The new chip race and iPads in Vietnam

Hi everyone, and happy holidays in advance! This is Cheng Ting-Fang, your host for #techAsia this week.

For the past month, I’ve been delving into a classic question: How long can Moore’s Law — the idea that the number of transistors on a chip will double every two years — remain viable? As TSMC chair Mark Liu put it, this “renowned prediction” by Intel co-founder Gordon Moore provided a clear path that has guided the chip industry for 50 years, underpinning advances in everything from computers and smartphones to generative AI.

To my surprise, leading chip manufacturers and equipment and materials suppliers were all eager to share their thoughts on the matter. While acknowledging that it is becoming increasingly difficult to shrink transistors, they all strongly defended Moore’s Law, underscoring its profound impact on shaping the tech world.

Take Intel, for example. Senior vice-president Sanjay Natarajan, a 30-year veteran of the industry, told me recently that Moore’s Law has been about to die “the whole time I have been in this industry”. But it is still alive.

Keren Kanarik, technical managing director at US chip equipment supplier Lam Research, even said this is an “incredibly exciting time” for the industry, as engineers get to work on features measured “in atoms”!

But the chip race today requires collaboration with hundreds of suppliers around the world — and hundreds of billions of dollars in investment. This means only a few major players can afford to stay in the race.

So how small can transistors get? Industry experts predict at least 10 more years of miniaturisation. But getting smaller is no longer the only way forward.

The new chip race

Moore’s Law may not be dead, but it is slowing as further miniaturisation of transistors becomes increasingly difficult. This slowdown will have profound implications not only for the commercial side of the chip industry but also for geopolitics, Nikkei Asia’s Cheng Ting-Fang and Lauly Li write.

Only TSMC, Intel and Samsung remain at the forefront of the chip race, with each aiming to produce 2-nanometer chips by 2025. Top Chinese chipmaker SMIC, supported by local tech champion Huawei, is striving to catch up.

The slowdown in Moore’s Law could give SMIC a chance to do just that. According to a Nikkei Asia analysis, the technology gap between Intel and SMIC is narrower than ever. Where Intel once had a four- or five-year lead, it is now just three years.

And that is not all. With the miniaturisation of transistors becoming tougher, chipmakers are urgently seeking alternative ways to boost chip performance.

This is where chip packaging, once a mere afterthought for most chipmakers, comes in. Intel and TSMC, for example, have earmarked billions of dollars to develop new ways of connecting different chip types, like processors and memory, together.

This approach may give China a further chance to catch up, as the tools used for chip packaging do not fall under US export controls, at least not yet.

“You don’t need very delicate, complicated equipment for advanced packaging, and it is possible to use advanced packaging technologies to push forward from 7-nm to 5- or even 3-nm [performance],” an executive with Kinsus Interconnect Technology, a Nvidia and AMD chip substrate supplier, told Nikkei Asia.

“So in a way, the slowdown of Moore’s Law is good timing for Chinese chipmakers to narrow their gaps with the frontrunners.”

TikTok taps Tokopedia

TikTok has hatched a plan to save its ecommerce business in Indonesia after the country’s regulators in September banned transactions on social media: a tie-up with a successful local operator.

The ByteDance-owned company has agreed to invest $1.5bn in Tokopedia, the ecommerce unit of Indonesia’s GoTo, in return for a controlling stake of 75.01 per cent, writes the Financial Times’ William Langley in Hong Kong.

As part of the transaction, Tokopedia will acquire TikTok Shop’s local business for $340mn.

Indonesia was the first and largest market for TikTok Shop, a feature within the viral video platform that allows users to make purchases directly in the app. The feature has also found success in Vietnam.

This focus on south-east Asia is an attempt to replicate some of the success of Douyin, TikTok’s sister app in China, which generates billions in sales each year. Indonesia’s new rules put such ambitions at risk, until TikTok Shop inked the deal with GoTo to preserve its presence in its most important market.

Meanwhile TikTok Shop is still trying to break through in the West, where it has invested heavily in the UK and US.

Relationship issues

South Korean battery makers could be forced to pick sides between the US and China thanks to Washington’s introduction of guidelines on foreign entities of concern (FEOC), writes Nikkei Asia’s Kim Jaewon. Companies that are 25 per cent or more owned by Chinese, Russian, North Korean or Iranian entities will be ineligible for US incentives like tax breaks and grants under the Inflation Reduction Act (IRA).

That leaves South Korean battery maker SK On’s joint venture with Chinese partners caught in the crossfire. The venture was agreed earlier this year, with an eye towards producing key EV battery materials. Now SK On will have to either convince its Chinese partners to reduce their stake in the JV or risk losing access to the lucrative US market.

This new rule could deal a blow to South Korea’s battery industry, which relies heavily on partnerships with Chinese companies for crucial materials and production. Three Korean battery suppliers — LG Energy Solution, SK On, and Samsung SDI — are among the global top 10 in making batteries for the growing EV market.

Major EV makers selling into the US market will want to use batteries that qualify for government benefits. For example, consumers can get a $7,500 tax break for new clean vehicles that meet US standards. Eligibility for such incentives could make a huge difference in how competitive these EV makers and their suppliers are.

Apple engineers a shift

For the first time ever, Apple is shifting key engineering and development resources for iPads from China to Vietnam, Nikkei Asia’s Cheng Ting-Fang and Lauly Li write. This move, done in collaboration with its major iPad assembler BYD of China, involves sending engineers, building up labs and installing new equipment in Vietnam to ensure the development of new iPad models is smooth. This marks a significant step towards diversifying Apple’s production base away from China.

Test production for a new iPad model using this approach will start in mid-February. The final product is expected to launch in the second half of the year. BYD is also the supplier that helped Apple first move some iPad production to Vietnam in 2022.

This shift of key iPad engineering work is a major boost for Vietnam’s position in the global electronics supply chain, executives and analysts told Nikkei Asia. Until now, Apple and its suppliers have done most of their crucial engineering collaboration in China, which has helped the country become a tech manufacturing powerhouse. Now, Vietnam is emerging as a key beneficiary of the growing tensions between the world’s two biggest economies.

Suggested reads

1. Rapidus confident Japan can close ‘20-year’ gap with global chip leaders (Nikkei Asia)

2. Panasonic’s EV battery unit boosts US supply chain with potential alternative to materials from China (FT)

3. UAE’s top AI group vows to phase out Chinese hardware to appease US (FT)

4. ASML and Samsung strike $760mn deal on memory chip equipment research (Nikkei Asia)

5. Chinese EV battery maker CATL denies ‘espionage threat’ accusations (FT)

6. Taiwanese tech start-ups pile into Asean amid risks in China (Nikkei Asia)

7. Tokyo plays Cupid with matchmaking app to boost marriages (Nikkei Asia)

8. Apple moves towards India-made iPhone batteries in push away from China (FT)

9. Semiconductor giants race to make next generation of cutting-edge chips (FT)

10. Japan and Asean to team on AI and cyber security (Nikkei Asia)