With the successful mass production of TSMC’s 3nm process and preparations for the upcoming 2nm process, recent reports suggest that TSMC has awarded a special contribution bonus to its research and development team in December, acknowledging the hard work of its employees.

In response to the news about the special contribution bonuses in December, TSMC stated that the company has always upheld the belief that “employees are the company’s most important assets” and this move is part of the ongoing commitment to taking care of its workforce.

According to reports citing from the industry sources, TSMC successfully commenced production of 3nm chips last year, and mass production is on track for the latter half of this year. Following this, advancements are being made in advanced processes, including 2nm and the development of processes such as A14 (1.4nm) and A10.

Specifically, after smooth research and development trials of the 2nm process this year, it will be integrated into the completed construction of Fab 20 in Baoshan, Hsinchu. The team at this facility is gearing up for risk production in 2024 and aims for mass production in 2025. A14 is expected to undergo trial production and mass production between 2027 and 2028.

TSMC has previously mentioned in its Earning Conference that the 2nm process technology will adopt a Nanosheet transistor structure, enhancing performance to meet the growing demand for energy-efficient computing.

Additionally, the 2nm family has developed backside power rail solution, particularly suitable for high-speed computing applications. The goal is to launch this solution for customer adoption in the latter half of 2025 and begin mass production in 2026.

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(Photo credit: TSMC)

Semiconductor manufacturers, after more than a year of destocking, are experiencing a recovery from the bottom of the market, and recently, there have been signs of price increases. Market sources reveal that Analog Devices Inc. (ADI), a major analog IC manufacturer, has recently issued a price increase notice to its Chinese distributors. The notice indicates an estimated price increase of 10% to 20%, set to take effect in February of the coming year.

According to reports compiled by Liberty Times Net, ADI stated in the price increase letter that the company places a high value on the reliability of stable component production. Therefore, it will not arbitrarily stop the production of components within a controllable range. To maintain a guaranteed supply for customers, the company will increase prices for certain older product lines to offset the cost pressures of sustaining production. If customers object to the price increase, ADI is committed to providing the best possible component replacement solutions.

According to industry sources, ADI’s price increase reflects the company’s optimistic outlook on the recovery of industry demand. On one hand, by increasing the prices of older products, ADI is expected to encourage customers to transition to new products.

In terms of ADI’s operations, ADI CEO Vincent Roche has previously stated in the company’s 2023 Q4 Earnings Call that, “Weakness in the industrial sector broadened and hit all the various market segments with 1 exception, the aerospace and defense area.”

Last month’s financial report from ADI revealed that, influenced by the still-high semiconductor inventory, the company’s fourth-quarter revenue decreased by 16% to USD 2.7 billion.

Within this, only automotive revenue showed positive growth, increasing by 14% to USD 730 million year-on-year, representing 27% of the overall revenue. Industrial revenue, accounting for approximately 50%, is the largest source of revenue, but in the fourth quarter, it experienced a 20% year-on-year decline to USD 1.35 billion.

For the entire fiscal year of 2023, ADI’s revenue reached USD 12.3 billion, a 2% increase compared to the previous year. This growth is attributed to record-breaking performances in the industrial and automotive sectors. The company’s Gross Margin increased by 5% to USD 7.8 billion, with a Gross Margin Percentage of 64%. Operating Income significantly rose by 17% to $3.8 billion, and the Operating Margin reached 31.1%.

(Photo credit: ADI)

As competition in the semiconductor industry intensifies, countries worldwide are implementing industrial policies to attract domestic and foreign investments. Japan, in particular, has introduced substantial subsidies to entice industry players to invest and establish facilities.

According to the report from South Korean “Dong-a Ilbo,” compared to other nations, South Korea’s semiconductor industry lacks sufficient subsidies, and there are concerns that Japan may surpass South Korea within the next decade.

Given the high cost of advanced semiconductor facility equipment and relatively higher local labor and other costs in Japan compared to other Asian countries, semiconductor companies are making substantial investments, often in the trillions of yen, to set up facilities in Japan.

In an effort to attract foreign companies to establish facilities in Japan, the Japanese government not only promotes the capabilities of numerous domestic semiconductor upstream suppliers to meet supply chain demands but also provides subsidies to alleviate the burden on industry players, thereby enhancing the competitiveness of products manufactured in Japan.

Taking memory giant Micron as an example, reportedly, Micron’s DRAM plant being constructed in Hiroshima, Japan, has received a 39% subsidy from the Japanese government for the construction cost. This subsidy has enhanced its cost competitiveness by 5% to 7%.

With substantial assistance from the Japanese government, there is a potential for Micron to narrow the market share gap with Samsung Electronics and SK Hynix in the future.

In recent years, TSMC has also chosen to establish a plant in Kumamoto, Japan, under the active solicitation of the Japanese government. In June of the previous year, the Japanese Ministry of Economy, Trade, and Industry announced that TSMC, along with Sony and Denso, jointly investing in Kumamoto Fab 1, could receive a maximum subsidy of JPY 476 billion (approximately USD 3.34 billion), equivalent to half of the construction cost.

The head of the Japanese Semiconductor Strategic Promotion Council, Akira Amari, previously mentioned that the Japanese government would provide one-third of the construction cost as a subsidy for TSMC’s Kumamoto Fab 2.

However, in November of this year, the Japanese Cabinet approved a semiconductor subsidy plan of nearly JPY 2 trillion, deciding to grant a subsidy of JPY 900 billion to TSMC’s Kumamoto Fab 2, exceeding one-third of the construction cost.

As per TrendForce’s report, Japan is also actively supporting local company Rapidus with a goal of reaching the most advanced 2 nm process. They aim to create a semiconductor cluster in Hokkaido and are offering subsidies to foreign companies, including Japan Advanced Semiconductor Manufacturing (JASM) and PSMC’s Sendai plant (JSMC).

This dual-pronged approach by the Japanese government aims to attract both domestic and foreign semiconductor industry investments in Japan.

While the South Korean parliament expanded tax incentives for semiconductor facility investment in the chip law passed in March of this year, it did not provide direct cash subsidies, raising concerns among industry professionals about the potential overtaking of the South Korean semiconductor industry by Japan.

Read more

• [News] Japanese Gov’t Grants TSMC 900B Yen, Kumamoto Fab 2 Announcement Soon
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(Photo credit: TSMC)

TSMC’s 2nm fab, strategically positioned between the Hsinchu Science Park and the Nanzih Technology Industrial Park in Kaohsiung Science Park, is rapidly taking shape.

According to Liberty Times Net, reports from the supply chain suggest that up to five fabs could be constructed in the Nanzih. The first of these fabs, currently under construction, is scheduled to begin its tool-in in January 2025.

Furthermore, there are indications that construction for the second fab may commence in the near future. There is also speculation that the third fab might be designated for the production of 2nm process, although this possibility has not been ruled out.

Chen Chi-Mai, Mayor of Kaohsiung city, mentioned that the progress of the first fab is proceeding as scheduled as expectations. Additionally, miscellaneous permits for the second fab were issued to TSMC in mid-December, 2023

While the semiconductor industry is still undergoing inventory adjustments, TSMC still continues its pursuit of advanced process over Intel and Samsung. Construction is underway for the new 2nm fab, with the steel structure completed for the Baoshan 2nm fab in the Hsinchu Science Park, including the cleanroom, is currently in progress.

According to Wayne Wang, the director-general of the Hsinchu Science Park Bureau, Baoshan Phase 2 will serve as one of TSMC’s production bases for 2nm process. Simultaneously, public construction projects and fab construction are proceeding, with the first plant set to tool-in in April next year, following the completion of workflow inspections.

Nanzih is also a primary production base for TSMC’s 2nm fab. The initial plan for the first fab was to produce chips using the 28nm and 7nm process. However, in response to geopolitical and economic changes, the decision was made to switch to the 2nm process.

Due to the different specifications on each semiconductor equipment, the Nanzih project began earlier this year, and faced challenges. However, the design was subsequently modified right off the bat, and re-started. For now, the progress is halfway through the whole project.

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(Photo credit: TSMC)

In November 2023, China witnessed a remarkable 1050% surge in the import value of crucial chip manufacturing lithography equipment from the Netherlands, the primary exporter of photolithography equipment, according to the South China Morning Post.

This surge, measured in terms of value, indicates that Chinese semiconductor companies have managed to maintain a channel for ordering advanced equipment despite the tightened export restrictions imposed by the United States

Lithography equipment holds a paramount position among the ten types of equipment essential in the manufacturing process of integrated circuits (ICs).

Reportedly, despite substantial financial investments, China has been acknowledged to lag behind in this technology for many years. Despite allocating significant funds, the country has still struggled to narrow the gap with leading enterprises in this crucial aspect of IC manufacturing.

Meanwhile, in October, the U.S. Department of Commerce expanded its export control regulations on China, with the new provisions taking effect from November 2023.

These regulations specifically restrict the Dutch company ASML from selling certain immersion Deep Ultraviolet (DUV) lithography equipment to Chinese facilities engaged in advanced semiconductor manufacturing. Consequently, China’s import of equipment has seen a consecutive surge for nearly two months.

In November, China imported 16 lithography equipment units from the Netherlands, valued at USD 762.7 Million, marking a tenfold year-on-year increase. By comparison, in October, China imported 21 lithography equipment units valued at USD 672.5 million, with an average price difference of 46% per unit.

In November of this year, China imported a total of 42 lithography equipment, valued at USD 816.8 million, including 15 units from Japan. When combined, the imports from the Netherlands and Japan accounted for almost the entire amount spent by China on lithography equipment in November.

In response to the U.S. restrictions, ASML’s CEO, Peter Wennink, previously stated that these limitations would exclude the vast majority of Chinese customers. This exclusion is due to the fact that these customers are involved in mature or traditional semiconductor manufacturing, specifically in the production of semiconductors at 28nm and above.

Jan-Peter Kleinhans, Senior Researcher and Head of Technology and Geopolitics Projects at the Berlin-based think tank “Stiftung Neue Verantwortung” (New Responsibility Foundation), mentioned that the impact on sales would not be immediate following the new U.S. restrictions.

As per the report from South China Morning Post, this is because ASML has a lead time of approximately 18 months. This implies that the equipment shipped in the fourth quarter of 2023 would have been ordered in the second or third quarter of 2022, and ASML would apply for export licenses at some point thereafter.

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(Photo credit: ASML)