Various countries are actively developing their semiconductor industries, with Taiwan’s semiconductor foundries, including TSMC, UMC, and PSMC, becoming prime targets for local manufacturing facilities. TSMC has established plants in the United States, Germany, and Japan, while PSMC, in addition to its facility in Miyagi-ken, Japan, has recently announced plans to assist India in building a factory.

However, for these Taiwanese semiconductor foundries, expanding overseas may not always prove to be a economical choice.

According to Taiwan’s Economic Daily News, PSMC Chairman Frank Huang revealed that 7 to 8 countries have invited the company to establish manufacturing facilities in their respective regions. However, the costs in these countries are higher than those in Taiwan.

Huang pointed out that, based on the data they have, the cost of building a fab in Japan is 1.5 times higher than in Taiwan, with construction costs being 2.5 times higher and operational costs 50% more expensive than in Taiwan. It would take 7 to 8 years for the combined construction and operation to become profitable, meaning the factory would only start making money three years after its establishment. In contrast, PSMC’s Fab P5 in Tongluo Science Park is expected to break even this year.

PSMC had already disclosed plans to assist India in technology transfer for building a fab in early 2023. Huang explained that because South Korea and the United States are unwilling to teach others how to make semiconductors, neither TSMC nor UMC are offering such assistance, leaving PSMC as the go-to option for those seeking guidance in semiconductor manufacturing.

The countries reported to have sought PSMC’s assistance in building fab include Japan, Vietnam, Thailand, India, Saudi Arabia, France, Poland, and Lithuania.
According to TrendForce research, PSMC is the third-largest semiconductor foundry in Taiwan and ranks 10th globally. It announced its investment in a 12-inch factory in Miyagi-ken, Japan, at the end of 2023.

Similarly, TSMC, the leading foundry based in Taiwan, faces similar challenges when expanding overseas. In early 2023, TSMC executives stated during an earnings conference that due to factors such as labor costs, permits, regulatory compliance, and rising living prices, the cost of setting up a plant in the United States is at least four times higher than in Taiwan.

However, beneath the economic considerations, geopolitical factors play a significant role in these decisions. The ongoing regional shift in the semiconductor industry supply chain is inevitable in the current geopolitical climate.

(Image: PSMC)

The recovery of the memory industry is evident, with Taiwanese companies such as Macronix, Nanya Technology, and Transcend all showing month-on-month revenue growth in December last year. Additionally, contract prices for DRAM and NAND Flash are expected to continue rising in the first quarter of 2024. However, the global second-largest memory manufacturer, SK Hynix, plans a expansion, introducing a variable element to the memory market.

According to a report by the Commercial Times, SK Hynix disclosed that it might reduce the scale of DRAM production cuts in the first quarter, while adjustments to the NAND Flash production strategy may occur in the second or third quarter, depending on the situation.

In response to major memory manufacturers’ expansion plans, Taiwanese memory firms believe that Hynix’s expansion should focus primarily on DDR5 and HBM (High-Bandwidth Memory) products. Nevertheless, Taiwan currently specializes in DDR4 products, and it is not expected to impact product pricing.

According to a press release from TrendForce published this week, the DRAM contract prices are estimated to increase by approximately 13–18% in 1Q24 with mobile DRAM leading the surge. It appears that due to the unclear demand outlook for the entire year of 2024, manufacturers believe that sustained production cuts are necessary to maintain the supply-demand balance in the memory industry.

For consumer DRAM, manufacturers are aggressively raising contract prices, which has prompted buyers to stockpile early. This has greatly improved purchasing momentum. However, the first quarter coincides with the industry’s off-season, and end sales are expected to be weak and lead to increased inventory levels due to buyers’ early stocking strategies.

Manufacturers generally believe that in 2024—with the expanding penetration of HBM and DDR5 each quarter—low-margin DDR4 capacity will be crowded out, thereby leading to shortages. As such, DDR4 contract prices are expected to outpace DDR3 in the first quarter by 10–15%. DDR3 continues to be supplied by Taiwanese manufacturers, and with generally high inventory levels, its contract price increase is estimated at 8–13% for 1Q24.

(Image: SK Hynix)

After the U.S. authorities strengthens export restrictions on high-end processors, reports have emerged that Chinese companies are actively changing the purpose of PC gaming chips and utilizing them for the development of AI tools.

According to a report from the Financial Times on January 10, factory managers and chip buyers familiar with the details disclosed that every month, thousands of NVIDIA gaming cards are being disassembled in factories and workstations. The core components are then installed onto new circuit boards.

A factory manager further indicated that in December 2023 alone, their workers disassembled over 4,000 NVIDIA gaming cards, more than four times the quantity of November.

These modified components are primarily supplied to listed companies and small AI laboratories. They are rushing to accumulate a sufficient supply of NVIDIA server chips before the export controls take effect in the United States.

Industry sources have reportedly warned that modifying NVIDIA products would violate the company’s intellectual property rights, and certain gaming cards could be subject to bans at any time.

NVIDIA’s most powerful gaming card, the “GeForce RTX 4090,” is a popular choice for modification, but it is now prohibited from being sold in China. In December 2023, NVIDIA released a throttled-down version for China, the “GeForce RTX 4090 D,” which is 5% slower than versions available in other regions.

A factory manager has indicated a “significant” performance difference between the 4090 D and the regular 4090, suggesting that the downgraded version may not be suitable for training large language models (LLMs).

Although NVIDIA has developed three versions of AI chips specifically designed for China (expected to be launched in March), they face reluctance from Chinese customers due to weaker performance compared to the previously available versions in China, coupled with pricing that is almost similar to the more powerful but banned versions.

The recent report from The Wall Street Journal also addressed the lack of interest in NVIDIA’s downgraded models by Chinese customers. According to the data from TrendForce, currently, around 80% of the high-end AI chips used by Chinese cloud computing companies are sourced from NVIDIA. However, in the next five years, this proportion may decrease to 50% to 60%.

Read more

• [News] Cooling Response to NVIDIA’s Exclusive Chips for China, Lack of Interest in Downgraded Models by Customers
• [News] NVIDIA’s China-exclusive Chip H20 to Begin Production in Q2 by Wistron

(Photo credit: NVIDIA)

Pei-Ing Lee, the General Manager of Nanya Technology, a major DRAM manufacturer, mentioned on January 10th that this year has seen an upward trend in DRAM prices

According to Economic Daily News citnig from Nanya Technology’s earnings call for 23Q4,  this trend is attributed to the resurgence of the smartphone market, increased demand fueled by AI, and the three major memory manufacturers pivoting towards DDR5 production. This shift is advantageous for depleting DDR4 inventory and could potentially result in a supply shortage.

Having endured over a year of downturn in the memory market, Lee expressed an optimistic outlook by stating that “there is a possibility of future supply shortages,” revealing an overall positive trajectory for the DRAM market.

Lee acknowledged that the DRAM market faced challenges last year, resulting in stagnant bit sales for Nanya Technology. However, he anticipates a better scenario this year, noting the upward trend in DDR4 pricing. The timing for DDR3 price increases is expected to follow but at a slower pace. Lee further stated that DDR3 constituted about 40% of Nanya Technology’s revenue  in the past, but it is expected to decrease, with DDR4’s share rising.

Due to major international players focusing on High-Bandwidth Memory (HBM) and DDR5, he anticipates a potential supply shortage for DDR4 this year.

Lee pointed out that the growth in AI demand is positively impacting the DRAM market. The shift from high-end HBM and DDR4 to DDR5 is influencing demand, showing improvement quarter by quarter.

Regarding pricing trends, he confirmed a rebound in prices in the fourth quarter of 2023 and expressed optimism for a gradual upward trend in 2024. However, Lee cautioned that external variables such as geopolitical tensions, the war in Europe, and the U.S.-China trade dispute could still impact the market’s recovery momentum.

In terms of demand, Lee highlighted four key points. Firstly, server demand is driven by AI servers, with a focus on observing IT spending by U.S. cloud companies. Secondly, the introduction of new smartphones, leading to an increase in average DRAM capacity, especially in AI smartphones boosting the high-end smartphone market. Presently, improving smartphone sales in China are observed, and the recovery momentum of the Chinese economy is crucial.

In the PC application sector, Lee mentioned that inventory is gradually returning to normal levels, and AI PCs will simultaneously boost the high-end PC market. As for consumer electronic terminal products, demand for IP cameras, networking, industrial control, and automotive applications is relatively healthy, with consumer electronic products expected to show stable growth in 2024.

In terms of technological advancements, Nanya Technology aims to begin small-scale production of DDR5 products at the end of the third quarter of this year. Initially applied in servers and partly in PCs, the first product is expected to achieve a bandwidth of 5600MHz, while the second product is currently in the design phase, with an estimated bandwidth of 6400MHz.

Lee explained that their second DDR5 product will utilize third-generation processes, aiming to further improve cost structures, increase speed, achieve a target of 6400 MHz, and possess the capability for high density and 3D IC technology.

Read more

• [News] Nanya Tech Expects Continued Conservative Spending to Balance DRAM Supply-Demand in 2024
• [News] After Memory Price Hike, Shortages Emerge in Some Products?

(Photo credit: Nanya Technology)

Recent reports have suggested that UMC’s new facility in Singapore is set to be completed by mid-2024, with initial production expected to commence in early 2025.

UMC has announced that, in response to the demand for capacity expansion, the board of directors has approved a capital expenditure execution plan of USD 39.8 million. The first phase of the new facility is planned to have a monthly production capacity of 30,000 wafers, offering 22/28nm processes, with a total investment of USD 5 billion.

Semiconductor Companies Target Singapore

Influenced by complex international situations and other factors, the global semiconductor supply chain is undergoing a shift, with high expectations placed on the Southeast Asian region, particularly Singapore.

In the wafer manufacturing sector, IDM companies like Micron, Infineon, NXP Semiconductors, STMicroelectronics, and others, along with foundry enterprises like GlobalFoundries, UMC, and Vanguard International Semiconductor(VIS) are investing in building facilities in Singapore.

In 2010, GlobalFoundries acquired Singapore’s Chartered Semiconductor Manufacturing Company and took over its fab. In September 2023, GlobalFoundries announced the official launch of its USD 4 billion investment in expanding the manufacturing plant in Singapore, further expanding its global production capacity.

The expanded fab is projected to produce an additional 450,000 300mm wafers annually, raising GlobalFoundries’ total production capacity in Singapore to approximately 1.5 million 300mm wafers per year.

UMC has been operating its 12-inch fab in Singapore for over 20 years. In February 2022, UMC announced that its board of directors approved plans to expand a new advanced fab in the Fab12i campus in Singapore.

At that time, UMC anticipated that the new facility would commence production at the end of 2024. The latest updates indicate that the new facility is expected to begin production in early 2025.

VIS currently operates an 8-inch fab in Singapore. In October 2023, media reports indicated that VIS plans to establish its first 12-inch fab in Singapore. This facility is primarily intended to meet the demand for automotive chips. The investment for this project is estimated to be at least USD 2 billion, and it is anticipated to produce 28nm chips.

Continuous Expansion in Foundry Capacity

Despite the sluggish demand in the consumer electronics market, the pace of expansion for foundries remains unaffected.

Covering 2022 to 2024, the World Fab Forecast report has shown that the global semiconductor industry plans to begin operation of 82 new volume fabs, including 11 projects in 2023 and 42 projects in 2024 spanning wafer sizes ranging from 300mm to 100mm.

Among the newly added capacity, China is expected to experience rapid growth, securing the top position, followed by Taiwan, maintaining the second position. Subsequently, the rankings include South Korea, Japan, the Americas, Europe, and Southeast Asia.

According to TrendForce‘s statistics, the number of foundries in China has reached 44 and is expected to increase by 32 in the future, mainly focusing on mature nodes.

Read more

• [News] UMC, VIS, PSMC Cut Prices for Mature Process Wafers to Boost Production

(Photo credit: UMC)