According to a report by Bloomberg, Yoshihiro Seki, Secretary-General of the ruling Liberal Democratic Party and a member of the Japanese parliament, has announced that the government is planning to allocate an additional ¥900 billion for the construction of TSMC’s Fab 2 in Kumamoto, Japan. Furthermore, an extra ¥590 billion in subsidies will be provided to support the construction of a wafer fab by the Japanese semiconductor startup Rapidus.

Seki emphasized that subsidies usually cover about one-third of the total investment. With measures like training Japanese engineers and collaborative R&D with local companies, this subsidy could increase to potentially cover up to half of the investment. He also noted that the specific amount remains subject to change as the additional budget has not been finalized yet.

The Japanese government initiated the “Strategy for Semiconductors and the Digital Industry” in 2021 to address economic risks and prepare for the wave of digitalization. At that time, they already provided ¥476 billion in subsidies for TSMC’s Kumamoto 1st Fab. The current subsidy marks an expansion of these efforts.

The local government Kumamoto is eagerly anticipating TSMC’s presence. Ikuo Kabashima, the Governor of Kumamoto Prefecture, recently proposed “New Airport Concept Next Stage” that envisions using the airport as a hub for semiconductor imports and exports over the next decade. This plan aims to stimulate the clustering of semiconductor-related industries and contribute to regional development centered around Kumamoto.

Moreover, the Japanese government has pledged to provide ¥330 billion in funding to enable Rapidus to construct a 2nm wafer fab in Hokkaido. These substantial subsidies underscore the Japanese government’s commitment to these semiconductor projects.

In response to the Japanese government’s additional subsidies, Tetsuro Higashi, Chairman of Rapidus, stated in an interview with Jiji Press on the 24th that apart from the new factory being built in Chitose, Hokkaido, “We also plan to construct second and third factories, and they will also be situated in Chitose, Hokkaido.” Rapidus’s 2nm chip R&D/production facility, Chitose Fab IIM-1, located in the Chitose Meimeimei World industrial park in Chitose, Hokkaido, commenced construction in September. The trial production line is expected to start in April 2025, with mass production slated to begin in 2027.

The semiconductor foundry, United Microelectronics Corporation (UMC), held an online briefing on October 25th to unveil its 3Q 2023 operational report. UMC achieved consolidated revenue of NT$57.07 billion, marking a 1.4% growth compared to the previous quarter’s NT$56.3 billion in 3Q23. However, it’s essential to note that this quarter’s revenue decreased by 24.3% in comparison to 3Q 2022.

In 3Q, a 35.9% gross margin yielded a net profit of NT$15.97 billion and an EPS of NT$1.29. The first three quarters of 2023 saw revenue at NT$167.575 billion, marking a 20.5% decline from 2022. The gross margin for this period remained at 35.8%, resulting in a net profit of NT$47.795 billion and an EPS of NT$3.87.

UMC’s Co-president, Jason Wang, highlighted that the company’s performance in the 3Q was boosted by the growing demand in the computer and communication sectors. This was further enhanced by ongoing improvements in product offerings and favorable exchange rates. Notably, despite a 2.3% decrease in overall wafer shipments, the revenue and gross margin remained robust compared to the previous quarter.

Delving into the terminal product market, products like LCD controllers, Wi-Fi, encoders and decoders, and touch IC controllers stimulated demand in the computer application sector. Additionally, the demand for RF front-end ICs and network chips contributed to the shipment volume in the communication sector.

Looking ahead to the 4Q, Wang said that the computer and communication sectors are gradually recovering in terms of short-term demand. In contrast, the automotive market remains challenging, and customers are adopting a cautious approach in managing inventory levels.

UMC foresees that the expansion of capacity at Fab 12A P6 in Nanjing in 2024 will provide significant support, further boosting revenue contributions for 22/28-nanometer technologies.

UMC’s estimate for the 4Q indicates that wafer shipments are projected to decline by 5%, with the average selling price remaining stable. Capacity utilization is expected to decrease from 67% in the previous quarter to a range of 61-63%, which will consequently impact the gross margin. It is estimated to decrease from 35.9% in the 3Q to a range of 31-33%.

Regarding capital expenditure, Q3 saw approximately $570 million spent, a 30.49% decrease from the previous quarter and a 25.39% decrease from 3Q 2022. Cumulative capital expenditure for the first three quarters reached around $2.4 billion, showing a 52.69% increase compared to 2022. The total 2023 capital expenditure remains at $3 billion, with 90% allocated to 12-inch capacity and 10% to 8-inch capacity.

(Image: UMC)

SK hynix has introduced LPDDR5T (Low Power Double Data Rate 5 Turbo), a mobile DRAM with a remarkable 9.6Gbps speed. What sets this apart is its compatibility with Qualcomm’s new Snapdragon 8 Gen 3 Mobile Platform.

LPDDR5T features a 16GB-capacity version, delivering data processing speeds of 77GB per second while maintaining low power consumption. Its efficiency and speed are achieved through the incorporation of HKMG (High-K Metal Gate) technology, which reduces power usage and increases processing speed.

“Generative AI applications running on our new Snapdragon 8 Gen 3 enables exciting new use cases by executing LLMs and LVMs on device with minimal latency and at the lowest power,” said Ziad Asghar, Senior Vice President of Product Management at Qualcomm Technologies, Inc. “Our collaboration with SK hynix pairs the fastest mobile memory with our latest Snapdragon mobile platform and delivers amazing on-device, ultra-personalized AI experiences such as AI virtual assistants for smartphone users.”

“We are thrilled that we have met our customers’ needs for the ultra-high performance mobile DRAM with the provision of the LPDDR5T,” said Sungsoo Ryu, Head of DRAM Product Planning at SK hynix.

This collaboration between SK hynix and Qualcomm signals a new era for smartphones, aims to provide on-device, ultra-personalized AI experiences. As smartphones continue to evolve with enhanced DRAM for mobile, the partnership is set to strengthen and drive innovation in this space, positioning the devices as key vehicles for AI applications in the coming years.

(Image: SK hynix)

Nvidia has announced that the White House’s embargo on exporting advanced artificial intelligence (AI) chips to China will take effect earlier than anticipated, with no expected significant impact on the company’s short-term earnings.

On October 24th, Nvidia issued an announcement through the U.S. Securities and Exchange Commission (SEC), stating that the U.S. government had notified that the temporary final rule of October 18, titled “Implementation of Additional Export Controls: Certain Advanced Computing Items; Supercomputer and Semiconductor End Use; Updates and Corrections,” would be immediately enforced. This rule is applicable to products related to data centers with a “total processing performance” of 4800 or higher. Nvidia’s affected products include A100, A800, H100, H800, and L40S.

Nvidia clarified that the originally scheduled implementation of the authorization provisions would have occurred 30 days after the regulations were issued on October 17. Given the strong global demand for Nvidia products, the early enforcement of the U.S. government’s authorization provisions is not expected to significantly affect its financial reports in the near future.

According to Reuters, Advanced Micro Devices (AMD), which is also impacted by the White House’s export ban, did not respond to media inquiries, and the U.S. Department of Commerce declined to comment.

Bernstein analyst Stacy Rasgon had previously noted that AMD’s current AI chip “MI250” on the market may also face constraints due to the latest restrictions, and the forthcoming “MI300” could encounter challenges.

Intel, which began selling the “Gaudi 2” chip in China in July 2023, stated that the company is “reviewing the regulations and assessing the potential impacts.” Intel had previously developed a specialized version of Gaudi 2 to comply with the advanced chip export ban imposed by the Washington authorities in 2022.
(Image: Nvidia)

As reported by Taiwanese media, there’s a gradual uptick in TSMC’s capacity utilization lately, accompanied by a noticeable surge in orders from TSMC’s clients. Some segments of the market are showing signs of rekindled demand, hinting at a possible upswing in the semiconductor industry. Nevertheless, certain semiconductor manufacturing firms remain cautious in their industry outlook.

TSMC’s Capacity Utilization Rate on the Rise

Media’s report indicates that TSMC’s capacity utilization rate has gradually recovered. The 7/6nm utilization, which had dropped to 40% at one point, is now around 60% and could potentially reach 70% by the end of the year. Similarly, the 5/4nm utilization is at 75-80%, and the 3nm capacity, which increases seasonally, is approximately 80%.

Concurrently, TSMC is experiencing a significant uptick in orders from their clients, including tech giants like Apple, MediaTek, NVIDIA, AMD, Intel, Broadcom, Marvell, and STMicroelectronics. Furthermore, AI chip clients such as AMD’s subsidiary Xilinx, Amazon, Cisco, Google, Microsoft, and Tesla have all accepted TSMC’s plan for a price increase in 2024.

Taking Tesla as an example, they are building a supercomputer facility in Austin to accelerate the development of their autonomous driving system, expanding the computing power of Dojo. The core D1 of Dojo is produced using TSMC’s 7nm process and advanced packaging technology. Based on this, Tesla is deepening its collaboration with TSMC, and it’s expected that their order volume will increase from around 5,000 pieces this year to 10,000 pieces next year.

Amid the ongoing AI surge, NVIDIA is actively seeking additional production capacity. On October 19th, NVIDIA’s CEO, Jensen Huang, revealed in an interview that the global demand for AI chips remains robust. He has met with TSMC’s CEO, C.C. Wei, to discuss providing more capacity to serve customers. NVIDIA is in the planning stages for the next generation of chips designed for AI-based infrastructure and has also engaged in discussions with partners such as Quanta and ASUS to strategize collaboration.

Is the Semiconductor Industry on the Rebound?

During TSMC’s Q3 earnings call, C.C. Wei pointed out that, in addition to strong AI demand, there’s a rebound in demand for smartphones and personal computers. As for automotive electronics, benefiting from the continued growth of electric vehicles, the demand for next year is expected to be quite robust. Regarding when the semiconductor industry might hit bottom, Wei remarked that there are some early signs appearing in the PC and mobile phone sectors. However, it remains challenging to predict a strong resurgence as customers are still cautiously managing their inventories.

In response to industry concerns about smartphone growth, TSMC’s CFO, Wendell Huang, noted that smartphone growth is anticipated to remain lower than the company’s future growth rate. High-Performance Computing (HPC) is expected to be the most robust growth segment, making substantial contributions to growth in the coming years.

On the other hand, other semiconductor foundry companies, such as PSMC, have also shared their perspectives on the fourth quarter and future industry developments. Recently, PSMC’s President, Brian Shieh, pointed out that the supply chain’s inventory seems to have reached a reasonable level, with growing demand for mobile panel driver ICs, surveillance system CIS chips, and visibility extending beyond one quarter. Prices for special memory products have started to show an upward trend. Demand for Power Management ICs (PMIC) also displays signs of recovery, even though the trend isn’t as pronounced as that of driver ICs and CIS chips.

Regarding UMC, the company is scheduled to hold an earning call on 25th October. In their previous earnings call for the last quarter, UMC mentioned that due to ongoing adjustments in the supply chain’s inventory, the outlook for wafer demand remains uncertain. Although the industry glimpsed a modest recovery in the second quarter, the overall sentiment in the end-market remains subdued, and customers continue to maintain stringent inventory management practices.