Decoupling global supply chains will be “very complex, expensive and time-consuming”, one of the world’s leading chipmakers has warned, as rising US-China tensions threaten to worsen a sharp decline in the market.
Lorenzo Flores, vice-chair of Kioxia, said in an interview with the Financial Times that the Japanese company is analyzing the impact of the latest US export controls. The challenge, he added, is the uncertainty of how Beijing will respond to Washington’s moves to curb its efforts to produce advanced semiconductors.
The controls in Washington specifically targeted Kioxia’s Chinese rival Yangtze Memory Technologies. The company has had to ask American employees in core tech positions to leave the company as it rushes to comply with export controls.
“We’ve always looked at YMTC as a company to watch or understand, and they could be an emerging competitor,” Flores said, noting that the Chinese company was “leaping” the technology after lagging behind larger global rivals.
Analysts suggest Nand flash memory makers that directly compete with YMTC, such as Kioxia and Micron in the US, could benefit from the US restrictions. However, China is also expected to accelerate the development of domestic capabilities, which could threaten Kioxia in the long term.
Kioxia, a spin-off of Toshiba’s chip unit, mainly manufactures its flash memory chips in Japan, but Flores said decoupling supply chains from China would be a costly endeavor. for the semiconductor industry and it will not “happen in six months or a year” .
“Even [decoupling] an imperative or not, I don’t know. The smart thing to do is find ways to de-risk your own supply chain and increase your competitiveness at the same time. The logical alternative is [the] friendshoring approach,” he said, referring to the term for building supply chains with like-minded countries.
The comments came as Kioxia said it would spend ¥1tn ($6.8bn) on a new No 7 chip fabrication plant at its main Nand production facility in Yokkaichi, western Japan, despite a sharp decline in demand for electronic devices, forcing the company to cut wafer production by 30 percent.
“Market conditions are dire and we don’t know how deep and how long they will last,” Kioxia chief executive Nobuo Hayasaki said at the opening of the No 7 plant on Wednesday. “But we don’t think demand will continue to fall so we have to prepare for the future.”
South Korea’s SK Hynix also warned of an “unprecedented” slowdown in demand for chips, but Flores said he still sees the slowdown as part of a cycle. He added that the drop in demand was driven by concerns about the global economic outlook, built-up inventories caused by supply chain disruptions caused by Covid and uncertainty about export controls. of the US against China.
Difficult market conditions also forced Kioxia to delay its share listing plans.
According to people close to the discussions, the company is in talks for a merger with its longtime manufacturing partner Western Digital as Washington and Tokyo back the creation of a US-Japanese chip champion because of the economic security concerns.
“The IPO is not the end. It is a step,” said Flores, who recognized the need for scale to compete in the investment-heavy semiconductor industry.
