China, Taiwan, and South Korea’s foundry price war continues to heat up. Rumors of price reductions are circulating in the foundry industry, Chinese foundries allegedly lowering their tape out prices, attracting Taiwanese IC design companies to switch their orders.

Companies including Samsung, GlobalFoundries, UMC, and PSMC have reportedly seen customers cancel orders in favor of these Chinese foundries.

According to reports from IJIWEI, China’s SMIC, Huahong Group, and Nexchip began lowering their foundry service prices to Taiwanese IC design companies last year to secure new orders. Many Taiwanese IC design companies have been enticed by these lower prices, prompting them to shift their orders to Chinese foundries. As a result, companies like Samsung, GlobalFoundries, UMC, and PSMC have witnessed customers canceling orders in favor of Chinese manufacturers.

Due to the mature manufacturing processes in China, unaffected by US export restrictions, the lowered wafer fabrication costs have become attractive to Taiwanese IC design companies seeking to enhance their cost competitiveness.

Reports also indicate that this competitive pressure has forced Taiwan’s foundries, UMC and PSMC, to follow suit by reducing their prices. UMC has lowered its 12-inch wafer foundry services by an average of 10-15%, while its 8-inch wafer services have seen an average price reduction of 20%. These price adjustments took effect in the fourth quarter of 2023.

Earlier reports from TechNews had already highlighted that, due to the sluggish semiconductor market conditions in 2023, both China and South Korea aggressively reduced prices to secure orders, with price reductions of up to 20-30% observed in 8-inch and 12-inch mature processes. Taiwanese foundries also made concessions in terms of pricing.

Taiwan’s leading foundry, TSMC, had already initiated pricing concessions in 2023, mainly related to mask costs rather than wafer fabrication. It was reported that these concessions primarily applied to the 7nm process and were dependent on order volumes.

Samsung Foundry, which had previously remained inactive, also adopted a price reduction strategy in the first quarter of this year, offering discounts ranging from 5-15% and indicating a willingness to negotiate.

Looking at the global semiconductor foundry landscape, data released by TrendForce in 2023 showed that Taiwan accounted for approximately 46% of the world’s wafer fabrication capacity, followed by China at 26%, South Korea at 12%, the United States at 6%, and Japan at 2%. However, due to active efforts by China, the United States, and other countries to increase their local capacity shares, by 2027, Taiwan and South Korea’s capacity shares are expected to converge to approximately 41% and 10%, respectively.

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• [News] Competing with TSMC? Samsung Foundry Follows Price Cuts, Offering Discounts Up to 15%

The growing importance of advanced processes in wafer foundries is evident, propelled by innovations like AI and high-performance computing. While 3nm chips have entered the consumer market, efforts are underway in wafer foundries to advance to 2nm chips. Recent reports suggest progress in 1nm chips, further fueling the competition among wafer foundries.

2nm Chips: Unveiling in 2025

Anticipated by 2025, the race for 2nm chips is in full swing, with major players like TSMC, Samsung, and Rapidus actively pursuing mass production. TSMC plans to implement GAAFET transistors in its 2nm process by 2025, offering a 15% speed boost and up to a 30% reduction in power consumption compared to N3E, all while increasing chip density by over 15%.

Samsung is on a similar trajectory, planning to unveil its 2nm process by the end of 2025. As report by media in October, Samsung Foundry, said on Semiconductor Expo 2023 in South Korea, has already initiated discussions with major clients, expecting decisions in upcoming future.

Rapidus aims for trial production of 2nm chips in 2025, scaling up to mass production by 2027. Reports in September indicated that ASML plans to establish a technical support hub in Hokkaido, Japan in 2024. Approximately 50 engineers will be dispatched to Rapidus’ ongoing construction site for the 2nm plant, assisting in the setup of EUV lithography equipment on the trial production line, and providing support for factory activation, maintenance, and inspections.

When will 1nm chip arrive?

Apart from 2nm, the industry’s attention turns to 1nm-level chips. According to industry plans, mass production of 1nm-level chips is expected between 2027 and 2030.

Nikkei recently reveals collaboration between Japanese chipmaker Rapidus, Tokyo University, and the French technological research organization Leti to develop foundational technology for 1nm IC design. Talent exchange and technical sharing are slated to begin in 2024, aiming to establish a supply system for indispensable 1nm chip products, crucial for enhancing auto driving and AI performance.

On the other hand, collaborations with IBM for 1nm products are also being considered. The computing performance of 1nm products, anticipated to become mainstream in the 2030s, is expected to surpass 2nm by 10-20%.

TSMC and Samsung are also eyeing 1nm chip development. TSMC’s initial plan to build a 1.4nm process wafer fab in Taiwan faced delays after abandoning the original site selection in October. Samsung aims to launch its 1.4nm process by the end of 2027, with improved performance and power consumption through an increased number of nanosheets per transistor, promising enhanced control over current flow and reduced power leakage.

(Image: TSMC)

According to a report by Taiwan’s TechNews, Samsung Electronics’ semiconductor foundry division, Samsung Foundry, has been operating at less than 50% utilization rate as of the second quarter due to weak demand for 8-inch wafer foundry services. Industry sources have revealed that Samsung Foundry has already halted operations on 30% of its equipment, but with further inventory reduction expected, there is a possibility of restarting these machines by the end of the year and resuming production in the first quarter of the following year.

Previously, South Korean media outlet The Elec reported that the IT industry’s demand is currently low, leading South Korean wafer foundries to reduce prices for 8-inch wafer services by 10%. As of the second quarter, both Samsung Foundry and other South Korean wafer foundry companies like Key Foundry and SK Hynix System IC, a subsidiary of SK Hynix engaged in foundry operations, have been operating at capacity utilization rates ranging from 40% to 50%.

8-inch wafer services primarily manufacture components such as power management ICs, panel driver ICs, and microcontrollers. Given the uncertain demand for consumer electronics products, Samsung Foundry has decided to halt operations on 30% of its equipment as a cost-saving measure. However, market expectations suggest that the overall manufacturing and semiconductor industries have undergone more than a year and a half of inventory adjustment, and there is hope for inventory replenishment by the end of the year in the supply chains of three major sectors: smartphones, PCs, and consumer electronics.

According to industry sources, Samsung Foundry plans to restart the halted 8-inch wafer equipment by the end of the year and aims to resume full production in the first quarter of the next year. However, the revival of consumer product demand has not yet shown clear signs, and whether the restart will proceed as expected remains to be observed.

(Photo credit: Samsung)