As AI semiconductor competition intensifies, the wafer foundry industry faces new challenges due to stagnant demand and excess capacity. The battle for dominance in the high-bandwidth memory (HBM) market is also escalating.

According to Business Korea, Samsung has extended the operation time of its Taylor plant from the end of 2024 to 2026, possibly adjusting the investment pace in consideration of the foundry market.

Regarding the global wafer foundry industry outlook for this year, TSMC President C.C. Wei stated that the growth of the global foundry industry this year has been revised from the previous earnings call of 20% to mid-teens.

Currently, TSMC’s two fabs in Arizona, USA, are scheduled to commence production in 2025 and 2028, respectively; the Kumamoto fab in Japan has started operations in February, and the second fab will start production before 2027. Intel, on the other hand, plans to establish new foundries in the United States, Europe, and Israel. The activation of these new fabs has raised concerns in the market about oversupply issues.

Contrastingly, in the HBM market, crucial for AI chips, SK Hynix and TSMC have formed an alliance, intensifying the competition between this alliance and Samsung.

SK Hynix announced on April 19th that the company has recently signed a memorandum of understanding with TSMC for collaboration to produce next-generation HBM and enhance logic and HBM integration through advanced packaging technology. The company plans to proceed with the development of HBM4, or the sixth generation of the HBM family, slated to be mass produced from 2026, through this initiative.

Looking at Samsung’s developments in the HBM, Samsung Electronics successfully developed the industry’s first highest-capacity 12-layer HBM3E in February, attempting to regain market dominance. In the second quarter, along with the 8-layer product, it will supply to Nvidia. The next goal is to launch the 16-layer HBM4.

Per TrendForce’s data, the three major HBM manufacturers held market shares are as follows: In 2023, SK Hynix and Samsung each held around 47.5%, while Micron’s share was roughly 5%. Still, forecasts indicate that SK Hynix’s market share in 2024 will increase to 52.5%, while Samsung’s will decrease to 42.4%.

In line with the same report from Business Korea, despite the decline in foundry demand, Samsung Electronics and SK Hynix’s profit prospects are expected to improve compared to last year.

As per estimates cited in the report from investment institutions, SK Hynix’s first-quarter revenue is expected to reach 12.1021 trillion won, with an operating profit of 1.7654 trillion won, and the operating profit for the entire year of 2024 is expected to exceed 21 trillion won; Samsung Electronics’ DS division’s performance is improving, with the first-quarter operating profit expected to be between 700 billion and 1.8 trillion won, and the overall operating profit for 2024 is expected to be around 35 trillion won.

(Photo credit: SK Hynix)

Recently, according to sources from an official platform of Shanghai Construction No.4 (Group), Huahong Group has topped out the main building of FAB9 of the Huahong Manufacturing (Wuxi) project. This is reportedly the second phase project with a total construction area of about 530,000㎡, which is projected to construct a 12-inch characteristic process production line with a monthly capacity of 83,000 wafers.

It can be seen that the 12-inch wafer field is greeted by high enthusiasm. Previously, companies such as Renesas Electronics, PSMC, TSMC, and UMC have all announced plans to build new 12-inch fabs. As for China, as per earlier industry reports, 12-inch fabs scheduled to start production in 2024 include CR Micro, ZenSemi, and CanSemi, all located in Guangdong Province.

• Investment Enthusiasm in 12-Inch Fabs Unabated

On April 11, Renesas officially restarted its previously closed factory in Kofu. It was announced in 2022 that Renesas would invest JPY 90 billion to convert the plant into a 12-inch fab in a bid to meet the increasing demand in the power semiconductor sector.

The fab has a cleanroom with an area of 18,000㎡, and it will start mass production of IGBTs, power MOSFETs, and other power devices in 2025, which is expected to double Renesas’ overall power semiconductor capacity.

On March 13, PSMC and India-based Tata Group held a groundbreaking ceremony for their joint 12-inch fab. The fab comes with a total investment of INR 910 billion (Around USD 11 billion), which is estimated to produce a monthly capacity of 50,000 wafers, covering various mature nodes such as 28nm, 40nm, 55nm, 90nm, and 110nm.

On February 24, TSMC’s Japan Kumamoto fab (JASM) was officially opened, marking TSMC’s first plant (Fab23) in Japan. TrendForce stated that the plant will possess a total capacity of up to 40~50Kwpm in the future, with the process mainly focusing on 22/28nm and a small amount of 12/16nm. This will pave the way for developing the main process of the Kumamoto Fab2 later.

Previously, TSMC had announced that in response to customer demand growth, construction of JASM’s second fab in Japan is planned to commence at the end of 2024 and start operation in late 2027. Media reports stated that TSMC would invest JPY 2 trillion in the second fab in Kumamoto, which will adopt advanced processes of 6nm and 7nm. The monthly total capacity of 12-inch wafers in JASM Kumamoto fab is expected to exceed 100,000 pieces in the future.

In January, it was reported that UMC’s new fab in Singapore is scheduled to complete construction by mid-2024 and start mass production in early 2025. UMC said that to meet the demand for capacity construction, its board of directors approved a capital budget execution proposal of USD 39.8 million. The first phase of the new fab, with a total investment of USD 5 billion, is expected to deliver a monthly capacity of 30,000 wafers, providing 22/28nm processes.

UMC has been operating the 12-inch fab in Singapore for over 20 years. In February 2022, UMC’s board of directors approved the plan to expand a new advanced fab in the Fab12i area in Singapore. At that time, UMC expected the new fab to start mass production in late 2024, but the latest news indicates that the date of mass production will be in early 2025.

• Several Guangdong-Based 12-Inch Fabs Set to Start Production in 2024

According to a local official report from Zengcheng, Guangdong, ZenSemi held a lithography machine introduction ceremony for the project of 12-inch advanced intelligent sensors and characteristic process wafers mass production lines, marking that the project has smoothly entered the debugging and production preparation phase.

It is reported that the first phase of the project covers an area of 370 acres, with a planned investment of CNY 37 billion. It is expected to start production in June 2024, with the first batch of high-yield products scheduled to be completed in late December and delivered to customers.

According to official information from CanSemi, the third phase of CanSemi’s project will establish a 12-inch integrated circuit analog characteristic process production line with a capacity of 40,000 wafers per month. Currently, the first and second phases have been put into production successively, and the company are accelerating the construction of the third phase project, striving to achieve a fixed asset investment of over CNY 4 billion in 2024 and ensure the third phase to complete construction and start production in 2024.

According to the Wechat Account “Binhai Baoan”, Huahong’ 12-inch characteristic process integrated circuit production line project is also expected to start production this year.

It is reported that the first phase of Huahong’ 12-inch power chip production line project has a total investment of CNY  22 billion, with a total construction area of 238,000㎡, and an annual production capacity of 480,000 wafers after completion. The products will mainly be used in automotive electronics, new energy, industrial control, consumer electronics, and other fields.

As per stats from Wechat Account “Global Semiconductor Observation”, there are currently 31 operating 12-inch fabs in China (Inclusive of under-construction 12-inch fixed-capacity fabs), with a total monthly capacity of approximately 1.189 million wafers.

Compared with the planned monthly capacity of 2.17 million wafers, the capacity utilization rate of these fabs is close to 54.48%, indicating significant expansion potential. Considering construction and future planning, it is estimated that China will add 24 new 12-inch fabs in the next five years, with a planned monthly capacity of 2.223 million wafers.

Assuming all planned 12-inch foundries achieve full production, the total monthly capacity of 12-inch wafers in China will exceed 4.14 million wafers in late 2026, representing a 248.19% increase in capacity utilization compared to the present.

Read more

• [News] SK Hynix Rumored to Propose Collaboration with Kioxia for HBM Production in Japan
• NAND Flash Industry Revenue Grows 24.5% in Q4 2023, Expected to Increase Another 20% in Q1, Says TrendForce

(Photo credit: TSMC)

According to industry sources cited in a report from Business Korea, Japanese NAND Flash supplier Kioxia is preparing to restart its merger plan with its partner Western Digital (WD). However, SK Hynix, a major shareholder and Korean memory giant, continues to firmly oppose the merger.

The same report citing industry sources also indicates that Kioxia could potentially go public on the Tokyo Stock Exchange as early as October 2024, according to its schedule. Kioxia’s major shareholder, Bain Capital, a U.S. private equity firm, has engaged its creditor banks to review the listing process, with the banks providing over JPY 1 trillion in loans to support this effort.

Despite facing losses of JPY 254 billion from the second to fourth quarters of 2023 and the impending repayment of a JPY 900 billion loan in June 2024, Kioxia has seen improved market conditions in the memory market, leading to higher market quotations and increased revenue to address these financial challenges. This resurgence has prompted Kioxia to restart its merger plans with WD, with the backing of creditor banks supporting this initiative.

However, SK Hynix, which indirectly holds a 15% stake in Kioxia through a KRW 4 trillion investment in Bain Capital, has explicitly stated its opposition to restarting the merger between Kioxia and Western Digital. A representative from SK Hynix cited by the report from Business Korea stated that their position against the merger of Kioxia and WD remains unchanged. However, they are open to discussing potential cooperation under conditions that protect their investment interests.

In 2023, Kioxia and Western Digital had drafted a merger agreement that was blocked due to opposition from SK Hynix. The same report, citing industry sources, suggests that SK Hynix is expected to continue opposing the merger of the two companies. SK Hynix intends to leverage its advantages in the normalization of the NAND Flash market to maximize the gap in market conditions between itself and Kioxia/ WD as much as possible.

For the NAND Flash market, TrendForce’s report in march has indicated that, as of the fourth quarter of 2023, SK Group captures the global market with a share of 21.6%, followed by WD (14.5%) and Kioxia (12.6%).

Read more

• [News] SK Hynix Rumored to Propose Collaboration with Kioxia for HBM Production in Japan
• NAND Flash Industry Revenue Grows 24.5% in Q4 2023, Expected to Increase Another 20% in Q1, Says TrendForce

(Photo credit: Western Digital)

According to a report from Korean media ETNews citing industry sources, it has indicated that Samsung Electronics has recently increased the capacity utilization rate of NAND Flash to over 90%, a further increase from the first quarter’s 80%.

Previously, Korean media including ETNews and The Elec held a relatively optimistic view of Samsung Electronics’ NAND Flash business, reporting that the operating rate of the Xi’an plant had reached 70%. However, the Chosun Daily has a different perspective, suggesting that Samsung Electronics continues to maintain its plan of reducing production by 50%.

According to the same report from ETNews, some NAND Flash fabs of Samsung are currently operating at full capacity, significantly better than the lowest utilization rate of 60% seen in 2023. Reportedly, the capacity utilization rate of the Xi’an plant in China has notably increased, followed by a gradual recovery in the NAND Flash capacity at Samsung’s Pyeongtaek facility in South Korea.

The report further cited another industry source who noted that downstream customers’ inventories of NAND Flash have essentially been depleted, leading to a balanced supply-demand trend. This is reportedly a key driver behind Samsung’s ongoing increase in capacity utilization.

The primary reason for the rise in NAND Flash market demand is attributed to the AI trend driving increased demand for enterprise solid-state drives (SSDs) from related businesses. This includes cloud computing service providers in North America and China increasing their purchases of enterprise storage to meet market demands.

As per TrendForce’s press release in March, it has projected a strong 13–18% increase in Q2 NAND Flash contract prices, with enterprise SSDs expected to rise highest. Despite Kioxia and WDC boosting their production capacity utilization rates from Q1 this year, other suppliers have kept their production strategies conservative. The slight dip in Q2 NAND Flash purchasing—compared to Q1—does not detract from the overall market’s momentum, which continues to be influenced by decreasing supplier inventories and the impact of production cuts.

Read more

• [News] Korean NAND Flash Manufacturers Cautiously Increase Wafer Input, Capacity Utilization Maintains Around 50%
• [News] Western Digital Customer Letter Confirms HDD Supply Shortage! NAND Flash and Hard Drive Prices Continue to Rise

(Photo credit: Samsung)

Japanese digital infrastructure service provider Sakura Internet, backed by government subsidies, is enhancing its cloud services for generative AI. According to a report from MoneyDJ, Sakura Internet’s procurement of GPUs is set to increase fivefold from the initial plan, with purchases including NVIDIA’s latest product, the “B200,” unveiled in March.

On April 19th, Sakura announced that it has secured Japanese government subsidies to strengthen its cloud service “Koukaryoku” for generative AI. The company plans to expand the number of GPUs deployed in “Koukaryoku” to fivefold from the initially planned quantity, aiming to incorporate around 10,000 GPUs, including NVIDIA’s latest “NVIDIA HGX B200 system” introduced in March. The goal is to establish a large-scale cloud infrastructure with a computational power of 18.9 EFLOPS by the end of March 2028.

Sakura had previously received similar government subsidies in June 2023, marking this as the second time they have received such support.

Sakura announced that last June they invested JPY 13 billion, aiming to purchase approximately 2,000 NVIDIA GPUs (with a computational power of 2.0 EFLOPS) between July 2023 and March 2025. Due to significantly higher demand than expected, the procurement of these 2,000 GPUs is projected to be completed ahead of schedule by the end of June 2024.

This new investment plan, totaling around JPY 100 billion (including costs for server components other than GPUs and maintenance fees), targets additional procurement of approximately 8,000 GPUs (with a computational power of 16.9 EFLOPS) between April 2024 and December 2027.

The overall GPU procurement quantity of around 10,000 units will thus be five times the original plan of approximately 2,000 units. According to Japanese media reports, Sakura will provide server computing power equipped with these GPUs to companies engaged in generative AI research.

On April 19, the Ministry of Economy, Trade and Industry of Japan announced that in order to establish the necessary supercomputers for developing generative AI domestically in Japan, they will provide a maximum subsidy of JPY 72.5 billion to five Japanese companies, with Sakura receiving a maximum subsidy of JPY 50.1 billion.