According to Taiwan’s Economic Daily, after disassembling Huawei’s Mate 60 Pro smartphone, it has been revealed that the chips, including the Kirin 9000S, are produced by China’s semiconductor foundry, SMIC, using their advanced 7-nanometer process. This development has brought attention to SMIC’s manufacturing capabilities. Recently, it has been reported that SMIC has placed a substantial order with Taiwanese suppliers in the supply chain, equivalent to approximately two years’ worth of demand, and is urging swift delivery.

While SMIC has established itself in mature semiconductor manufacturing processes and serves not only domestic IC design companies but also many Taiwanese IC design firms, it has been actively trying to catch up with foreign giants in advanced manufacturing processes. Additionally, limitations in acquiring equipment like EUV have constrained its progress, making its achievements in the 7-nanometer process a noteworthy accomplishment.

In light of these developments, it has been reported that SMIC has approached Taiwanese partner companies to secure a substantial supply of specific products for an estimated two-year period, likely to be used in their advanced 7-nanometer manufacturing process. SMIC is hoping for proactive cooperation from its supply chain partners to ensure prompt delivery.

(Photo credit: SMIC)

According to reports from the Hong Kong’s etnet, it was announced in early September that China’s National Integrated Circuit Industry Investment Fund (known as the “Big Fund”) is planning to organize its third fund, with a scale reaching 300 billion yuan, aimed at supporting and revitalizing the semiconductor industry.

However, in response to the latest reports, the initial fundraising phase of the third Big Fund has encountered difficulties due to the challenging economic recovery environment in China. The China State Council Information Office, the Ministry of Industry and Information Technology, and the Big Fund have not yet provided any official response to these reports.

The China National Integrated Circuit Industry Investment Fund launched its first fund in 2014 and its second fund in 2019, raising approximately 138.7 billion yuan and 200 billion yuan, respectively. These funds were intended to bolster China’s semiconductor industry and compete more vigorously with the United States and other global rivals. Contributors to the Big Fund include the Ministry of Finance, China Development Bank Capital, China National Tobacco Corporation, and China Mobile, among others. The Big Fund has invested in various chip companies, including China’s leading semiconductor foundry, SMIC (Semiconductor Manufacturing International Corporation). Collectively, the first two Big Funds held approximately 9.4% of the company’s equity.

Despite being a key player in China’s semiconductor investment landscape, the Big Fund faced a scandal in mid-2022 involving allegations of illegal activities. Several officials, including Ding Wenwu, the former General Manager of the National Big Fund, and senior executives from SINO-IC Capital, the fund manager, were investigated by the Central Commission for Discipline Inspection. This incident raised concerns about its potential impact on the development of China’s semiconductor industry.

According to a report by Taiwan’s TechNews, Samsung Electronics’ semiconductor foundry division, Samsung Foundry, has been operating at less than 50% utilization rate as of the second quarter due to weak demand for 8-inch wafer foundry services. Industry sources have revealed that Samsung Foundry has already halted operations on 30% of its equipment, but with further inventory reduction expected, there is a possibility of restarting these machines by the end of the year and resuming production in the first quarter of the following year.

Previously, South Korean media outlet The Elec reported that the IT industry’s demand is currently low, leading South Korean wafer foundries to reduce prices for 8-inch wafer services by 10%. As of the second quarter, both Samsung Foundry and other South Korean wafer foundry companies like Key Foundry and SK Hynix System IC, a subsidiary of SK Hynix engaged in foundry operations, have been operating at capacity utilization rates ranging from 40% to 50%.

8-inch wafer services primarily manufacture components such as power management ICs, panel driver ICs, and microcontrollers. Given the uncertain demand for consumer electronics products, Samsung Foundry has decided to halt operations on 30% of its equipment as a cost-saving measure. However, market expectations suggest that the overall manufacturing and semiconductor industries have undergone more than a year and a half of inventory adjustment, and there is hope for inventory replenishment by the end of the year in the supply chains of three major sectors: smartphones, PCs, and consumer electronics.

According to industry sources, Samsung Foundry plans to restart the halted 8-inch wafer equipment by the end of the year and aims to resume full production in the first quarter of the next year. However, the revival of consumer product demand has not yet shown clear signs, and whether the restart will proceed as expected remains to be observed.

(Photo credit: Samsung)

While 2nm advanced semiconductor chips are yet to enter mass production, the battle for equipment among semiconductor foundries is already in full swing.

TSMC, Samsung, and Rapidus Make Their Moves

To ensure the smooth deployment of 2nm process technology, TSMC, Samsung, and Rapidus have all embarked on pursuits in the upstream equipment sector.

TSMC, on September 12th, announced its intention to acquire a 10% stake in IMS Nanofabrication, a subsidiary of Intel, for no more than $432.8 million. IMS specializes in the development and production of electron beam lithography machines, widely used in semiconductor manufacturing, optical component production, MEMS manufacturing, and more. Industry experts believe that TSMC’s acquisition of IMS will ensure the development of critical equipment technology and meet the supply requirements for the commercialization of 2nm.

On the other hand, Samsung previously acquired a 3% stake in ASML, still holding approximately 0.7% of ASML shares. Additionally, Samsung’s collaboration with ASML continues to deepen. Reports suggest that Samsung is preparing to secure production of the next-generation High-NA EUV lithography machine, with the prototype expected to be unveiled later this year and commercial availability in the following year.

As for the semiconductor newcomer, Rapidus, obtaining ASML’s support is essential, given that EUV is a vital technology for mass-producing chips below 5-7nm. The latest reports from Japanese media indicate that ASML will establish a technical support base in Hokkaido, Japan, in 2024 and dispatch about 50 engineers to assist in setting up EUV lithography equipment in Rapidus’ 2nm chip factory’s pilot production line, offering assistance in commissioning, maintenance, and inspection.

The development of the major manufacturers in 2nm will be revealed in 2025

Leading traditional semiconductor foundries TSMC and Samsung, along with the emerging player Rapidus, are all actively positioning themselves in the 2nm chip landscape. So, how are these three companies progressing?

TSMC is targeting the production of N2 technology by 2025. Reports from June indicated that TSMC is fully committed, initiating preliminary preparations for the trial production of 2nm chips. In July, the TSMC supply chain revealed that TSMC had informed equipment suppliers to begin deliveries of 2nm-related machinery starting in the third quarter of the following year. In September, media reports revealed that TSMC had formed a dedicated 2nm task force, aiming to achieve risk production next year and commence mass production by 2025.

In June, Samsung announced its latest foundry technology innovations and business strategies, unveiling detailed plans and performance levels for 2nm process mass production. They plan to apply the 2nm process to mobile applications by 2025, expanding to HPC and automotive electronics in 2026 and 2027, respectively.

According to Rapidus’ plan, trial production of 2nm chips is set to begin in 2025, with mass production slated for 2027. In July, Rapidus President Atsuyoshi Koike stated that operating a trial production line in 2025 and commencing mass production in 2027 is an ambitious goal, but progress is on track. He noted that once the company’s 2nm process products go into mass production, their unit price will be ten times that of current Japanese-produced logic semiconductors.

With this timeline, it appears that the 2nm chips from these three semiconductor giants will first make their debut in 2025. At that time, the competition for advanced 2nm processes is expected to become even more intense.

(Photo credit: TSMC)

According to a report by China’s Jiwei, Intel’s recent sale of a 10% stake in IMS to TSMC has not generated much buzz in the industry. Most industry insiders view this transaction positively, considering the importance of IMS and TSMC’s vertical integration.

However, why did TSMC decide to purchase a 10% stake in IMS now, when the two companies have been collaborating on research and development for a decade?

The Importance of IMS

When it comes to semiconductor equipment, Dutch lithography giant ASML is a well-known name. However, it’s worth noting that in the semiconductor manufacturing process, the multi-beam mask writer provided by IMS is also crucial. Established in Vienna in 1985, IMS primarily focuses on advanced process node photomask manufacturing.

The significance of photomasks is undeniable. As processes evolve, the demand for photomasks continues to rise. It’s understood that the 14nm process requires approximately 60 photomasks, while the 7nm process demands around 80 to even hundreds of them. Correspondingly, photomask prices have been steadily climbing. According to IBS data, photomask costs are approximately $5 million in the 16/14nm process, but in the 7nm process, they rapidly increase to $15 million.

Within the total cost of photomasks, which includes equipment like writers and inspection tools, raw materials like quartz and photoresist, as well as software like OPC and MDP, the writer’s contribution is significant.

Experts analyze that without IMS’ multi-beam mask writer, all EUV process technologies would come to a halt, rendering ASML’s EUV equipment less useful. Furthermore, as lithography technology advances towards High-NA EUV, its progress relies on sophisticated mask writing tools. With advanced processes continually pushing forward, IMS technology will play a crucial role.

Perhaps recognizing the importance of mask writers early on, Intel invested in IMS as early as 2009 and ultimately acquired it in 2015. After years of effort, IMS has secured a dominant position in the multi-beam mask writer market, with reported its employees and capacity quadrupling since the acquisition, bringing substantial profits to Intel.

Delving deeper, there is a longstanding connection between TSMC and IMS.

Since 2012, TSMC has been collaborating with IMS to develop multi-beam mask writers for advanced technology nodes. Kevin Zhang, Senior Vice President, Business Development and Overseas Operations Office at TSMC, stated that this investment will continue their long-term partnership to accelerate innovation and achieve deeper cross-industry collaboration.

Regarding TSMC’s investment in IMS, research institutions have pointed out that TSMC has always pursued a vertical integration strategy to master various aspects of technology and resources in the semiconductor manufacturing field. Particularly noteworthy is TSMC’s in-house mask manufacturing, where the precision and quality of masks are crucial for chip performance. IMS can be seen as a key supplier to TSMC, providing critical products.

Industry experts also point out that TSMC’s decision may help them gain an advantage in the 2nm competition. As the competition in the 2nm transitions from three competitors to four, involving TSMC, Samsung, Intel, and Japan’s Rapidus, 2025 is poised to be a pivotal year. In the era of 2nm, not only will the use of ASML’s next-generation High-NA EUV equipment be essential, but also harnessing the power of mask writers. TSMC’s investment in IMS could solidify their collaboration and help them pull ahead of other competitors.

(Photo credit: IMS)