Semi-Conductors

[hauritz]

When Australia talks about sovereign capability one thing often left out of the discussion is semi-conductor manufacturing. Without this nothing else really happens.

Here is a list of the world’s top semi-conductor producers.

Taiwan.
South Korea.
Japan.
United States.
China.

See the problem with that list?

If war were to break out between the US and China Australia’s supply of semi-conductors would dry up immediately.

To have a truly sovereign capability we need to be able to make our own semi-conductors. At the moment that capability is extremely limited. There are one or two very small manufacturers located in Australia.

One problem is that Australia could probably not justify an industry from a purely economic standpoint. It is probably always going to be cheaper to purchase semi-conductors from an established overseas manufacturer. That is all well and good if these supply lines stay open.

It would take a concerted effort and probably a lot of Australian tax dollars to establish a sizable semi-conductor industry in Australia. There are already efforts underway but like most of these things the progress is agonisingly slow.

In the shorter term overseas chip manufacturers should be encouraged to set up operations in Australia. That means tax incentives and other financial inducements would need to be offered. In the longer term you would need to establish training and research facilities. Without this a local industry could never become competitive in a global market and would need to be forever propped up by government funding.

https://www.aspi.org.au/report/australias-semiconductor-national-moonshot#:~:text=The%20Silanna%20Group%20was%20founded,semiconductor%20design%20and%20manufacturing%20company

.

For those not familiar with the semi-conductor manufacturing process.

 

[Todjaeger]

When Australia talks about sovereign capability one thing often left out of the discussion is semi-conductor manufacturing. Without this nothing else really happens.

Here is a list of the world’s top semi-conductor producers.

Taiwan.
South Korea.
Japan.
United States.
China.

See the problem with that list?

If war were to break out between the US and China Australia’s supply of semi-conductors would dry up immediately.

To have a truly sovereign capability we need to be able to make our own semi-conductors. At the moment that capability is extremely limited. There are one or two very small manufacturers located in Australia.

One problem is that Australia could probably not justify an industry from a purely economic standpoint. It is probably always going to be cheaper to purchase semi-conductors from an established overseas manufacturer. That is all well and good if these supply lines stay open.

It would take a concerted effort and probably a lot of Australian tax dollars to establish a sizable semi-conductor industry in Australia. There are already efforts underway but like most of these things the progress is agonisingly slow.

In the shorter term overseas chip manufacturers should be encouraged to set up operations in Australia. That means tax incentives and other financial inducements would need to be offered. In the longer term you would need to establish training and research facilities. Without this a local industry could never become competitive in a global market and would need to be forever propped up by government funding.

https://www.aspi.org.au/report/australias-semiconductor-national-moonshot#:~:text=The%20Silanna%20Group%20was%20founded,semiconductor%20design%20and%20manufacturing%20company

.

For those not familiar with the semi-conductor manufacturing process.

It is actually somewhat more complicated than that TBH. Not only would there need to be a domestic manufacturing capability, but there would also need to be a secure and uninterrupted rawmats supply as well. Given the role of China in global rare earths processing (~90% in 2021) and rare earth magnet production (~87% in 2021) and the need for such materials in semiconductor production...

Australia does engage in rare earths mining, but I suspect refining and processing facilities would either need to be established or significantly expanded. An Australian company, Lynas Rare Earths, does operate the Mount Weld mine & concentration plant, but has a refining and processing facility in Malaysia. This makes me suspect that despite having the 5th highest rare earths reserves, Australia does not do much domestically with the refining and processing.

This is why I have some significant reservations about plans/claims to establish "sovereign" manufacturing capabilities for some of the high tech kit and munitions in Australia. Spending (limited) coin to build manufacturing facilities which might only have small or boutique production runs domestically and which are still very much dependent on a global supply chain does not a sovereign capability make. Now if there is going to be a significant and ongoing domestic demand, and/or export, then the situation becomes somewhat different. However, such capabilities would still not truly be "sovereign" unless and until all critical components and materials can be sourced domestically.

As a side note, as of March of this year, Taiwan is still producing ~60% of the global supply of semiconductors as well as over 90% of the most advanced semiconductors. This adds another potential wrinkle in the event of a conflict between the US and China, and how it could impact global supply chains.

 

[hauritz]

It is actually somewhat more complicated than that TBH. Not only would there need to be a domestic manufacturing capability, but there would also need to be a secure and uninterrupted rawmats supply as well. Given the role of China in global rare earths processing (~90% in 2021) and rare earth magnet production (~87% in 2021) and the need for such materials in semiconductor production...

Australia does engage in rare earths mining, but I suspect refining and processing facilities would either need to be established or significantly expanded. An Australian company, Lynas Rare Earths, does operate the Mount Weld mine & concentration plant, but has a refining and processing facility in Malaysia. This makes me suspect that despite having the 5th highest rare earths reserves, Australia does not do much domestically with the refining and processing.

This is why I have some significant reservations about plans/claims to establish "sovereign" manufacturing capabilities for some of the high tech kit and munitions in Australia. Spending (limited) coin to build manufacturing facilities which might only have small or boutique production runs domestically and which are still very much dependent on a global supply chain does not a sovereign capability make. Now if there is going to be a significant and ongoing domestic demand, and/or export, then the situation becomes somewhat different. However, such capabilities would still not truly be "sovereign" unless and until all critical components and materials can be sourced domestically.

As a side note, as of March of this year, Taiwan is still producing ~60% of the global supply of semiconductors as well as over 90% of the most advanced semiconductors. This adds another potential wrinkle in the event of a conflict between the US and China, and how it could impact global supply chains.

The problem goes beyond semi-conductors as well. Just about every electronic component, engine parts, even basics like petroleum depend on foreign production and supply lines. True sovereign production may just be a pipe dream. It isn't just military either. If Australia couldn't access everyday technology such as communication equipment, computers, motor vehicles or heavy machinery we would struggle to keep the economy going. We are almost totally dependant on a global production chain. Of course we aren't Robinson Crusoe in that regard.

To some extent China has already won that war since they are pretty much in control of the manufacture of these products and the ones they don't own, fall under their sphere of influence.