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)

DRAM Spot Market

In the spot market, prices have been rising noticeably in the recent period, and demand has also rebounded marginally. Also, because the supply of rebelled used chips has shrunk slightly, price hikes have been most significant for chips belonging to the bottom of the price range. On the other hand, spot buyers have become somewhat hesitant in the past two or so days because the price hikes are too rapid. They are now less willing to accept higher prices than before. Since the overall demand for DRAM products has yet to turn around, spot prices are expected to continue to fluctuate. The average spot price of the mainstream chips (i.e., DDR4 1Gx8 2666MT/s) rose by 0.13% from US$1.498 last week to US$1.500 this week.

NAND Flash Spot Market

A price increase is seen among finished products, including memory cards, USB flash drives, and eMMC, from the spot market recently due to the diminished supply of wafers, which resulted in a significant rebound in spot quotations for NAND Flash. With that being said, buyers are not all that willing to follow up with the corresponding prices that had a significant jump within a short period and have slightly stagnated in procurement. 512Gb TLC wafer spots have climbed at 3.96% this week, arriving at US$1.757.

In recent developments, an industry source revealed that Coherent, a leading chip material supplier in the U.S. automotive industry, has piqued the interest of four major Japanese corporate groups with regards to its silicon carbide (SiC) business, with a transaction amount potentially reaching $5 billion.

The four Japanese companies involved are DENSO, Hitachi, Mitsubishi Electric, and Sumitomo Electric, and discussions have been underway regarding the acquisition of minority stakes in Coherent’s SiC business.

Coherent had previously stated its intention to invest $1 billion over the next decade to expand the production of SiC wafers. Compared to traditional silicon chips, SiC wafers contribute to improved electric vehicle range. If this investment materializes, it would significantly ease the financial burden on the company. However, no concrete agreements have been reached at this stage.

Data indicates that Coherent is one of the few companies globally with complete and vertically integrated SiC manufacturing capabilities. It can produce SiC wafers and epitaxy materials, extending all the way to power devices. Furthermore, Coherent’s SiC materials are known for their exceptional quality, making it nearly the only supplier capable of transitioning from the current standard wafer diameter of 150 millimeters to 200 millimeters successfully. The production of larger diameter wafers can substantially reduce device costs. Additionally, Coherent’s SiC power devices demonstrate excellent heat resistance and conductivity.

Competition and Collaboration in the Japanese SiC Industry

According to TrendForce’s latest analysis, as collaborations between companies like Infineon and ON Semiconductor with automotive and energy sector stakeholders become more apparent, the overall SiC power device market is projected to reach $2.28 billion in 2023, growing at an annual rate of 41.4%.

Meanwhile, buoyed by robust demand in downstream application markets, TrendForce anticipates that the SiC power device market could reach $5.33 billion by 2026, with its primary applications continuing to center around electric vehicles and renewable energy.

In recent years, the new energy vehicle industry has been thriving, and Si power devices have gradually fallen short of meeting the demands of new energy vehicles. SiC, as its alternative, has shown remarkable performance in applications, making it highly sought after in the market. The SiC power device market still has considerable room for growth, prompting both automotive and SiC companies to invest in SiC power device production or enhancements.

Japan, being a leader in semiconductor power device manufacturing and production, has numerous companies actively expanding to broaden their market reach.

On October 4th last year, Nikkan reported that Hitachi Power Semiconductor Device would invest several billion yen, aiming to triple its SiC power semiconductor production capacity by fiscal year 2026.

On July 12th this year, ROHM announced its acquisition of the former Solar Frontier factory in Kunitomi, Miyazaki, to expand its SiC power semiconductor production capacity. The acquisition is set to conclude in October 2023 and is planned to become the company’s main factory, primarily producing SiC power semiconductors. It is expected to increase its silicon carbide capacity to 35 times that of the fiscal year 2021 by 2030.

With these competitive and cooperative scenarios unfolding, it’s evident that neither automotive nor SiC companies are holding back in their pursuit of SiC power device production or improvements.

In July this year, Renesas Electronics signed a 10-year agreement and paid $2 billion in advance to Wolfspeed for the supply of 150mm bare and epitaxial SiC wafers. Renesas Electronics also reached an agreement with Mitsubishi Electric, with Mitsubishi investing 260 billion yen in technology and expansion, including the construction of a new SiC factory in Japan.

As a technological leader in producing SiC substrates, epitaxy, and power devices, Coherent is not to be overlooked by these major corporations.

On May 26th this year, Coherent and Mitsubishi Electric announced that they had signed a MOU and reached a project collaboration agreement to jointly scale up the mass production of SiC power electronic products on a 200mm technology platform.

Mitsubishi Electric announced that it would invest approximately 260 billion yen over a five-year period ending in March 2026, with approximately 100 billion yen dedicated to constructing a new SiC power device factory based on a 200mm technology platform and strengthening related production facilities. According to the MOU, Coherent will develop 200mm n-type 4H SiC substrates for Mitsubishi Electric’s future SiC power devices to be produced at the new factory.

In the future, Mitsubishi Electric aims to produce large quantities of silicon carbide chips using Coherent’s 200mm wafer technology in the Japanese market.

In the 2023 fiscal third-quarter earnings conference call, Mary Jane Raymond, the Chief Financial Officer of Coherent Inc., mentioned that the revenue composition of the company’s four main markets is as follows, based on regional distribution: North America accounts for 53%, Europe accounts for 20%, Japan and Korea account for 14%, China accounts for 11%, and 3% goes to other regions worldwide.

For Coherent, capturing 14% of the sales in the Japanese and Korean markets is highly significant. If Coherent continues its collaboration with Japanese partners, it is highly probable that the production capacity of SiC power devices in Japanese-related companies will be increased. Additionally, this will allow Coherent to further expand its influence and presence in Japan.

(Photo credit: Coherent)

In the era of increasing electric vehicle penetration and automotive electrification, the future of cars resembles smartphones on wheels, demanding substantial computing power for advanced autonomous systems. As a result, future vehicles equipped with high-end self-driving systems are akin to mobile data centers. With the growth rate of the consumer electronics market slowing down, Self-Driving System-on-Chip (SoC) has become a crucial avenue for IC design firms to expand.

TrendForce Insights:

• Sluggish Growth in Consumer Electronics Market Spurs IC Design Firms to Focus on Self-Driving SoCs

With the deceleration in growth of mainstream consumer electronics products like smartphones and PCs, IC design firms are venturing into the automotive sector, with Self-Driving SoCs emerging as a key area of expansion. Key competitors in this space include NVIDIA, Mobileye, Qualcomm, Ambarella, and Horizon Robotics. Qualcomm, with solutions spanning smart cockpits, ADAS, and V2X, showcases its advantage in entering the automotive sector after years of success in the smartphone market. To avoid sustained dominance by international giants in the Chinese smart cockpit market, Chinese companies such as Siengine Technology, Navinfo, Autochips, Semidrive, Huawei, Rockchip, and Unisoc are actively entering this market.

• NVIDIA and Qualcomm Offer Broad Computing Capabilities, While Mobileye, Ambarella, and Horizon Robotics Bring Unique Strengths

NVIDIA and Qualcomm offer Self-Driving SoCs with broad computing capabilities. Initially targeting Level 4 and above autonomous driving, NVIDIA has adjusted its focus to Level 3 and below due to regulatory delays. Its high-computing SoCs cater to the computing needs of both smart cockpits and self-driving systems, achieving a “cockpit-and-drive integrated” approach. Qualcomm’s products cover computing requirements from Level 1 to 4. Intel’s Mobileye emphasizes low power consumption and integrates image sensing hardware and software. Both Ambarella and Mobileye possess core computer vision technologies, while Horizon Robotics provides highly open platforms to developers, offering software development tools (AIDI) and cloud-based AI training platforms. Horizon Robotics is also poised to benefit from China’s domestic production plans.

• NVIDIA’s Collaboration with MediaTek (Dimensity) is Crucial for Hardware-Software Integration

In May 2023, NVIDIA announced a partnership with MediaTek (Dimensity) to target the automotive market, with a focus on smart cockpits. NVIDIA concentrates on the main computing chips for in-vehicle computers and essential software, while MediaTek specializes in peripheral audiovisual entertainment and V2X communication systems. In Dimensity Auto, NVIDIA’s GPU and software are integrated, enabling the development of smart cockpit solutions. However, the collaborative car SoC development between MediaTek and NVIDIA is expected to launch by the end of 2025, with mass production slated for 2026-2027, necessitating a wait-and-see approach for the results of this collaboration.

Currently, high-end vehicles have software lines of code (SLOC) exceeding 100 million lines, more than double that of a PC. Vehicles with Level 5 self-driving systems in the future could potentially have over 1 billion lines of code. In the era of Software Defined Vehicles (SDV), hardware-software integration will be the key to competitiveness for manufacturers. NVIDIA, dominating the AI market with its CUDA platform, is well aware of this fact. Consequently, the results of NVIDIA’s collaboration with MediaTek (Dimensity) are highly anticipated.

(Photo credit: MediaTek)

According to Taiwan’s TechNews, with the ongoing reduction in production by major memory manufacturers and the visible benefits of inventory clearance in the market, NAND Flash prices are beginning to rebound, and DRAM prices are expected to follow suit. This signals a ray of hope for memory manufacturers who have endured the longest-ever price downturn, finally seeing light at the end of the tunnel.

To reduce losses, NAND Flash suppliers have implemented multiple production cuts since 2023, aiming to lift prices and halt further declines. This strategy has started to yield results, with reports of wafer contract prices for NAND Flash rebounding in August and continuing to rise in September, putting NAND Flash ahead of DRAM in its recovery.

Samsung, a leading player, has continued its production cuts, mainly focusing on products with less than 128 layers. Their September output decreased by nearly 50%, prompting other manufacturers to follow suit and demonstrate the benefits of inventory adjustments. Market experts also predict that NAND Flash prices will continue to rise in the fourth quarter. TrendForce is optimistic about NAND Flash pricing for Q4, estimating an increase of around 3% to 8%, higher than the initial projection of 0% to 5%.

While DRAM price increases have lagged behind NAND Flash, the benefits of production cuts by major manufacturers and accelerated inventory clearance are expected to lead to a gradual price rise starting in the fourth quarter. Market expectations are that this upward trend will mark the beginning of the next growth cycle.

Industry experts point out that the rise in DRAM prices is not only due to factors like production cuts and inventory clearance but also linked to the artificial intelligence market. The demand for DDR5 in the data center market driven by AI applications has limited capacity supply, leading to an early price surge. Additionally, DDR3, which major manufacturers have gradually phased out but still has market demand due to limited supply, is experiencing a significant price increase.

As for the current mainstream DDR4, although manufacturers are working to clear substantial inventories in hopes of boosting prices, there is still unfavorable news in the market. Intel’s new Meteor Lake computing platform only supports DDR5 and not DDR4, which poses additional challenges for manufacturers with high DDR4 inventories.

(Photo credit: Samsung)