East Asia is becoming a global chip manufacturing center with a capacity of 3/4.

Decades of investment moving from high-cost to low-cost and efficient regions has changed the geography of the world's manufacturing industry. East Asia is becoming the manufacturing center of semiconductor chips in the world.

It is reported that the share of global semiconductor production capacity in the United States fell from 37% in 1990 to 12% last year, while Europe also decreased by 35% to 9%. Mainland China's market share has increased from almost nothing to 15%, and that figure is expected to grow to 24% in the next decade.

At present, 3/4 of the world's chip production is concentrated in East Asia. Manufacturers such as TSMC in Taiwan, SMIC in the mainland and Samsung Electronics in South Korea jointly dominate global production capacity.

Although the recent severe shortage of automotive semiconductors has prompted the United States and the European Union to strive to improve local manufacturing capacity. But these measures are costly.

(Semiconductor Industry Association), the American semiconductor industry association, and (Boston Consulting Group), the Boston consulting group, estimate that the cost of building and operating the same semiconductor factory in the United States for 10 years will be about 1/3 higher than in Taiwan, South Korea or Singapore.

The report also points out that under government incentives, the cost of contract manufacturing in mainland China is 37% to 50% less than that in the United States. With the help of technology and cost, mainland China has become a major destination for semiconductor investment in the world.

According to relevant data, since 2015, China's semiconductor industry has announced about 84 greenfield investment (FDI) projects, 44% of which are manufacturing projects. In the same period, the United States attracted 45 foreign semiconductor projects, followed by India (37), the United Kingdom (36) and Taiwan (29).

It is worth mentioning that China is not only the chip manufacturing industry, but also the largest auto market in the world. At the same time, China also supplies auto parts to OEM in South Korea and Japan. Between 2015 and 2019, Chinese parts exports to Japan rose 17 per cent to $3.2 billion, according to IHS Markit. As the auto industry continues to move towards electrification, East Asia is likely to benefit further.