from substrate material firms and etch or stamp chip features on silicon wafers.

Finally, the wafer then goes to assembly and testing services companies that examine the viability of the chips and package them in a ceramic module that can be mounted on the circuit boards of electronic devices.
 

Typically, each foundry can only manufacture chips of a particular process node, which refers to the distance between the transistors inside the chip.

The distance is measured in the billionths of a metre, or nanometres – the smaller the node, the more transistors a chip can pack and hence perform advanced computing tasks.

That also means for each new generation of chips, a new foundry must be constructed, which may take two or more years, and tens of billions of dollars.

Chips that are 28 nanometres (nm) or bigger are called mature nodes and chips smaller than 28 nm are considered advanced nodes.

With 2 nm nodes likely to be commercially available soon, some experts believe all double-digit nodes should be considered mature. For a sense of the minute scales involved, the width of a strand of human hair is about 100,000 nm.

As modern technologies requiring more computing power and processing speeds such as artificial intelligence, 5G networking, and Internet of Things (IoT) emerged in the past decade, the demand for advanced node chips started to rise.

In response, chipmakers worldwide began building new fabs dedicated to ever tighter nodes. Taiwan Semiconductor Manufacturing Company (TSMC), for instance, is set to start volume production of 2 nm chips in the United States by 2026. The price tag of the N2 fab is estimated to be north of US$30 billion.

Intel recently broke ground for a new fab to produce leading-edge chips in the US which will cost it US$20 billion.

A plant to produce 28 nm chips would cost less than a third of that. But until a few years ago, there were only a handful of companies with any plan to build a fab making mature nodes even though they still accounted for more than 60 per cent of global sales.

All of that changed in late 2020 when, following the confusion over COVID-19 lockdowns and production disruptions, the auto industry was left short of mature node semiconductors they needed the most.
 

New investment cycle

Many global players have since renewed their investment commitments to mature node chips.

Singapore, where the semiconductor ecosystem is almost entirely built around mature nodes, saw a surge in new investments.

For instance, in February 2022, Taiwan’s chipmaker United Microelectronics Corp (UMC) announced plans to invest in a new S$6.8 billion wafer fab facility in Singapore producing 22 nm and 28 nm chips for advanced speciality technologies.

In September 2023, US-headquartered Global Foundries (GF) officially opened its new S$5 billion wafer fab facility in Singapore focused on end-markets such as automotive, 5G mobility, and secure devices.

Investments in new manufacturing and research and development (R&D) facilities also came from other semiconductor value chain companies such as US chip equipment-maker Applied Materials, German wafer-disc manufacturer Siltronic, and US computer processor and graphics maker AMD.
 

For instance, in May 2023, Analog Devices – which provides chip designs and innovative solutions for the industry – launched a new R&D facility in Singapore located within the Kallang Industrial Park.

Besides UMC and GF, Singapore has three other foundry companies – Vanguard International Semiconductor (VIS), which counts Taiwan’s renowned chipmaker TSMC as a major shareholder; Systems on Silicon Manufacturing Company (SSMC) – a joint venture between TSMC and the Netherlands’ NXP Semiconductors; and STMicroelectronics of France.

Micron Technology, for whom Singapore is the biggest manufacturing site outside of the US, makes data storage and memory chips that are also used in various automotive applications including advanced driver-assistance systems (ADAS), autonomous vehicles, cloud-connected cars, and infotainment display panels.

While the semiconductor industry has been suffering a glut since 2023 – following the boom in demand from late 2020 to most of 2022 – all these chipmakers have seen increasing business from the auto industry.

Mr Tan Yew Kong, senior vice-president and general manager of GF in Singapore, said: “A bulk of our Singapore business is focused on the automotive segment, which is a growing market as we see more electrification in cars.”

He said multiple GF-manufactured chips could be in a single car for battery management, sensors, safety features, in-car lighting systems, infotainment and more.
 

Mature node innovations

Chip designers are also producing modern technology architectures for EVs that will require new and innovative mature node chips.

Mr Daryl Wan, regional business director for the South Asia Pacific region at Analog Devices, said the company has developed a new battery management system that will boost the miles per charge an EV can deliver and maximise the batteries’ overall lifetime, and as a result, lower the cost of ownership.

He said the perception that mature node chips are somehow less advanced than small node chips is a misconception.

“There is still a lot of innovation going into larger chips which will keep them relevant and viable for years to come,” he said.

Mr Brian Tan, regional president of Applied Materials South East Asia, said his company gets the bulk of its business from foundries working on mature nodes.

“Most of the chips used in IoT, communications, automotive, power and sensor devices – or ICAPS as we call them – do not have leading-edge nodes. They are speciality chips and in terms of nodes, some of them are even larger than the 28 nm chips,” he said.

“We believe that there is going to be a growing market in this ICAP space,” he noted.

However, SSIA’s Mr Ang believes that Singapore will eventually have foundries making smaller nodes.

“We already have a number of chip research and design companies that are working on leading-edge process technologies. So, at some point, they will start to attract foundries that produce the same wafers and chips.”
 

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.