Qualcomm executives reportedly approached the Taiwanese Semiconductor Manufacturing Company (TSMC), United Microelectronics Corporation (UMC), and Vanguard International Semiconductor (VIS) about handling some of its production needs.
The firm is concerned about its overseas manufacturing capacity amid mounting trade tensions between China and the United States. Because of its forward-thinking, technologically oriented culture, Taiwan houses the type of foundries the chipmaker needs.
Qualcomm’s Potential New Partnerships
In particular, Qualcomm is looking for a company to fabricate its power management integrated circuits (ICs) using a 0.18-micron process. The corporation also made inquiries regarding the production of its 14nm and 28nm handset application processors and system-on-a-chips (SoCs).
Currently, Qualcomm outsources the production of its electronic components to foundries based in the Chinese mainland. However, the U.S. Department of Commerce has recently tightened its regulations on the export of American semiconductor technology. Consequently, some Sino chip designers and manufacturers have lost access to crucial software and equipment.
That policy change prompted the California chipmaker to consider diversifying its supply chain to prevent potential disruption.
Why Qualcomm is Considering Partnerships with Taiwanese Foundries
With more than $6 billion in cash on hand as of the fiscal third quarter, Qualcomm could afford to contract the services of any foundry it wants. For that reason, its decision to investigate partnerships with some of Taiwan’s leading chipmakers is notable, but not surprising.
Given the status of relations between Beijing and Washington, Qualcomm is wise to consider moving its production capacity. The company exited FQ3 with a 19 percent revenue decline year-over-year, but with a solid rebound plan in place. However, a series of new tariffs or the loss of a primary chip vendor would disrupt those plans.
So, Qualcomm is looking for a partner with affordable manufacturing costs, trade neutrality, and technological sophistication. By partnering with a Taiwanese semiconductor supplier, the company can get all of those things.
TSMC’s innovative manufacturing processes have made it the world’s most successful contract component vendor. Similarly, UMC operates 12 fabs to sustain a monthly production cadence of 750,000 8-inch wafers per month. VIS has developed a wide range of processing technologies for power management, mixed-signal, analog, logic, and memory ICs.
The Taiwanese government recently launched a $334 million subsidy initiative to bring even more manufacturers to the island.
Because of the logistics hurdles involved, Qualcomm would likely prefer to keep its existing supply chain in place. But if geopolitical realities prompt a change, Taiwan is an excellent place for the firm to recenter its production capacity.