Following the disappointing 2025 forecast from Dutch chip making equipment giant ASML, Tokyo Electron also highlighted a potential slowdown in demand from China as well as the risk of stricter U.S. export restrictions.

According to a report from Nikkei, the Japanese semiconductor equipment maker anticipates China’s share of its sales will fall to the 30% range in the second half, down from 41% in the second quarter (ended September 30th), as the investment surge by Chinese chipmakers begins to ease.

Japanese Semiconductor Equipment Providers Warn of Slowing Demand from China

“We are accounting for all possible risks, including the potential for heightened U.S. export controls targeting China,” stated Tokyo Electron’s Senior Vice President Hiroshi Kawamoto, according to Nikkei.

Despite the looming threats, Tokyo Electron has posted strong financial results in the quarter ended September 30^th. The company’s operating income for the July-September quarter surged 54% year-over-year to 148 billion yen, driven by investments in AI and traditional chipmaking in China.

It is worth noting that during the quarter, Tokyo Electron generated 41.3% of its net sales from China, down from 49.9% in the previous quarter, while sales in North America and Japan saw growth, according to its press release.

In addition, other chip equipment makers in Japan seem to agree with Tokyo Electron on the matter. “Demand is slowing even for older-generation technologies, and we are seeing signs that investments are being delayed,” said Fumiyuki Kanai, president of Japanese chipmaking equipment maker Kokusai Electric, according to Nikkei.

Toshio Hiroe, president of Screen Holdings, also noted that with Chinese customers entering the ramp-up phase for their equipment, investment is expected to slow for a while, according to Nikkei.

For Tokyo Electron and Screen Holdings, China reportedly accounted for around 45% of their chipmaking equipment sales during the April-September period.

Citing remarks from SEMI, a previous Nikkei report noted that in 2025, the semiconductor equipment market in China is anticipated to drop below USD 40 billion and back to the level of 2023, after peaking in 2024.

FY2025 Forecast Upgraded Again Thanks to Strong AI Demand

On the other hand, Tokyo Electron has raised its full-year profit forecast again. The company announced earlier that it now anticipates a 44.5% increase in group net profit, reaching 526 billion yen (USD 3.4 billion) for the fiscal year ending March 2025, an upgrade of 48 billion yen from its previous estimate.

In terms of FY2025 sales, Tokyo Electron now projects a 31% rise, reaching 2.4 trillion yen—100 billion yen higher than the prior estimate. The company also announced a larger dividend increase and a stock buyback plan of up to 70 billion yen.

According to the company, it expects a double-digit growth for FY2025, with the demand from DRAM further expanding. NAND investment, on the other hand, would resume as inventory adjustment progress. It also projects the momentum from advanced logic/foundry would offset a lull in investment for mature nodes.

Citing Tokyo Electron President Toshiki Kawai, the Nikkei report notes that despite the ease of investment by Chinese chipmakers, the company sees the investment in AI servers to remain strong, and that there is also solid investment in AI-powered personal computers and smartphones.

Read more

• [News] ASML Reports Disappointing Q3 Bookings while Lowering 2025 Forecast, Raising Concerns in Chip Sector
• [News] China’s Chipmaking Equipment Spending Likely to Drop below USD 40 Billion in 2025 amid U.S. Tensions

(Photo credit: Tokyo Electron)

With Trump’s inauguration in January, “Made in America” is expected to dominate, driving an urgent push for semiconductor packaging and equipment companies to relocate to North America. Coupled with TSMC’s Arizona plant set to start mass production early next year, the Commercial Times reports that industry insiders foresee a surge in investments across the North American semiconductor supply chain.

TSMC’s Arizona fab is in the final stages of preparing for 4nm production, with a projected monthly capacity of 20,000 to 30,000 wafers. The company previously signed an MOU with Amkor Technology, a partnership widely seen as supporting advanced and back-end packaging efforts.

On November 8, however, leading packaging and testing company ASE also announced plans to set up a facility in Mexico, aiming to offer advanced packaging services for TSMC’s U.S.-produced chips.

Industry sources cited by Commercial Times speculate that ASE’s Mexico plant, once complete, could compete with Amkor for TSMC’s packaging and testing orders from the Arizona fab. Following the packaging process, the chips could be delivered directly to U.S.-based OEM/ODM partners, including Foxconn, Wistron, and Inventec, for final product assembly, completing the “Made in America” manufacturing chain.

The report also highlights TSMC’s stronghold on advanced packaging technologies such as 3D Fabric and SoIC, required for 2nm production, as well as SoW (system-on-wafer) technology. To meet customer demands, TSMC may need to establish in-house advanced packaging capabilities in the U.S. for even more advanced processes.

TSMC’s advanced packaging line is already highly automated, with optimized production flows reduced from over 300 steps to just over 200, and its gross margin is approaching the company average. The Commercial Times quotes industry experts who suggest that setting up advanced packaging capacity in the U.S. should be straightforward for TSMC, given its extensive experience in wafer fab construction, making it a matter of time.

(Photo credit: TSMC)

Currently, the global semiconductor industry is entering a new period of transformation. With the rapid development of AI, big data, cloud computing, and other technologies, the demand for high-performance computing chips, optical communication chips, and advanced packaging has surged, and recent reports suggest that prices for these types of chips are increasing.

Advanced Process and Advanced Packaging Products May See Price Increases

According to a recent report by Morgan Stanley, TSMC is considering raising prices for its 3nm process and CoWoS advanced packaging technology in response to soaring market demand. TSMC plans to implement these price increases in 2025, with the cost of its 3nm process potentially rising by up to 5%.

Industry analysts point out that on the demand side, major AI chip manufacturers such as NVIDIA and AMD heavily rely on TSMC’s 3nm process, and the explosive growth in AI technology has driven continuous demand for these chips, contributing to the price increase.

On the supply side, the high research and production costs associated with advanced process technology—including equipment investment, material costs, and R&D personnel—add significant pressure to the supply chain. Multiple factors have led to a tight supply of such chips, further driving up prices.

Additionally, TSMC’s 5nm and 4nm process quotes have increased more than previously anticipated by 4%, with some price hikes reaching as much as 10%.

Reports indicate that TSMC also plans to raise prices for its CoWoS advanced packaging technology, with potential increases between 10% and 20%. High demand for CoWoS from major companies like NVIDIA, AMD, Microsoft, Amazon, and Google has resulted in a shortage of CoWoS packaging capacity, which has driven up prices.

According to TrendForce research, NVIDIA is the primary driver of demand for CoWoS, and with the upcoming launch of its Blackwell series, demand for CoWoS is expected to increase by more than 10 percentage points annually by 2025.

Optical Communication Chip Sector Begins Price Increases

Demand for high-speed, high-bandwidth, and low-latency optical communication is rising, particularly in data centers, enterprise networks, and telecommunications, driving demand in the optical communication chip market. Recently, media reports revealed that Marvell, a major optical communication chip manufacturer, has issued a price increase notice, with its entire product line set to see price hikes starting January 1, 2025. According to TrendForce, Marvell ranked sixth in the global IC design market in 2023.

Industry forecasts predict that, driven by ongoing advances in optical communication technology and expanding applications, the global optical communication chip market will grow rapidly in the coming years.

The development and application of technologies such as silicon photonics, optoelectronic hybrid integration, and high-performance photonic chip materials are expected to bring new growth points and opportunities to the optical communication chip market.

(Photo credit: Marvell)

Vanguard International Semiconductor Corporation (VIS) today announced that its Fab 3 in Taoyuan experienced a power supply issue at 12:10 PM, leading to a power outage.

VIS stated that as a precaution, the cleanroom was promptly evacuated, and all personnel were confirmed to be safe. Power was restored at 12:34 PM, and the company has taken steps to fully resume operations, with all facility systems now back to normal.

The company is currently conducting standard checks on the equipment and evaluating any potential impact on products. VIS has immediately informed the affected customers of the situation, and the impact on operations is still under assessment.

(Photo credit: VIS)

Following previous controversies of supplying 7nm chips to Huawei through proxies, TSMC is rumored to be requested by the U.S. Department of Commerce to suspend shipments of all its 7nm or more advanced chips to the AI/GPU clients in China, starting from today (November 11), according to the reports by the Financial Times and Reuters.

Though the information has yet to be confirmed, neither does TSMC make a clear statement to its clients, market sources seems to increase the credibility of the matter. A report by TechNews, therefore, compiles the development and the possible impact of the incident, providing further insights into the current situation. Please read below for the report’s analysis on four key aspects:

Why Now?

According to Reuters, the Department of Commerce sent an “informed” letter to TSMC to make the request, enabling the U.S. to bypass lengthy rule-making procedures and swiftly impose new licensing requirements on specific companies. The action comes shortly after TSMC told the Department that one of its chips had been found in a Huawei AI processor.

The move, in some way, reportedly indicates growing concerns from both Republican and Democratic lawmakers about the effectiveness of export controls on China as well as the U.S. authority’s enforcement of these regulations.

Earlier in July, the Biden administration reportedly drafted new rules targeting chipmaking equipment exports and aimed to add around 120 Chinese companies to the restricted entity list. However, despite initial plans for an August release, the rules have not yet been issued, according to Reuters.

Current Scenario of TSMC and Its Clients in China

However, things aren’t as bad as they seem, as sources tend to indicate that TSMC is not truly halting supply of 7nm and below advanced processes to China, but is instead required to conduct individual project reviews for each customer wishing to place orders. Production will only proceed after obtaining the necessary permits, according to TechNews.

According to another report by TechNowvoice, the main focus of the current restrictions would be on AI chips, which means products such as GPUs will be closely monitored. On the other hand, mobile and automotive chips may be excluded from the restrictions.

The TechNowvoice report further suggests that within the AI chip category, those responsible for training will be the key target of the restrictions, while chips used for AI inference may have a chance of passing the review.

Criteria for Export Restrictions

According to TechNowvoice, market speculations indicate that there are four criteria for evaluation, including transistor count (exceeding 300 billion), chip size (exceeding 300mm²), HBM incorporation, and whether the chip leverages CoWoS packaging.

Given these standards, it will be increasingly difficult for AI chips based on current mainstream architectures to pass the review and obtain approval from the U.S. Department of Commerce, the report indicates.

The report further suggests that the move will likely impact the four major cloud computing companies in China, including Huawei, Baidu, Tencent, and Alibaba. While Huawei has already been included in the blacklist, the other three companies, which have been collaborating with TSMC on AI chip development, may also require further reviews in the future.

What Would the Impact Be?

TSMC’s decision would be a major blow to China’s AI ambition, as AI and GPU companies in China will no longer have access to TSMC’s advanced process, which could lead to higher costs and longer time-to-market, and significantly impact their product performance and market competitiveness.

A supply chain reshuffle is likely to follow, as Chinese chip design companies may need to seek alternative foundries, according to TechNews.

According to the latest research report by TrendForce, if the policy takes effect, it could impact TSMC’s revenue performance and utilization rates of its 7nm and below advanced process capacity, while also affecting the future development of China’s AI industry.

For the first three quarters of 2024, TSMC’s revenue distribution shows that advanced nodes accounted for 67% of its total revenue—a key revenue source. However, TrendForce highlights that the major clients for TSMC’s 7/6n, 5/4nm, and 3nm processes are primarily from the U.S., Europe, and Taiwan. Consequently, even if regulatory actions impact business some Chinese clients may be lost, TrendForce expects other customers to offset this loss, limiting the potential effect on advanced process utilization rates.

TSMC’s revenue from China has remained steady at 11% to 13% for the full year of 2023 and the first three quarters of 2024. If regulatory scrutiny of TSMC’s advanced processes intensifies, or if certain Chinese clients are added to the Entity List—particularly affecting Chinese AI-related IC design companies, IP providers, third-party design services, or other businesses that depend on TSMC’s advanced processes for project initiation, tape-outs, and mass production—TSMC could face a revenue impact of approximately 5% to 8%.

However, strong global demand for AI chips and TSMC’s planned price increases for advanced process clients are expected to help mitigate some of this impact, according to TrendForce.

Read more

• [News] TSMC Reportedly to Halt 7nm and Below Chip Shipments to China’s AI Firms Next Week
• [News] TSMC Reportedly Halts Shipments to Chinese Firm Sophgo After Chip Found in Huawei Processor

(Photo credit: TSMC)