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Taiwan & Israel's joint future within the semiconductor industry

Taiwan's superiority in the semiconductor industry is a known commodity, but the pairing with Israel's innovative arena has open new and intriguing possibilities

Written by Rani Shifron, Healthier Globe CEO, is a representative of the Taiwanese company i2i and manages the IP² innovation programs in Israel

The COVID-19 pandemic has accelerated many digital processes, leading to a growth spike within the global semiconductor industry. The impact of this phenomenon is evident through both reports of a global chip shortage resulting from an increase in demand, as well as through the revival of the industry as a whole. In Israel, we have increasingly been hearing in recent months about companies announcing the establishment of research & development (R&D) centers for the development and production of semiconductors, as well as the expansion of existing centers. Such announcements have been made by Intel, Microsoft, Nvidia, Amazon, Facebook and Google.

This trend apparent in Israel is very much a reflection of a global phenomenon. The US is currently leading huge investments within the semiconductor industry in cooperation with TSMC, a Taiwanese company which has pledged to establish a plant in Arizona. The Biden administration has also announced a $50 billion investment in the field, in addition to the US manufacturing giant GlobalFoundries announcing its intention to invest $4 billion in semiconductor manufacturing plants in Singapore.

The US is currently responsible for the production of about 12% of semiconductors, while TSMC is responsible for approximately 60%, (within the smart-industry alone, the company is responsible for the production of about 90% of semiconductors). The Taiwanese company, which was established approximately 43 years ago, has become the global leader in semiconductor production, being named world industry leader for several years. The Taiwanese government, which recognized the market potential as early as the 1970's, continues to invest billions of dollars in advancing the industry.

How did Taiwan become the semiconductor industry leader?

The growth and development of the Taiwanese semiconductor industry began following a government decision made in the 1970's to transition the economy from agricultural to industrial. The two technology giants of today - TSMC and UMC, which is the third largest chip company in the world, are both spin-offs of government entities established at the time, and founded on knowledge developed at the Taiwanese Industrial Technology Research Institute (ITRI). These two companies are the brains behind manufacturing in Taiwan, as well as the leading companies in the global semiconductor industry.

Alongside its impressive global standing within the semiconductor industry, since the 1990's, Taiwan has also become an industry leader and one of the largest manufacturers within the ICT industry. Taiwan's standing within the ICT field has since waned, having once been the "Asian Tiger". However, their influence in the semiconductor industry has only gained momentum- an effort which requires significant capital investment for the establishment of manufacturing plants. In order to achieve this, the government has committed a budget in the range of tens of billions.

Where does Israel stand within the global semiconductor industry?

The growing global semiconductor industry has greatly impacted the local industry in Israel, which has gained significant momentum as more international companies choose to establish or expand their R&D centers here. Israel's entry into the semiconductor industry also began in the 1970's, although not in any way connected to Taiwan's similar growth at the time. Intel's first Israeli development center was established in the 1970's, following which, the then Investment Authority and the Israeli government decided to invest in the semiconductor industry. Through this decision, additional centers were established- encouraging an increasing number of international companies to mark their presence within the Israeli ecosystem. In the 1980's, Intel opened its first chip manufacturing center outside of the US, choosing Jerusalem as their first international manufacturing site. Simultaneous to Israel's growing pull as a global center for technology companies, the local industry began to develop as well, with many startups being created, and many sold off.

Today, the Israeli semiconductor industry consists of development centers of both Israeli companies and multinational corporations, both manufacturing plants and factories that manufacture equipment for the semiconductor industry. Countless startups currently operate in the field; according to a 2020 study, Israel is ranked second in the world (after the United States) in the number of semiconductor startup companies.

The Taiwanese-Israeli Connection

In both Israel and Taiwan, a leading technological ecosystem developed at approximately the same time, with one clear difference - Israel is identified worldwide as a "startup nation", whereas Taiwan is identified as a "scale-up nation". While Taiwan has placed particular focus on the manufacturing aspect of semiconductors, Israel has focused on its relative strength and advantage: R&D. By combining the technological capabilities between these two ecosystems via joint cooperation, each country is able to wholesomely complement the others' needs and capabilities, creating significant opportunity for both parties. For example, this past January, Nova announced the expansion of its operations in Taiwan and the establishment of offices in Hsinchu, the "chip capital" of Taiwan. Another example is Valens, which announced in June its intention to launch a SPAC on the New York Stock Exchange, one of the leading strategic investors in the deal is Taiwanese MediaTek. These are merely two examples of impactful joint activities. The collaborative history between these two countries traces back nearly three decades, as Israel and Taiwan have had official trade relations since 1993.

According to the Israel Ministry of Economy and Industry in Taiwan, trade relations between Israel and Taiwan maintain a relatively constant volume of $1.5 billion, with a trade balance slightly in Taiwan's favor at a rate of about 55% - 45%. 61% of export activity as well as most import activity to Israel falls within the semiconductor industry. Taiwan's developed production chain provides significant opportunities for Israeli companies as reflected in Israeli exports to the country: expensive and sophisticated metrology machines used to control the final quality of chips, various sensors used in advanced manufacturing stages, as well as exporting various services such as advanced chip design. In addition, Israel exports advanced water solution services to Taiwan, as the semiconductor industry is very heavily reliant on water consumption and Taiwan is currently in the midst of a prolonged drought.

Over the last two years, Taiwan Startup Terrace supported by Small and Medium Administration, Ministry of Economy has been working to encourage technological innovation via expanding ties and joint activities between Israel and Taiwan. A number of innovative programs have been launched in order to achieve increased tech cooperation between the two countries, alongside activities taking place in cooperation with the commercial attachés of the Israeli Ministry of Economy & Industry in Taiwan.

Above - Representatives of the companies selected to participate in a joint program and representatives of the program's partners in Israel. Below - Representatives and Program Partners in Taiwan. credit: Nati Levi

Collaboration between the two semiconductor giants is strategic, especially in light of current and future challenges. For example, the automotive industry is currently facing a drastic shortage of semiconductors. Today, a new vehicle fresh off the production line will contain approximately fifty chips, as opposed to the individual chips that were required for automobiles from previous decades. This shortage will only worsen as the vehicles of the future become increasingly more innovative, sophisticated and autonomous. It is safe to assume that Taiwanese companies will lead the future of this industry by supplying semiconductors, among other crucial components. Now the question remains as to how to ensure that Israeli companies will also secure their place within the future supply chain of this radically innovative and vital industry.

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