CHIPS Act Again, PSMC Captured Orders rerouted from HuaHong Foundry Business

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Over the past few years, the US Department of Commerce has imposed export restrictions and the CHIPS Act, causing political tensions to rise between China and the US. To mitigate geopolitical risks, customers are beginning to diversify the proportion of Chinese and non-Chinese suppliers, with Taiwanese foundries expected to benefit.

Industry sources claim that one of the world’s top three CMOS image sensor manufacturers, which previously produced CIS chips for laptops at Hua Hong, has reportedly shifted its orders to PSMC at the request of its customers. Another major power discrete manufacturer is also reportedly considering discussions with PSMC for related cooperation due to geopolitical concerns.

The subsidy regulations of the CHIPS Act prohibit subsidy recipients from transferring funds to related foreign entities, expanding semiconductor manufacturing capacity in “related countries” within 10 years, or engaging in any form of joint research or technology licensing with foreign entities involved in sensitive technology or products.

China’s advanced process capacity will only account for 1% in 2025

TrendForce predicts that the CHIPS Act may further reduce the willingness of multinational semiconductor companies to invest in China. Japan and the Netherlands have also joined the sanctions, which may hinder the expansion plans of both Chinese and multinational foundries in China. Chinese foundries are more active in expanding mature process capacity, with a projected growth of 27% from 2022~2025, but the advanced process has only 1% in 2025. However, the US is expected to have the highest growth rate in advanced processes (7nm and below), reaching 12% by 2025.

China’s memory production capacity will decline annually

SK hynix is the only one of the top three DRAM manufacturers with a production facility in China’s Wuxi. Due to factors such as oversupply and geopolitics, Wuxi’s DRAM production has decreased from 48% to 44%. The company’s new plant is expected to be located in Korea. Meanwhile, Samsung and Micron have no DRAM production in China, and their expansion plans will focus on Korea and the United States respectively. According to TrendForce, as DRAM production in Korea continues to rise, China’s global share of DRAM production capacity will gradually decline from 14% to 12% between 2023 and 2025.

Samsung and SK Hynix are reportedly unlikely to expand their legacy-process production lines for NAND flash memory as they approach manufacturing of 200-layer and higher products, making sub-128-layer processes uncompetitive. Instead, they are planning to establish new production facilities in South Korea or other regions. This move could restrict China’s NAND flash production capacity expansion and process upgrades, causing its global market share to drop from an estimated 31% to 18% between 2023 and 2025.

(Image credit: SMIC)