Digitalization made in Asia
14 FEB 2021
Asia is not only the largest semiconductor market in the world. Along with the United States, the Asian microelectronics industry also ranks among the leaders in terms of growth and innovation.
With our solutions for the semiconductor industry, we at Merck KGaA, Darmstadt, Germany play an important role in this dynamic growth market. It is of central importance for our Electronics business sector.
Semiconductors are a key technology
Today, nothing works without microchips, whether it's smartphones, cars, medical technology or industrial machinery. At the beginning of the year, the automotive industry showed us just how dependent the economy is on semiconductor technology. With car sales having surged again primarily in China following the Covid-19 crisis, semiconductor manufacturers have not been able to meet the demand for engine control, cockpits or the increasingly smarter warning and assistance systems in the latest models. This resulted in production stoppages at several German carmakers.
A look at the figures impressively demonstrates the importance of semiconductor technology. Last year, the total volume of the global semiconductor market increased to US$ 439 billion despite the Covid-19 crisis. And there is no end in sight to the growth. In view of drivers such as AI, IoT and cloud, global growth is forecast to accelerate to 8.4% in 2021.
The “Big Four” from Asia dominate
The Asia-Pacific region is the world's largest market for semiconductors. In 2019, 60% of global sales were generated there, according to consulting firm Deloitte. China alone accounts for around 30%. Looking at the entire value chain of semiconductor production, China, Japan, South Korea and Taiwan are among the six largest global producers. 77% of the microchips manufactured worldwide come from here. There’s a reason why they are referred to as the “Big Four” of the semiconductor industry. South Korea alone is home to some 20,000 companies working on semiconductors. Among them is industry leader Samsung, with whom our Electronics business also cooperates on the development of innovative semiconductor technologies.
There are several reasons for Asia's strong position in the semiconductor sector. On the one hand, Asia has always had a large consumer electronics industry, which is one of the most important customers for semiconductors. Numerous large tech companies such as Sony, Huawei, Nintendo, Panasonic, and Toshiba, to name just a few, are based there. In addition, the state provides billions in aid to support the industry. For example, back in 2014, the Chinese government launched a $150 billion government stimulus program for the domestic semiconductor industry. In its current five-year plan (2021-2025), the People's Republic is also focusing on promoting the semiconductor industry.
Another reason for the continent's strong position in the semiconductor industry can also be found in the curricula of local schools and universities, which place a strong focus on STEM subjects. In the PISA study, school students from China, Japan and South Korea regularly rank at the top in both mathematics and science. The fact that China has the world’s highest number of science and engineering graduates each year isn’t merely due to the sheer size of the country.
In order to help the semiconductor industry not only in the short term, but also to give it a long-term development boost, the EU and Germany have launched extensive support programs, which I expressly welcome.
In December 2020, Germany and 18 other EU member states agreed to allocate around €145 billion by 2023 in order to promote Europe as a location for microelectronics, up to €50 billion thereof in Germany. The German Federal Ministry of Education and Research is also providing an additional €400 million for research in the field of microelectronics in Germany by 2024. In my view, greater support for the European semiconductor industry is urgently needed in order to secure Europe's competitiveness and technological sovereignty in the long term and to prevent supply gaps such as those in the automotive industry.
Merck KGaA, Darmstadt, Germany inside
At Merck KGaA, Darmstadt, Germany, our Electronics business sector is making an important contribution to the further development of the industry with its expertise in materials for semiconductor production. Accounting for a 77% share of our sales in the first nine months of 2020, the Asia-Pacific region is of course especially important to us in Electronics. In China alone, we supply around 100 chip manufacturers with more than 150 different products for all stages of semiconductor production.
In addition, we are investing in Asia in various ways to support the further growth of the electronics industry and to benefit at the same time from the region's innovative strength. In China, for example, we operate two Innovation Hubs in Shanghai and Guangzhou to develop new semiconductor technologies together with start-ups. We also recently invested €18 million in a new electronics technology center near Shanghai, which will expand our capacity for analysis and application testing of semiconductor materials.
Asia is therefore an important region for Merck KGaA, Darmstadt, Germany. However, we are also strongly positioned in the semiconductor industry in the United States and Europe. Through our products and solutions, we make important contributions to the further technological developments. After all, semiconductors are the foundation of the digital transformation. More and more industries depend on microchips – not only in Asia, but everywhere.