Entegris, a US chip material manufacturer, plans to more than double its investment in Taiwan and build its largest manufacturing base on the island. This is a major victory for Asia’s major chip economies as it races to ensure its presence in the semiconductor supply chain Status.

Entegris CEO and President Bertrand Loy said in an interview with Nikkei Asia that Entegris will invest US$500 million in Taiwan in the next three years, which is higher than the previous US$200 million plan. The company is building a manufacturing plant in the southern city of Kaohsiung in Taiwan to supply TSMC and other companies. Operations will begin at the end of next year, and mass production will begin in the middle of 2023.

Loy said that the facility will produce filtration and deposition materials for the production of 3nm and 2nm chips, which is the most advanced chip manufacturing technology in the industry. The smaller the nanometer, the more advanced the chip.

Due to national security concerns, the United States and other major economies are increasingly calling for more chip supply chains to be introduced into their countries.

“everyone [in the industry] Actually now realize that a shorter supply chain and closer to customers may be a better model [of operation],” Roy told Nikkei Asia. “We intend to have a shorter supply chain and more local manufacturing closer to our customer base in Taiwan, and our customer base in Taiwan. [South] South Korea, or Japan and the United States. “

Loy said that the company’s main production base is still in the United States, accounting for about 60%, but the industry veteran is seeking to create a more balanced manufacturing footprint.

“If you fast forward to 2024 or 2025, I think the output in the United States may be 50% and 50%, respectively, compared to the output in other places,” Roy said. “The reason for this is that we are also continuing to invest in the United States.” Entegris already has production bases in Japan and South Korea.

Major chip makers are in the most aggressive expansion ever to help ease the global chip supply crunch in a range of industries from automobiles to consumer electronics. Only the world’s top three chip makers-TSMC, Intel and Samsung-have allocated more than $350 billion in capital expenditures in the next few years. Counterpoint Research estimates that between now and 2025, cutting-edge production capacity-defined as any product below 10 nanometers-will more than double the current level.

Although some analysts and industry participants have expressed concerns about the potential oversupply after all these expansion plans are realized, Loy said his company is not worried about short-term market volatility.

“Growth is never linear,” he said. “I think the semiconductor industry will grow at twice the rate of GDP in the next 10 years, and it will reach US$1 trillion [market size by 2030]We need to be prepared for this, which means we need to increase capacity. Will things slow down a little for a year? perhaps. But we are not short-term management. We are managing for a long time. “

Entegris, headquartered in Massachusetts, is the world’s top high-end filter supplier, these filters are essential to ensure the purity of the chemicals and liquids used to make chips and displays. As semiconductor manufacturing becomes more and more complex, and the tolerance for impurities and defects becomes lower, this material becomes more and more important.

The company’s new factory in Taiwan will first provide services to its top customer TSMC, which is the world’s largest foundry chip manufacturer, and will subsequently support other chip manufacturers. Entegris supplies all chip leaders in the world, including Intel, Samsung, Kioxia, Micron and SK Hynix. Loy said the company will also spend US$11 million to expand its technology center in Taiwan.

The CEO also talked about the US initiatives to introduce incentives for the domestic semiconductor industry, including the $52 billion chip bill. Loy is also the chairman of the board of the global industry association SEMI. He said that chip manufacturing materials and equipment suppliers should also receive this support, and foreign companies investing in the United States should also be eligible.

“This is a very global industry that relies on a very broad global ecosystem. I think this opportunity should be given to everyone and should not be discriminatory,” Roy said. “Going back in time, we benefited from South Korea’s incentives when investing in South Korea… I understand that politically, this may be a difficult decision, but from an economic point of view, I think it is the right decision.”

At the same time, Taiwan is getting new investment from many chip material manufacturers. Formosa Sumco, a joint venture between Taiwan’s leading petrochemical group Formosa Plastics Group and Sumco, the world’s second largest wafer material manufacturer, is building a NT$28.26 billion (US$1 billion) plant in Yunlin, Taiwan. Will be put into production in 2024. Mitsubishi Chemical, Mitsui Chemicals and Hitachi Chemical are also expanding their manufacturing operations in Taiwan.

According to data from IC Insights, it is estimated that the capital expenditure of the semiconductor industry in 2021 will reach a record of more than 148 billion U.S. dollars, an increase of 30% year-on-year, nearly six times that during the global financial crisis in 2009. This number is expected to increase further in 2022.

A version of this article First published by Nikkei Asia on December 8, 2021. ©2021 Nikkei Inc. All rights reserved

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