Taiwan’s chipmakers shine brightest in living memory

Hi everyone from Cheng Ting-Fang, Annie, in Taipei!

This week, I had the chance to meet top executives from two Taiwanese memory-chip makers, Winbond Electronics and Macronix International, at what could be the brightest moment in their companies’ histories amid an unprecedented global memory chip shortage. Business has rarely been better, with record earnings being reported and gross margins of more than 70 per cent for Macronix and Winbond in the July-September quarter.

While memory giants Samsung Electronics, SK Hynix, Micron, Kioxia, and China’s ChangXin Memory Technologies compete fiercely for market share and manufacturing scale in the high-end AI memory sector, Winbond and Macronix have carved out their own niches in customised products and specialised needs. But despite blockbuster results similar to their larger rivals, both companies’ share prices have nearly halved from their June peaks amid fears of oversupply and doubts about the AI boom’s sustainability.

Macronix founding chair Miin Wu said the company would offset uncertainty by focusing more on specialised memory chips for industrial, automotive, space and medical applications markets that require lengthy qualification processes and are seeing growing demand. The company also needed to scale back supplies to the gaming console market, with makers such as Nintendo struggling to absorb soaring memory chip prices. Yet even with this sharper focus, Macronix is finding it difficult to keep up with customer demand.

“Every day, customers are chasing us or visiting our company, but our capacity is fully booked, and we can’t expand it anytime soon,” said Wu, a pioneer of Taiwan’s semiconductor industry who founded Macronix in 1989. “Any memory-chip maker that did not shut down over so much market turmoil can enjoy and earn a lot of money now.”

Some equipment the company has ordered will not arrive until next year, prompting Wu to take the unusual step of personally joining several meetings with equipment suppliers to push for faster deliveries.

“The equipment vendors think I’m there to yell at them, but instead, I’m there to beg, beg, beg: ‘Please, could you shorten the lead times for the machines?’” Wu said.

For Winbond, demand for specialised Nor flash memory, a type of chip used to store code, has been particularly strong. “A single Nvidia Vera Rubin AI data centre rack needs some 600 of these chips, compared with just a handful in traditional servers,” Winbond president Chen Pei-Ming said.

The company also produces legacy DRam memory chips and has found that its price quotes are sometimes surprisingly low compared with those of competitors, reflecting how tight the market has become.

However, like Macronix, Winbond faces the major headache of securing production tools and building new facilities fast enough to meet surging demand. Chen said lead times for some equipment, including lithography and metrology tools, now exceed two years. Competing with much larger chipmakers such as TSMC for these machines, Winbond has had to place orders well in advance to ensure timely deliveries.

“Construction of our new plant in Kaohsiung will begin in December,” Winbond’s Chen said, referring to the southern Taiwanese city. “However, as it is an entirely new facility and cleanroom, we expect only very limited capacity to come online in 2029, with a meaningful production ramp-up not until 2030, so you see how much time is needed to boost capacity now!”

Butterfly effects

China’s export controls on tungsten, imposed in early 2025, are sending far-reaching but little-known impacts rippling through the AI chip supply chain. I reported exclusively this week that supplies of tiny microdrills essential for manufacturing printed circuit boards and chip substrates, two of the most sought-after components for building AI infrastructure, are being disrupted.

Needlelike microdrills are made mainly of tungsten carbide, a high-performance material supplied by leading players in Japan, Europe and the US. However, these suppliers are vulnerable in their exposure to China’s dominance of global tungsten production, which accounts for nearly 80 per cent of the world’s output.

The export controls have not only driven prices of tungsten carbide materials outside China up severalfold since last year, but have also fuelled the rise of Chinese microdrill makers such as Guangdong Dtech Technology, which reported record earnings and benefits from ready access to a cost-competitive domestic supply chain.

Nidec’s rise and fall

Japan’s Nidec, renowned for making motors for everything from wind turbines and electric vehicles to robots and machine tools, is embroiled in a corporate governance crisis. Nidec was once one of Japan’s most celebrated companies under outspoken founding chair and CEO Shigenobu Nagamori, who has stepped down amid accounting concerns. The motor maker has been rocked by financial irregularities since last year, raising the risk of a delisting from the Tokyo Stock Exchange.

The Nidec saga underscores the need for a broader overhaul of Japan’s corporate culture, where employees often find it difficult to challenge senior executives or speak up against their decisions, Nikkei Asia’s Tsubasa Suruga and Mitsuru Obe report. The crisis also exposes the risks of relying on a single dominant CEO and highlights the need for stronger independent board oversight, more diverse boards and more vocal shareholders across corporate Japan.

Despite governance turmoil, Nidec maintains strong tech advantages in hard disc drive motors, precision machine tools and AI data centre cooling systems.

Nvidia’s China clampdown

Chinese tech companies are finding it increasingly difficult to access the powerful Nvidia chips used to train AI.

The US semiconductor giant is ordering its data centre partners to reduce their exposure to Chinese customers, the FT’s Zijing Wu, Demetri Sevastopulo and Eleanor Olcott report.

It has told cloud computing clients that they must now sell at least 51 per cent of their services to non-Chinese companies, according to five people with knowledge of the matter. There had been no previous restrictions.

Many Chinese groups have relied on overseas leases for advanced AI tasks, including model training. Nvidia’s most advanced chips are not allowed to be sold in China due to US export controls.

Nvidia implemented the new requirement over the summer in a pre-emptive effort to reduce the kind of flak it routinely receives from US lawmakers and other critics of its approach to China, according to two people familiar with the matter.

Cloud providers are struggling to comply with the new requirements because it is “difficult to find enough non-Chinese clients outside the US”, said one Singapore-based group. “If strictly implemented, it will definitely hurt business.”

AI debt is ballooning

Off-balance-sheet debt among US tech giants Alphabet, Microsoft, Amazon, Meta and Oracle nearly doubled in just a few months to reach $3.2tn by the end of September, according to a Nikkei data analysis by Kohei Yamada.

These hidden debts include outstanding purchase commitments, which account for roughly 60 per cent of the total, and leases yet to begin, which make up the remaining 40 per cent. The $3.2tn already equals about 80 per cent of the companies’ combined assets and could soon exceed them if the current pace continues.

The staggering figures highlight the risks behind the massive AI infrastructure gamble. Investors are increasingly concerned about tech giants’ surging investment and concentrated credit risks. If returns fall short of expectations, confidence in these companies could falter, sending shockwaves through the tech sector and broader financial system.

Taiwan’s chipmakers shine brightest in living memory

Butterfly effects

Nidec’s rise and fall

Nvidia’s China clampdown

AI debt is ballooning

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