TSMC on alert and Singapore on the rise

Hello, this is Kenji. I am writing this week’s newsletter from Bangkok, where I am attending an annual meeting with colleagues from across the region.

I was posted here as an editor about a decade ago, and it’s always a pleasure to come back, but the positioning of Thailand — and the Association of Southeast Asian Nations as a whole — has shifted significantly, especially since tensions between the US and China started to heat up around 2018.

Getting caught between great power rivals like this is something smaller nations seek to avoid, and members of Asean are no exception. But even when countries do get drawn into these power plays, it is not always in a negative way, such as Vietnam attracting substantial investments and emerging as a major manufacturing hub of various tech products during this period.

As we feature in this edition of the newsletter, Singapore has enjoyed a sharp rise up the global ranking of start-up ecosystems, as investment in so-called deep tech surged against a backdrop of Sino-American tensions. Cambodia, meanwhile, is becoming a battleground between China and Japan, a key US ally, in terms of telecom infrastructure building, which could turn into a positive for local users as increased competition brings better services at lower prices.

Of course, anyone can find themselves in the crossfire of the US-China rivalry, as our Taipei colleagues remind us with their scoop this week about Taiwan Semiconductor Manufacturing Co (TSMC) halting shipments to certain customers to avoid inadvertently violating US export controls on China.

No matter who is elected president in the US next week — Kamala Harris or Donald Trump — other countries will continue having to navigate the Washington-Beijing rivalry with all its various consequences.

Raising the alarm

TSMC, the largest semiconductor manufacturer in the world, has stopped shipping to at least two chip developers over suspicions they were trying to circumvent US export controls on China’s Huawei Technologies, Nikkei Asia’s tech correspondents Cheng Ting-Fang and Lauly Li reported in this exclusive story from Taipei.

The two developers placed orders for chips made with 7-nanometre process technology, which TSMC has been using for mass production since 2018. Washington has been restricting chipmaking equipment containing American technology from being used to make chips of 14nm or better for China without an export license. TSMC’s most advanced commercial products are the 3-nm processor chips used for Apple’s iPhone 16 series.

Enforcing Washington’s export controls is far from straightforward, as chip developers could use layers of non-Chinese shell companies to camouflage their orders, according to sources.

TSMC reiterated to Nikkei Asia that it has not supplied Huawei since mid-September 2020 in compliance with the US export restrictions.

Samsung’s struggles

Samsung Electronics is struggling to hold on to its crown as the world’s top-selling smartphone maker, write the Financial Times’ Song Jung-a and Christian Davies.

The South Korean tech giant was the only one of the top five global smartphone makers to experience falling shipments in the third quarter of this year, losing market share to US rival Apple and Chinese contenders offering slick new foldable devices.

Research group TechInsights expects Apple’s new generative artificial intelligence features to help power the US company past Samsung next year.

Samsung once pioneered foldable devices but ceded the top spot earlier this year to Chinese rival Huawei, which had a 27.5 per cent share of the foldables market in the second quarter, compared with Samsung’s 16.4 per cent, according to IDC.

The company’s smartphone struggles come at a critical point. It has been hit by a series of failures at its semiconductor division, which accounts for 60 per cent of Samsung’s operating profit.

Deep pockets for deep tech

Singapore’s global presence has surged
in recent years

“Deep tech” endeavours in Singapore are getting a boost amid the ever-intensifying Sino-American tech tensions. Nikkei Asia’s Tsubasa Suruga reports that investment in this field — which is based on scientific research with potentially large social impacts like chips, robotics and medicine — was up 31 per cent by volume last year, even as overall start-up investment dropped 20 per cent.

Based on data by DealStreetAsia and Enterprise Singapore, deep tech accounted for 25 per cent of the total deal value, up from 17 per cent in 2022.

The boost in deep tech investment helped push the city-state’s global start-up ecosystem ranking to seventh this year, up from 18th just two years ago, and leapfrogging all other Asian hubs, including Beijing, Seoul and Tokyo, according to US-based research company Startup Genome.

Investors — who are mostly local or American, but also from Taiwan, Japan, France and Malaysia — say deep tech tends to remain under the radar due to the complex technology and expertise involved, but it is gaining importance amid the US-China trade war and supply chain shifts.

New connections

A Japanese tech consortium, with help from government subsidies, is challenging the Chinese dominance in the 5G market. The initial battleground is Cambodia, an ostensibly neutral country that has shown itself to be a staunch ally to Beijing, according to an exclusive report by Nikkei’s Kiu Sugano, Shiho Miyajima and Kyoko Hariya.

Orex Sai, a joint venture between NTT DoCoMo and NEC, will build a 4G network at a large commercial complex in the Southeast Asian country by March, which will serve as a platform for transitioning to 5G in the future.

Cambodia’s telecom network, like many around the world, is reliant on equipment from Huawei Technologies. The Chinese company and its compatriot ZTE together control more than 40 per cent of the global market for 5G base stations, British research company Omdia says. Japanese players as a whole hold about 3 per cent.

For this Cambodia project, Tokyo is applying a new aid policy that applies government assistance proactively rather than waiting for a request from a recipient country. The development co-operation charter revised last year, which stresses Japanese aid money “does not involve debt traps or economic coercion, and that does not undermine the independence and sustainability of developing countries”, will also be applied to the project.