Taiwan's chipmakers shine brightest in living memory

This week, I had the chance to meet top executives from two Taiwanese memory chipmakers, 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% 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 customized products and specialized 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 chairman Miin Wu said the company would offset uncertainty by focusing more on specialized 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 chipmaker 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 specialized NOR flash memory, a type of chip used to store code, has been particularly strong. "A single Nvidia Vera Rubin AI data center 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!"

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.

Needle-like microdrills are made mainly of tungsten carbide, a high-performance material supplied by leading players in Japan, Europe and the U.S. However, these suppliers are vulnerable in their exposure to China's dominance of global tungsten production, which accounts for nearly 80% of the world's output.