According to Nikkei Asia, when Power Semiconductor Manufacturing returns to China's Taiwan Stock Exchange on December 6, it will be an extraordinary comeback for a company that has been cancelled or even cancelled by its own supporters.

Power Semiconductor Manufacturing Co., Ltd. (formerly Powerchip) was once the largest memory chip manufacturer in Taiwan, but it was delisted in 2012 in response to a US$40 billion debt crisis. It was forced to close its most advanced chip factory and sell its equipment, and gave up its shares in a joint venture with Japan's Elpida Memory, which was its most important technology partner at the time.

These measures have bought time for Power Semiconductor Manufacturing Co., Ltd., and this is also a bold strategic shift—from manufacturing highly commoditized memory chips to more profitable semiconductor products—which has helped Power Semiconductor Manufacturing Co., Ltd. gradually recover. Then there is the real return.

The global chip shortage that occurred at the end of last year has triggered unprecedented demand for the types of peripheral chips currently in Power Semiconductor’s trading inventory. These components include image sensors, display driver chips, and power management components. Compared with modem chips, central processing units, or graphics processing units, these chips are cheaper and not advanced enough. But equipment manufacturers have learned that they are equally important.

Power Semiconductor Manufacturing is just one of several smaller, not-so-glamorous chip suppliers that have found themselves in the center of attention due to global supply constraints.

GLOBALFOUNDRIES was listed on the Nasdaq at the end of October, and its stock price has risen by more than 50%, and its market capitalization is more than 35 billion US dollars, which is equivalent to Twitter and HP, although the company only announced on November 30 for the three months ending in September. Profit for the first quarter of the month.

TowerSemi, an Israeli foundry that specializes in various sensors and power-related chips, has increased its market value by 35% this year, and the net income of VIS (World Advanced), which specializes in manufacturing power management and display driver chips, which is closely related to TSMC, will be in 2021. In the first three quarters, it rose by more than 80% year-on-year.

As recently as 2018, GF was still in a financial crisis. It decided to terminate its most advanced chip development, abandoned its new chip factory in China, and sold several loss-making factories that year and the following year. GlobalFoundries is now positioning itself as a "safe choice" to meet chip manufacturing needs, while major economies are scrambling to bring semiconductor production back to their home countries.

For Pioneer Semiconductor, the dramatic change is reflected in another aspect. It was originally considered to be a foundry for TSMC’s main mature process chips, but as investors recognized its key position in the supply chain, its stock price has gone from the recent low point when the new crown epidemic swept the world in March 2020. It has risen by more than 153%. Customers also re-evaluated the company.

The strong earnings of these companies reflect the shift in roles in the chip supply chain.

The shortage has extended the supply chain to materials used to manufacture chips, such as substrates, wafer materials, and chip manufacturing tools.

Several factors outside the COVID-19 pandemic are driving increasing demand for chips, including the technological decoupling between the United States and China.

Peter Hanbury, a partner at consulting firm Bain, told Nikkei Asia that geopolitical tensions have forced many companies to hold more inventory than they currently need, especially for non-locally produced components. He said: "Geopolitical tensions may lead to increased demand because the company orders more parts to build additional buffer stocks to avoid geopolitical risks."

Structural issues are also at work. Technologies such as 5G, artificial intelligence, and electric vehicles require more chips and other components than past technologies. At the same time, smaller chip and chip material manufacturers do not always have the ability to expand capacity quickly enough.

The recent increase in revenue and market value can allow these companies to increase their production capacity and have more investment in R&D and recruitment, forming a virtuous circle.

According to data from IC Insights, global chip makers are expected to spend more than US$148 billion this year, almost six times the US$26.1 billion in 2009, when the industry was in the throes of the financial crisis.

The next question is whether this will drive further growth or will lead to an oversupply of chips.

After several months of purchasing as many chips as possible, supply chain managers began to re-examine their inventory levels.

Donnie Teng, a technology analyst at Nomura Research, said that the worst-case scenario is that consumer demand will slow down as the supply contraction eases. It said, “This may become a chain reaction of corrections, first affecting the downstream (product assemblers), and then quickly spreading to the upstream (chip manufacturing) supply chain.”

An executive of a top European chip manufacturer told Nikkei Asia: “Because there are so many participants investing in capacity expansion, supply and demand may reach equilibrium in the second half of next year, and we may start to see an oversupply in the next year. Worry."

However, others are more optimistic.

"I may not be able to comment on the overall market demand from an all-round perspective," said Leuh Fang, Chairman and CEO of VIS. "But even if there is a correction in the short or medium term, it will not affect the long-term structural demand for 5G, artificial intelligence, electric vehicles and all applications that may support the next wave of growth."