With the semiconductor market facing uncertainties and limited signs of industry recovery in the first half of 2024, foundries in China, Taiwan, and South Korea are all implementing price reductions to secure orders and solidify customer relationships.

According to TechNews citing from supply chain sources, Samsung Foundry, which had not taken action previously, is expected to follow suit with price cuts in the first quarter to keep pace with competitors.

Reportedly, industry sources suggest that Samsung Foundry is adopting a price reduction strategy in the first quarter of 2024, offering discounts ranging from 5% to 15% and expressing a willingness to negotiate.

Samsung Foundry’s actions can be interpreted as a goodwill gesture towards its customers. The company has been in constant competition with TSMC, especially in processes below 5nm, and actively engaging in negotiations with customers, seeking collaboration opportunities with Qualcomm, NVIDIA, AMD and others.

Considering the subdued semiconductor market in 2023, fabs in both China and South Korea have implemented price cuts to secure orders. The price reductions for mature processes in 8-inch and 12-inch wafer reached 20-30%, while Taiwanese fabs have also made concessions in pricing.

TSMC, the leading foundry, had already been reported to offer price concessions in 2023, with the major focus on mask costs rather than foundry services. It was mentioned at that time that TSMC’s price concessions primarily applied to the 7nm process, where utilization rates were lower, and the extent of concessions depended on the volume of orders from customers.

In terms of the global foundry landscape, according to data published by TrendForce, Taiwan holds approximately 46% of global foundry capacity, followed by China (26%), South Korea (12%), the US (6%), and Japan (2%).

However, due to government incentives and subsidies promoting local production in countries like China and the US, the semiconductor production capacities of Taiwan and South Korea are projected to decrease to 41% and 10%, respectively, by 2027.

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(Photo credit: Samsung)

In a bid to revitalize its semiconductor industry, Japan has enticed the sector with subsidies worth trillions of yen, aiming to attract both domestic and international semiconductor companies.

Leading semiconductor foundry Taiwan Semiconductor Manufacturing Co. (TSMC) has invested USD 8.6 billion to construct a factory in Kumamoto Plant, and it is considering building a second plant nearby. According to reports, TSMC is also contemplating a third plant within Kumamoto Prefecture to produce cutting-edge 3nm chips.

Apart from TSMC, major players like Samsung and Powerchip Semiconductor Manufacturing Corporation (PSMC) are actively investing in Japan. The initiatives of these giants have not only influenced semiconductor manufacturing equipment suppliers in Japan but also spurred them to accelerate technological research and expand production capacity.

As a result of these efforts, the investment of Japan’s six major semiconductor equipment suppliers has surged by 70% over the past five years.

TSMC Kumamoto New Plant Aims for Monthly Production of 55,000 12-Inch Wafers

Reportedly, the new chip plant in Kumamoto, Japan, operated by Japan Advanced Semiconductor Manufacturing (JASM), a joint venture between TSMC, Sony, and Denso, is poised for commencing production in the fourth quarter of 2024, while the plant’s production capacity will target a full capacity of 55,000 12-inch wafers per month.

Simultaneously, JASM aims to enhance the local contribution of semiconductor supply chain and ecosystem in Japan from the current 25% to 60% by 2030.

Meanwhile, according to sources cited by Bloomberg, TSMC has informed its supply chain partners that it is considering building a third factory in Kumamoto Plant in southern Japan, codenamed TSMC Fab-23 Phase 3.

TrendForce’s analysis mentioned that Japan’s expertise in semiconductor materials and machinery makes it an attractive location for TSMC’s expansion.

Additionally, Japan’s critical role in semiconductors and raw materials, coupled with collaboration with Sony, provides TSMC with significant advantages. TSMC’s investment in Japan is expected to facilitate access to advanced materials and expertise in CIS technology.

Furthermore, industry speculation suggests that in the future, Japan will not only continue subsidizing semiconductor manufacturing but also enhance collaboration between the semiconductor industry and academia to attract more talent to join the semiconductor industry.

PSMC Japanese Plant Aims for Monthly Production of 40,000 12-Inch Wafers

In late October, PSMC, in collaboration with SBI Holdings, Inc., the Miyagi Prefecture of Japan, and JSMC Corporation, signed a memorandum of understanding. The memorandum confirmed that JSMC’s first semiconductor wafer plant is expected to be located in the Second Northern Sendai Central Industrial Park in Ohira Village, Kurokawa District, Miyagi Prefecture (Second Northern Sendai Central Industrial Park).

The plant will produce 28nm, 40nm, and 55nm chips for automotive and industrial applications, with a planned monthly production of 40,000 12-inch wafers. Previous reports indicated that PSMC plans to construct multiple plants, with the first phase potentially starting construction as early as 2024, involving an investment of around JPY 400 billion (USD 2.6 billion).

The Japanese Ministry of Economy, Trade, and Industry (METI) is expected to provide up to JPY 140 billion in subsidies for the project, targeting operational commencement by 2026. The timeline and plans for the second phase are yet to be determined, with a total investment of approximately JPY 800 billion.

Regarding subsidies, PSMC stated that once Japan announces the subsidy amount for this semiconductor wafer plant investment, all relevant parties will reconfirm the effectiveness of this memorandum of understanding and proceed with the planned construction.

Is Foundry Revenue Expected to Continue its Upward Trend?

In the semiconductor industry chain, the significance of the foundry industry is self-evident. In recent years, the foundry sector has been affected by headwinds in end markets such as consumer electronics. However, as entering the latter half of the year, there are gradually emerging positive signals in the semiconductor industry.

According to TrendForce’s report on December 6th, looking ahead to 4Q23, TrendForce’s anticipation of year-end festive demand is expected to sustain the inflow of urgent orders for smartphones and laptops, particularly for smartphone components.

Although the end-user market is yet to fully recover, pre-sales season stockpiling for Chinese Android smartphones appears to be slightly better than expected, with demand for mid-to-low range 5G and 4G phone APs and continued interest in new iPhone models. This scenario suggests a continued upward trend for the top ten global foundries in Q4, potentially exceeding the growth rate seen in Q3.

According to the Semiconductor Equipment and Materials International (SEMI) report presented at SEMICON Japan 2023 on December 12, the global semiconductor equipment market is anticipated to experience a 6.1% year-on-year decline to USD 100.9 billion in sales for new equipment in 2023, marking the first contraction in four years.

However, the forecast for 2024 shows a reversal, with the semiconductor equipment market expected to grow by 4%, reaching USD 105.3 billion in sales. In 2025, a substantial increase of 18% is projected, surpassing the historical high of USD 107.4 billion in 2022.

SEMI CEO Ajit Manocha has noted that the semiconductor market exhibits cyclical patterns, with a short-term downturn expected in 2023. However, he anticipates a turning point towards recovery in 2024.

The year 2025 is poised for robust recovery, driven by increased production capacity, the construction of new wafer fabs, and growing demand for advanced technologies and solutions.

Major Companies Indirectly Boost Chip Equipment Investment in Japan, Surging 70% in 5 Years

According to a report by Nikkei, the proactive investments by semiconductor giants such as TSMC and Micron in Japan have accelerated technological innovations and production capacity expansion among Japanese chip equipment manufacturers.

The combined investment (including R&D and equipment investment) of Japan’s six major chip equipment firms, namely TEL, DISCO, Advantest, Lasertec, Tokyo Seimitsu, and Screen Holdings, for the fiscal year 2023 (April 2023 – March 2024) is approximately JPY 547 billion, marking a significant 70% increase compared to the 2018 fiscal year.

On December 13, Tokyo Electron Limited (TEL) President Tony Kawai stated at SEMICON Japan 2023 that the semiconductor market is projected to exceed USD 1 trillion by 2030, highlighting the immense potential within the industry.

On December 14, Hisashi Kanazashi, the Duputy Director at METI of Japan, noted that top overseas semiconductor firms plan to collaborate with Japan’s strength in “equipment” and expand their research and development presence in Japan.

Read more

• Top 10 Foundries Experience 7.9% QoQ Growth in 3Q23, with a Continued Upward Trend Predicted for Q4, Says TrendForce
• [News] TSMC’s Kumamoto Plant Production Capacity Set for Significant Leap, Gradually Increasing to 55,000 Wafers per Month

(Photo credit: TSMC)

On November 7th, Intel held its “Intel Innovation Taipei 2023 Technology Forum”, with CEO Pat Gelsinger highlighting the healthy state of PC inventory. He also expressed optimism about the injection of several more years of innovative applications and evolution in PCs through AI. 

Intel Aims to Ship over One Hundred Million AI PC within the Next Two Years

Gelsinger expressed that the PC inventory has reached a healthy level, and he is optimistic about the future growth of AI PCs, which are equipped with AI processors or possess AI computing capabilities. He anticipates that AI will be a crucial turning point for the PC industry.

Additionally, Gelsinger stated that the server industry may have seemed uneventful in recent years, but with the accelerated development of AI, it has become more exciting. AI is becoming ubiquitous, transitioning from the training phase to the deployment phase, and various platforms will revolve around AI.

Gelsinger expressed his strong confidence in Intel’s position in the AI PC market, expecting to ship over one hundred million units within two years.

Intel’s Ambitious Expansion in Semiconductor Foundry Landscape

Intel is actively promoting its IDM 2.0 strategy, with expectations from the industry that the company, beyond its brand business, has advanced packaging capabilities to support semiconductor foundry operations. In the future, Intel is poised to compete with rivals such as TSMC and Samsung.

Gelsinger noted that some have viewed Intel’s plan of achieving five technical nodes in four years as “an ambitious endeavor.” However, he emphasized that Intel remains committed to its original goal of advancing five process nodes within four years.

The company’s foundry business has received positive responses from numerous potential customers, and while it may take three to four years for significant expansion, the advanced packaging aspect may only require two to three quarters to get on track.

This transformation marks a significant shift for the company, setting new standards in the industry. Intel is making steady progress in its four-year plan to advance five nodes, and Moore’s Law will continue to extend. The construction of Intel’s new factories is also ongoing.

According to Intel’s roadmap, Intel 7 and Intel 4 are already completed, Intel 3 is set for mass production in the latter half of this year, and Intel 20A and 18A are expected to enter mass production in the first and second halves of next year, respectively.

Regarding this roadmap, according to NIKKEI Asia’s report, Gelsinger also mentioned at the forum that for the 18A process, they currently have many test wafers in production. Additionally, the development of 18A has been completed, and it is progressing rapidly towards the production phase.

Read more

• [News] Intense Competition in Advancing Processes at the 2nm by Samsung, Intel, and TSMC

(Photo credit: Intel Newsroom)

TrendForce reports that from 2023 to 2027, the global ratio of mature (>28nm) to advanced (<16nm) processes is projected to hover around 7:3. Propelled by policies and incentives promoting local production and domestic IC development, China’s mature process capacity is anticipated to grow from 29% this year to 33% by 2027. Leading the charge are giants like SMIC, HuaHong Group, and Nexchip, while Taiwan’s share is estimated to consolidate from 49% down to 42%.

Expansion predominantly targets specialty processes such as Driver ICs, CIS/ISPs, and Power Discretes, with second and third-tier Taiwanese manufacturers at the forefront

Within the Driver IC sector, the spotlight is on high voltage (HV) specialty processes. As companies aggressively pursue the 40/28nm HV process, UMC currently dominates, trailed by GlobalFoundries. Yet, SMIC’s 28HV and Nexchip’s 40HV are gearing up for mass production in 4Q23 and 1H24, respectively—narrowing their technological gap with other foundries. Notably, competitors with similar process capabilities and capacities, such as PSMC, and those without twelve-inch factories like Vanguard and DBHitek, are poised to face challenges head-on in the short term. This trend may also have long-term implications for UMC and GlobalFoundries.

In the realm of CIS/ISP, 3D CIS structure comprises a logic layer ISP and CIS pixel layer. The primary demarcation for mainstream processes is around 45/40nm range for the logic layer ISP, which continues to progress toward more advanced nodes. Meanwhile, the CIS pixel layer, along with FSI/BSI CIS, predominantly uses 65/55nm and above processes. Currently, TSMC, UMC, and Samsung are the frontrunners in this technology. Yet, Chinese players like SMIC and Nexchip are hot on their heels, swiftly closing the gap. Their ascent is further fueled by Chinese smartphone titans OPPO, Vivo, and Xiaomi. Additionally, domestic shifts prompted by governmental policies are positioning Chinese CIS companies like OmniVision, Galaxycore, and SmartSens to rally behind local production.

Power Discretes mainly encompass products like MOSFETs and IGBTs. Vanguard and HHGrace have been deeply involved in Power Discrete processes for some time, boasting a more comprehensive process platform and vehicle certification than many competitors. However, a wave of Chinese contenders, backed by national policies favoring EVs and solar initiatives, are ready to stake their claim, intensifying global competition in this sector. This includes mainstream foundries like HHGrace, SMIC, Nexchip, and CanSemi. Additionally, smaller Chinese IDMs and foundries, such as GTA and CRMicro, are also entering the competitive landscape. If China massively ramps up its production capacity, it will intensify global competition in Power Discrete manufacturing. The impact will not only spark price wars among local Chinese businesses but could also erode the order books and clientele of Taiwanese companies.

In a nutshell, while China actively courts both global and domestic IC designers to bolster its local manufacturing presence, the ensuing massive expansion could flood the global market with mature processes, potentially igniting a price war. TrendForce notes that as China’s mature process capacities continue to emerge, the localization trends for Driver IC, CIS/ISP, and Power Discretes will become more pronounced. Second and third-tier foundries with similar process platforms and capacities might face risks of client attrition and pricing pressures. Taiwan’s industry leaders, renowned for their specialty processes—UMC, PSMC, Vanguard to name a few—will find themselves in the eye of the storm. The battle ahead will hinge on technological prowess and efficient production yields.

TrendForce research indicates that in 1H23, the utilization rate of 8-inch production capacity primarily benefited from sporadic inventory restocking orders for Driver ICs in the second quarter. Additionally, wafer foundries initiated pricing strategies to encourage clients into early orders, offering solid backup. However, in 2H23, persistent macroeconomic and inventory challenges led to the evaporation of an anticipated demand surge.

Meanwhile, stockpiles in automotive and industrial control segments grew after meeting initial shortages, tempering demand. Under fierce price competition from PMIC leader Texas Instruments (TI), inventory reductions for Fabless and other IDMs were drastically inhibited. With IDMs ushering in output from their new plants and pulling back outsourced orders, this compounded reductions to wafer foundries. This dynamic saw 8-inch production capacity utilization dipping to 50–60% in the second half of the year. Both Tier 1 and Tier 2/3 8-inch wafer foundries saw a more lackluster capacity utilization performance compared to the first half of the year.

Heading into 2024, with the prevailing economic turbulence, the overall semiconductor foundry capacity utilization rate will face challenges in recovery. The 8-inch capacity utilization for 1Q24 is poised to mirror—or potentially dip below—4Q23 figures, revealing a glaring lack of recovery indicators.

However, starting from 2Q24, TrendForce posits that while clarity on end sales remains murky due to overarching economic risks, inventory levels are expected to wane, returning to a healthier equilibrium. The ensuing periodic restocking and the added momentum from orders shifted to Taiwanese foundries (owing to decoupling from China), should keep the 8-inch utilization rate from diving further. The average annual utilization rate for 8-inch wafers in 2024 is pegged around 60–70%. A swift return to yesteryear’s peak capacity seems difficult for now.

Taiwanese and Korean semiconductor foundries face the brunt of order curtailments

A closer look reveals Chinese foundries, such as SMIC and HuaHong Group (primarily HHGrace for 8-inch), exhibiting marginally superior 8-inch utilization rates than their Taiwanese and Korean peers. The proactive pricing approaches of Chinese foundries and China’s push for domestic IC substitution and production are key drivers. However, despite price reduction across foundries in 2H23, a predominantly conservative market outlook from clients, combined with the absence of urgent orders, meant these reductions rendered limited assistance to the 8-inch wafer utilization rate in the latter half of the year.

Panning to 2024, SMIC and HHGrace are forecast to outpace their Taiwanese and Korean counterparts in an 8-inch utilization rate resurgence. HHGrance could even see a stellar rebound, reaching 80–90%. On the Taiwanese front, TSMC grapples with PMIC order pullbacks, predicting an expected drop in 8-inch utilization to below 60% from 4Q23 to 1Q24. UMC and PSMC, in the same span, are gearing up to maintain levels above 50%.

Furthermore, even traditionally resilient Japanese and European IDMs commenced their inventory recalibration in 3Q23, potentially further stalling the recovery timeline for the 8-inch capacity utilization rate. TrendForce insights suggest that, with mounting inventory pressures, Infineon is curtailing orders to external foundries such as UMC and Vanguard. This strategy will likely suppress Vanguard’s 8-inch utilization rate into 1Q24, casting a gloomier shadow than earlier projections.

Korean heavyweight, Samsung, has prioritized its 8-inch production for large-sized Driver ICs, CIS, and smartphone PMICs. However, the persistent softness in consumer demand has prompted their clientele toward a more guarded-order strategy. Furthermore, Chinese CIS patrons, aligning with local manufacturing inclinations, are transitioning toward native foundries. Consequently, Samsung’s 8-inch utilization rate has languished in 2H23, with expectations set at approximately 50% throughout 2024.