Taiwan’s semiconductor giant, TSMC, faces overwhelming demand for its 3nm technology, with major clients like Apple and NVIDIA fully allocate its production capacity.

According to a report from Commercial Times, orders are expected to be filled through 2026. Reportedly, TSMC is planning to raise its 3nm prices by over 5%, and advanced packaging prices are anticipated to increase by approximately 10% to 20% next year.

The members of TSMC’s 3nm family include N3, N3E, N3P, as well as N3X and N3A. As the existing N3 technology continues to be upgraded, N3E, which began mass production in the fourth quarter of last year, targets applications such as AI accelerators, high-end smartphones, and data centers.

N3P is scheduled for mass production in the second half of this year and is expected to become mainstream for applications in mobile devices, consumer products, base stations, and networking through 2026. N3X and N3A are customized for high-performance computing and automotive clients.

Source: TSMC

Per the industry sources cited by the same report, TSMC’s Zhunan advanced packaging plant (AP6), operational for a year now, has become Taiwan’s largest CoWoS base with the equipment moved into its AP6C plant. In the third quarter, CoWoS monthly production capacity is expected to double from 17,000 to 33,000 wafers.

Industry sources cited by the report further suggests that while AI accelerators do not use the most cutting-edge manufacturing processes, they rely heavily on advanced packaging technology. The ability of global semiconductor companies to secure more advanced packaging capacity from TSMC will determine their market penetration and control.

TSMC’s advanced packaging capacity is scarce, with primary customer NVIDIA having the highest demand, occupying about half of the capacity, followed closely by AMD. Broadcom, Amazon, and Marvell have also expressed strong interest in using advanced packaging processes. With gross margins close to 80%, NVIDIA is said to agree to price increases to secure more advanced packaging capacity, thereby distancing itself from competitors.

Previously, NVIDIA CEO Jensen Huang emphasized that TSMC is not just manufacturing wafers but also handling numerous supply chain issues. He also agreed that the current pricing is too low and would support TSMC’s price increase actions.

The industry sources cited by Commercial Times have indicated that TSMC plans to add CoWoS-related equipment by the third quarter and has requested equipment manufacturers to dispatch more engineers to fully staff its Longtan AP3, Zhunan AP6, and Central Taiwan Science Park AP5 plants.

In addition to Zhunan’s AP6C, the Central Taiwan Science Park plant, which originally only handled the latter stages of oS, will also gradually transition to CoW processes. Meanwhile, the Chiayi site is in the land preparation stage and is expected to progress faster than Tongluo.

Reportedly, industry sources further reveal that the prices for advanced process nodes such as 3nm and 5nm will also be adjusted. Particularly, strong demand for 3nm orders in the second half of the year is expected to drive utilization rates to near full capacity, extending through 2025. The 5nm process is experiencing similar demand dynamics, driven by AI needs.

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(Photo credit: TSMC)

One major challenge for China’s IC design industry is the lack of advanced domestic Electronic Design Automation (EDA) tools. Due to US export controls, suppliers like Cadence and Synopsys are unable to provide chip design software to China. Additionally, the absence of domestic EDA tools capable of operating on Chinese-made CPUs adds further pressure.

However, according to a report from TechNews, there are signs of change. Chinese company X-Epic has introduced the first EDA software capable of running on domestically produced processors in China, potentially breaking through existing limitations.

As per a report from Tom’s Hardware, at the Kunpeng Developer Day on April 25, 2024, X-Epic presented the latest developments in China’s domestic chip design software EDA.

This platform is compatible with Huawei’s Kunpeng server processors based on Armv8 architecture and also supports Phytium’s Phytium processors based on SPARCv9 architecture. This represents a significant advancement for China’s semiconductor design industry, enabling domestic chip designers to conduct chip design and simulation using local software only.

X-Epic stated that they provide a comprehensive suite of chip design software EDA tools covering various aspects such as digital chip verification, hardware simulation, system debugging, and cloud-based verification. Extensive adaptation and optimization have already been completed, including adaptation to compilation environments, C++/ASM compilation, cmake compilation scripts, and third-party function libraries. The focus of application lies particularly on Huawei’s Kunpeng platform.

X-Epic has indicated that, through tools like GalaxSim and GalaxFV, X-Epic achieved 2 to 3 times performance enhancements in multiple customer test cases on Huawei’s high-performance Kunpeng server clusters compared to non-optimized software. These enhanced capabilities have notably reduced simulation testing times and improved efficiency in system-level chip simulation verification. However, there is currently no information available regarding test results for Phytium’s Phytium processors.

Overall, this collaboration not only strengthens Huawei’s Kunpeng ecosystem but also provides a comprehensive chip design software EDA solution for China’s domestic semiconductor industry.

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(Photo credit: X-Epic)

Following US sanctions in August 2019, Huawei’s internal operating system backup, HarmonyOS, emerged and has been in development for nearly 5 years. Currently, HarmonyOS is widely recognized, and its native version is set to launch on June 21st, marking the cornerstone of Huawei’s ambitious HarmonyOS project.

According to a report from UDN, Huawei is pursuing a dual-track development strategy for HarmonyOS. Internally, it focuses on its “1+8+N” terminal business strategy: “1” refers to smartphones, “8” includes large screens (TVs), tablets, PCs, wearables, car units, and more, while “N” covers a wide range of IoT devices. This approach aims to expand and flourish the HarmonyOS ecosystem.

In essence, HarmonyOS follows two main paths, while the first shares similar market positioning with current market leaders Android and iOS in the consumer sector, primarily focused on Huawei’s own terminal devices, aiming to expand the HarmonyOS ecosystem within the consumer domain.

The second path is OpenHarmony, also known as Open Source HarmonyOS. Reportedly, this initiative involves Huawei’s ecosystem partners leveraging Huawei’s donated OpenHarmony code base to develop their own commercial versions of HarmonyOS. These partners utilize their industry expertise and resources to vertically expand into sectors such as education, finance, transportation, and more. OpenHarmony primarily targets industrial applications.

Vertically, Huawei is reportedly looking to integrate HarmonyOS and OpenHarmony through foundational technology, establishing interoperability and connectivity to create an unified HarmonyOS. This strategic integration is designed to position HarmonyOS as a world-class operating system for the future IoT, aligning with Huawei’s ultimate goal of establishing HarmonyOS as a global IoT OS.

Recently, the unified device interconnection technology standards for OpenHarmony were officially released. Huawei’s Consumer Business Group Chairman, Richard Yu, recently disclosed plans to unify application and service ecosystems across Harmony OS and the commercial versions of OpenHarmony. This initiative aims to enhance consumer and industry experiences by sharing a unified HarmonyOS ecosystem that includes programming languages, compilers, and tools, thereby constructing a comprehensive smart terminal operating system.

Huawei is also said to be advancing another significant vertical initiative: the native HarmonyOS. Currently, Huawei has successfully developed the entire stack of HarmonyOS as an independent Chinese-made operating system, contrasting with the majority of global operating systems such as Android and iOS, which are based on the Linux or Unix kernel.

Huawei’s recent strides not only shape the future of HarmonyOS and OpenHarmony but also bolster Huawei’s autonomy and control. These developments are crucial for China’s tech enterprises, providing resilience against potential US sanctions. Whether in consumer or industrial sectors, the Mega HarmonyOS can be activated promptly, underscoring why numerous Chinese companies are joining the HarmonyOS ecosystem.

The intense price competition among Chinese mature process foundries is nearing its end. According to a report from the Economic Daily News, it has indicated that Hua Hong Semiconductor, the second-largest foundry in China, plans to raise prices by 10% in the second half of the year.

This marks the end of a two-year decline in mature process foundry prices, signaling that the industry is emerging from its correction phase and moving towards a healthier path. Consequently, Taiwanese foundries specializing in mature processes, such as UMC, VIS, and PSMC, are also expected to see a rise in their prices, boosting their operations.

Industry sources cited in the same report also note that due to geopolitical factors, Chinese foundries primarily focus on the domestic market, which is gradually diverging from the customer base of Taiwanese foundries. However, if Hua Hong’s price increase materializes, it would be a significant indicator.

Since the end of the COVID-19 pandemic, mature process foundry prices have been continuously adjusting downward. A price increase would indicate a rebound in demand for consumer electronics.

Reportedly, the industry sources believe that if the market for mature process foundries rebounds, UMC will be the primary beneficiary. As demand for consumer electronics and mobile phones picks up, related products such as OLED panel driver ICs, image signal processors (ISP), and WiFi chip will see improvements in inventory levels across the computer, consumer, and communication sectors, reaching healthier levels.

VIS and PSMC are also expected to benefit from the industry’s recovery trend. Although VIS does not comment on pricing issues, the company previously mentioned that inventory levels for consumer electronics are expected to return to normal by 2024. Despite ongoing adjustments in industrial and automotive inventories, the company remains optimistic about moderate growth in the second half of the year.

PSMC is anticipated to experience a gradual return of orders as well. The company emphasizes its commitment to adapting to market competition and continuously adjusting its production and sales strategies. With the positive effects of these adjustments becoming evident and customer inventory levels returning to healthy standards, along with new business opportunities at the Tongluo plant, PSMC expects its revenue to gradually recover.

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• [News] UMC Optimistic About Second Half Business Outlook, While AI Could Capture 10-20% Market Share
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(Photo credit: UMC)

The US government’s CHIPS and Science Act is reportedly injecting funds into chip manufacturing at an unprecedented rate. According to a recent report by the U.S. Census Bureau, the growth rate of construction funding for computer and electrical manufacturing is remarkably high. The amount of money the government is pouring into this industry in 2024 alone is equivalent to the total of the previous 27 years combined.

Due to the substantial funding provided by the U.S. CHIPS Act, the construction industry in the United States is experiencing explosive growth. Companies such as TSMC, Intel, Samsung, and Micron have received billions of dollars to build new plants in the U.S.

Research by the Semiconductor Industry Association indicates that the U.S. will triple its domestic semiconductor manufacturing capacity by 2032. It is also projected that by the same year, the U.S. will produce 28% of the world’s advanced logic (below 10nm) manufacturing, surpassing the goal of producing 20% of the world’s advanced chips announced by U.S. Commerce Secretary Gina Raimondo. 

Currently, new plant constructions are underway. Despite the enormous expenditures, there have been delays in construction across the United States, affecting plants of Samsung, TSMC, and Intel.

Notably, a previous report from South Korean media BusinessKorea revealed Samsung has postponed the mass production timeline of the fab in Taylor, Texas, US from late 2024 to 2026. Similarly, a report from TechNews, which cited a research report from the Center for Security and Emerging Technology (CSET), noted the postponement of the production of two plants in Arizona, US. Additionally, Intel, as per a previous report from the Wall Street Journal (WSJ), was also said to be delaying the construction timetable for its chip-manufacturing project in Ohio.

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• [News] A Subsidy Wave Sweeping in the US, Europe and Japan amid the Cut-Throat Chip Competition
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(Photo credit: TSMC)