According to a report from UDN, TSMC held a groundbreaking ceremony yesterday for its Dresden, Germany plant, offering a significant boost to the EU’s efforts to stabilize its chip supply.

TSMC Chairman C.C. Wei led a team of top executives at the event, joined by key officials including German Chancellor Olaf Scholz. European Commission President Ursula von der Leyen also attended, bringing with her the announcement that the EU has approved a EUR 5 billion subsidy for the Dresden plant.

TSMC announced last August that it would partner with Bosch, Infineon, and NXP Semiconductors to establish the European Semiconductor Manufacturing Company (ESMC) in Germany.

The joint venture will construct a 12-inch wafer plant, with TSMC holding a 70% stake, while Bosch, Infineon, and NXP each hold 10%. Construction is planned to start in the second half of this year, with mass production expected by the end of 2027.

The planned fab is expected to have a monthly production capacity of 40,000 12-inch wafers on TSMC’s 28/22 nanometer planar CMOS and 16/12 nanometer FinFET process technology.  TSMC will be responsible for the plant’s operations.

Following the U.S.-China tech war, the EU passed the “Chips Act” to fully support the development of the semiconductor industry, attracting key investments from companies such as TSMC, Intel, Belgium’s IMEC, GlobalFoundries, and GlobalWafers, all of which sought subsidies for their new European operations.

TSMC’s joint venture proposal, exceeding EUR 10 billion, stands as the largest global direct investment in Saxony’s history.

When C.C. Wei took the stage, he began by thanking the German government. He revealed that when he first met with the German Chancellor, he had prepared a polite speech to decline the offer of building a plant in Germany.

However, when the Chancellor mentioned that a budget had already been reserved for TSMC, Wei eventually found himself agreeing to the project.

C.C. Wei further highlighted that TSMC’s total investment in the German plant exceeds EUR 10 billion and is expected to create around 2,000 jobs.

He explained that the decision to locate the plant in Dresden was due to its proximity to TSMC’s customers and access to a large pool of talented individuals. Wei also pledged to continue recruiting and nurturing talent in the region, with the goal of making ESMC the most important semiconductor manufacturing hub in Europe.

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(Photo credit: TSMC)

Recently, two industrial moves took place in Shanghai’s integrated circuit (IC) sector.

First, the Shanghai Integrated Circuit Industry Investment Fund (Phase II) Co., Ltd. (hereinafter referred to as “Shanghai IC Industry Fund Phase II”) received a substantial capital increase.

Second, 14 key IC-related projects were signed and officially launched in Shanghai’s Lingang area on August 19, involving companies such as SICC, JHETECH, SIMIC, and Shanghai Institute of IC Materials (SICM) with a total investment of CNY 28.8 billion.

• The Capital of Shanghai IC Industry Fund Phase II Increased to CNY 14.5 Billion

Recently, the business registration information of Shanghai IC Industry Fund Phase II was updated, showing a significant increase in registered capital from CNY 7.6 billion to CNY 14.53 billion. Moreover, Shanghai Pudong Innovation Investment Development (Group) Co., Ltd. was added as a new shareholder, and some key personnel changes were made.

The Shanghai IC Industry Fund was founded in 2020. In June 2024, Shanghai AST announced the successful completion of its Series C financing round, with Shanghai IC Industry Fund Phase II among the investors, which has also invested in companies such as Hailin Microelectronics, SMIC, JCET, and GTX.

It is worth noting that this is the second capital increase for Shanghai IC Industry Fund Phase II. It’s learned that the fund’s initial registered capital was CNY 5.4 billion, which increased to CNY 7.6 billion in January 2022.

• Several IC Industry Funds Established

In 2016, Shanghai Integrated Circuit Industry Investment Fund Co., Ltd. (hereinafter referred to as “Shanghai IC Industry Fund Phase I”) was established with an initial fundraising scale of CNY 28.5 billion, making it the largest local IC industry fund in China at that time, with a focus on investing in IC manufacturing sector.

The National Integrated Circuit Industry Investment Fund ( “Big Fund”) was among the investors, currently holding a subscribed capital of CNY 3 billion and a 17.01% stake.

Up till now, Shanghai IC Industry Fund Phase I has invested in 14 companies, including HLMC Microelectronic, Hailin Microelectronics, Everdisplay, SMIC, GTA, HLMC IC, SouthChip, Zhaoxin, Unisoc, InnoGrit, and ACM, covering areas such as design, manufacturing, and equipment.

In July 2024, following the establishment of Shanghai IC Industry Fund Phase I and Phase II, Shanghai took further action by setting three new leading industry mother funds. It is reported that the funds invested a total of CNY 89.003 billion, respectively targeting three major industries: IC, biomedicine, and AI.

Among these, the IC mother fund has a capital of CNY 45.001 billion, focusing on areas including but not limited to IC design, manufacturing, packaging and testing, equipment materials, and components.

The AI mother fund, with a scale of CNY 22.501 billion, eyes fields such as intelligent chips, intelligent software, autonomous driving, and intelligent robots.

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• [News] China Imports 32 Lithography Systems in 2 Months, Shanghai and Beijing Top Buyers
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(Photo credit: JCET)

China has long been the preferred location for tech companies to establish their supply chains. However, in recent years, the decline in population dividends has led to rising labor costs, and the need for tech companies to mitigate the impact of geopolitical risks has prompted them to accelerate the relocation of supply chains out of China, with some shifting production capacity to Southeast Asia and South Asia.

Recently, as per a report from TechNews citing sources, it’s indicated that HP is considering moving more than half of its personal computer production away from China to countries like Thailand and Vietnam.

This move is primarily aimed at significantly reducing its reliance on China’s supply chain, as well as addressing global trade dynamics and the need to lower costs.

In addition to HP, several well-known tech companies are also shifting their supply chains to Southeast Asian and South Asian countries.

• Apple

One notable example of supply chain relocation is Apple. Having long relied on China’s supply chain, Apple is now finding that the era of full dependence on China is coming to an end due to political and commercial pressures.

iPhone

As one of Apple’s most important products, iPhone has been a key focus in this shift.

Although supply chain diversification was always part of Apple’s strategy, the plan has been accelerated following a series of disruptions at Foxconn’s Zhengzhou plant during the pandemic. These events have compelled Apple to expedite its efforts to diversify its supply chain.

According to a report from Business Standard, since April of this year, Apple has assembled iPhones worth USD 14 billion in India, with 14% of iPhones now being manufactured there.

Rajeev Chandrasekhar, India’s former Union Minister of State for Electronics and Information Technology, also stated on the X platform that by 2028, it is estimated that up to 25% of iPhones will be made in India.

iPad

In addition to iPhone, Apple has also started shifting part of its iPad production to Vietnam. Foxconn is responsible for manufacturing iPads in Vietnam, where mass production and shipments are already underway.

MacBook

Similarly, the MacBook production line has been partially moved out of China and relocated to Vietnam, which is primarily produced by Quanta and Foxconn in their Vietnamese facilities.

Earlier rumors cited by Nikkei have suggested that Apple was considering shifting some of its production to Thailand as well. However, Thailand’s supply chain for key components is not yet fully developed, with many parts still reliant on imports from China.

The associated transportation costs and the risk of potential damage during transit have led Apple to prioritize setting up production lines in Vietnam first.

Nevertheless, Thailand’s strong electronics manufacturing infrastructure and cost advantages make it a potential future production site for Apple.

As semiconductor giants, including Intel, TSMC and Samsung, have been competing fiercely in the Angstrom era for advanced nodes, the progress on their adoption of ASML’s High-NA EUV (high-numerical aperture extreme ultraviolet) equipment has been brought back into spotlight lately. However, the semiconductor market, which seems to get more polarized in the meantime, may rely more on China than most people have imagined.

ASML: China is Ten Years behind the U.S. regarding Cutting-edge Chips

In May, without the assistance for extreme ultraviolet (EUV) lithography machines manufactured by ASML, China’s largest foundry, SMIC, is rumored to produce 5nm chips for Huawei this year. However, ASML’s CEO has denied the possibility that China would be able to replicate EUV technology.

According to an interview by Germany media Handelsblatt in July, ASML CEO Christophe Fouquet stated that the EUV technology, which the Dutch semiconductor heavyweight boasts of, is highly complex. Wccftech, citing Fouquet’s remarks in the interview, noted that it would be extremely difficult for China to replicate because the country lacks the know-how.

Citing Fouquet, the reports noted that regarding the development of cutting-edge chips, China is about ten years behind the U.S.

The World in Dire Need of the Legacy Chips Produced by China

However, Fouquet argued that chip buyers, including those in the German automotive industry, are in need of older generation computer chips, an area in which Chinese chipmakers are currently increasing their investments.

His remarks highlight the importance of China’s semiconductor production for global markets, which may still thrive under U.S. export restrictions.

According to the reports, Fouquet stated that though global demand for the legacy chips have been soaring dramatically, Europe cannot even meet half of its own needs. As manufacturing these chips is not very profitable, Western firms are not investing enough in the sector, Fouquet said.

Therefore, neither did he agree with the extensive, tightening chip controls recently. Fouquet noted that it doesn’t make sense to prevent someone from producing something you need.

Peter Wennink, former CEO of ASML, stated in July that the chip war between China and the US lacks factual basis and is entirely driven by ideology. Wennink also anticipated that this chip war will not be resolved anytime soon and could potentially persist for decades.

China Contributes up to 50% Revenue of the World’s Top 5 Chip Equipment Makers

Take a look at the latest financial results of the world’s top semiconductor equipment manufacturers, and we may find where the strong momentum of China has led to.

ASML, as the world’s exclusive EUV provider, reported second-quarter earnings and sales (USD 6.8 billion) that beat forecasts, as AI chips drives up demand for the Dutch firm’s critical semiconductor making equipment.

More importantly, regarding ASML’s sales in lithography units in the second quarter of 2024, China emerged as the largest market, as it contributed 49% of the revenue, higher than South Korea’s 28% and Taiwan’s 11%.

It is worth noting that a year ago, in the second quarter of 2023, China only accounted for 24% of ASML’s sales in lithography units, while Taiwan and South Korea contributed 34% and 27%, respectively. The results, in a way, have reflected China’s ambition and importance in chip making, as Fouquet noted.

Despite export controls, China has also become the largest market by region for U.S. semiconductor equipment giant, Applied Materials. In the second quarter, China accounted for 43% of its total sales of Applied Materials, a 22 percentage point increase YoY, while Taiwan and South Korea contributed 15% and 15%, respectively.

The dominance of the Chinese market is also evident with other major semiconductor equipment makers. China contributed 39% of Lam Research’s revenue in the June quarter, 2024, much higher than 26% a year ago.

Tokyo Electron, on the other hand, attributed as high as 49.9% revenue to China for the first quarter of its 2025 fiscal year, compared with 39.3% a year ago. China accounted for 44% of KLA’s revenue in the June quarter, 2024.

As DUV systems, which have not been extensively regulated, can still be applied to nodes down to 7nm, or even 5nm, Chinese chipmakers, with the support of government, may continue to hold a significant position in the global semiconductor ecosystem.

Read more

• [News] ASML Former CEO Predicts Chip War Between China and the US May Persist for Decades
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The World Integrated Circuit Association (WICA) recently released its 2023 ranking of the top 100 cities in the global semiconductor industry. According to the list, the U.S. and China each have 26 cities represented, leading the rankings. South Korea, Japan, and Taiwan have 9, 9, and 5 cities listed, respectively.

Notably, Shanghai and Beijing have secured spots in the top ten, ranked fifth and ninth globally, highlighting China’s growing potential and prominence in the semiconductor industry.

In the WICA’s recently released “2023 Global Semiconductor Industry Comprehensive Competitiveness Top 100 Cities White Paper” (referred to as the white paper), the top five cities are identified as Santa Clara, Hsinchu, Seoul, San Jose, and Shanghai.

The white paper highlights that China has the largest semiconductor application market in the world, with a complete industry chain. The design and manufacturing sectors are at a mid-level globally, with a significant number of design companies and substantial growth. Additionally, China’s packaging and testing technologies have reached the forefront globally.

Reportedly, China’s semiconductor industry is poised for continued robust growth, driven by expanding demands in automotive electronics, the Internet of Things (IoT), industrial control, and new energy, supported by favorable policies and financial resources.

As per the white paper, Shanghai is home to several semiconductor giants, such as SMIC, Hua Hong Semiconductor, Unisoc, and AMEC, serving as a major hub for China’s semiconductor industry. In recent years, Shanghai’s semiconductor sector has reportedly sustained its growth, developing a complete industry chain from design and manufacturing to packaging and testing.

The white paper further notes that Beijing also hosts numerous key semiconductor companies, including Tsinghua Unigroup, SMIC, Naura, and GigaDevice. The city has gradually become a core area in the global semiconductor industry, with a well-developed industry chain covering design, manufacturing, and packaging/testing, forming a relatively complete industrial ecosystem.

Read more

• [News] China Makes Progress in Chip Tool Self-Sufficiency, Yet Lithography Remains a Key Bottleneck
• [News] SIA Reports China’s June Semiconductor Sales Increase by Over 20% YoY

(Photo credit: SMIC)