According to a report from the South China Morning Post, the U.S. export controls, which are restricting China’s access to advanced chips and technology, have intensified China’s efforts to replace global semiconductor manufacturing equipment. However, industry sources have indicated that China still faces significant bottlenecks in this area.

The report mentions that Chinese semiconductor equipment companies like NAURA and AMEC are leading efforts to encourage local foundries to adopt domestic equipment.

Notably, sources cited in the same report also reveal that there is an unwritten rule among Chinese semiconductor fabs that locally-made tools should account for 70% of their production lines.

Per a report by TrendForce, Chinese manufacturers have achieved a self-sufficiency rate of 15% or higher in materials for mature processes, such as silicon wafers, photomasks, photoresists, electronic gases, and wet chemicals. However, items with a self-sufficiency rate still below 15% include photolithography equipment, photomasks, and EDA.

AMEC’s chairman and CEO, Gerald Yin Zhiyao, stated that China is expected to achieve a basic level of self-sufficiency in chip production equipment by this summer, something that was unimaginable just a few years ago.

He acknowledged that while there are still gaps in quality and reliability, China’s semiconductor supply chain can indeed achieve self-sufficiency. This, he suggested, is further evidence that U.S. export controls may have accelerated the development of China’s chip industry.

However, the report also pointed out that China remains constrained in one critical area: lithography technology, which is subject to the most stringent export controls.

Dutch company ASML is the sole supplier of Extreme Ultraviolet (EUV) systems, essential for producing advanced chips, and is also the main supplier of Deep Ultraviolet (DUV) systems needed for mature process chips.

President of foundry China Resources Microelectronics, Li Hong, stated that in 2023, only 1.2% of the lithography systems used by Chinese foundries was purchased from local suppliers.

In the second quarter of this year, ASML’s shipments to Chinese customers totaled EUR 2.35 billion, accounting for nearly half of its global sales. This indicates that China continues to rely heavily on ASML’s equipment in the legacy nodes, which is not subject to U.S. sanctions.

Paul Triolo, senior vice-president for China and technology policy lead at the U.S. consulting firm Albright Stonebridge Group, noted that the significant purchases of DUV lithography systems from ASML by Chinese companies highlight that SMEE, a major Chinese lithography equipment manufacturer, still lags behind ASML in reliably producing lithography systems for 28nm and below processes.

However, lithography technology is not the only bottleneck China faces. Li Hong also noted that the local supply ratios for ion implantation and inspection and metrology systems is only 1.4% and 2.4%, respectively.

As per Chinese customs data, the value of ion implantation systems imported by China in 2023 increased by 20% year-on-year to USD 1.3 billion.

A research report by Guohai Securities indicates as well that Chinese fabs rely heavily on metrology systems from companies like KLA, Applied Materials, and Japan’s Hitachi.

KLA reportedly holds a 50% global market share in inspection and metrology equipment.

An industry source cited in the report mentioned that the local supply ratio in the inspection and metrology sector is relatively low, with local substitution primarily occurring in lower-end products.

Read more

• [News] China Lists Semiconductor Self-Reliance Challenges, Excluding Lithography Equipment
• [News] ASML Former CEO Predicts Chip War Between China and the US May Persist for Decades

(Photo credit: ASML)

According to sources cited in a report from Commercial Times, in response to the global increase in chip orders and rapid AI development, TSMC is actively seeking available land to keep its most advanced process technologies in Taiwan.

Currently, TSMC has already planned three 2nm fabs at the Nanzih Technology Industrial Park in Kaohsiung, southern Taiwan.

Regarding the need for additional land to accommodate facilities for more advanced nodes beyond 2nm, the report notes that the Kaohsiung City Government has been proactively preparing by evaluating land availability, as well as water and electricity supply, for TSMC’s next-generation advanced technology production, specifically targeting the A14 (14 angstrom) process.

Yet, regarding the matter, TSMC has remained discreet and declined to comment on market rumors regarding the progress of expansion.

Reportedly, the Nanzih Park site has the capacity to accommodate up to five fabs for TSMC, and there are rumors that its fourth and fifth fabs are likely to focus on A14 process, although TSMC has yet to confirm this.

TSMC’s first 2nm process fab in Nanzih is expected to begin mass production in 2025. Per sources cited by the report, the node will be used in high-performance computing (HPC), smartphones, electric vehicles, and autonomous driving applications.

Earlier, concerns were raised about the progress of TSMC’s CoWoS advanced packaging plant due to the discovery of cultural heritage sites at the Chiayi Science Park.

However, sources cited by Commercial Times have pointed out that while there have been some delays due to cultural heritage issues, TSMC’s adjustment plan has been approved. The company will adjust its working procedures in order to proceed with construction according to the original schedule, with no changes to the completion timeline.

Read more

• [News] Samsung Expected to Unveil its 1nm Plan in June, Advancing it to 2026
• [News] Decipher TSMC’s Calm Take on High-NA EUV Lithography Machines: Who May Have the Last Laugh in the Angstrom Era?

(Photo credit: TSMC)

In spite of its skyrocketing profit in Q2 thanks to the strong AI demand for memory chips, Samsung Electronics might be still struggling with losses in its foundry business, according to reports by ijiwei and Technews.

Citing Korean media, the reports indicate that Samsung’s foundry business is expected to face operating losses amounting to several trillion Korean won in 2024. The reports note that one of Samsung’s major challenges may lie in securing major foundry clients, as improving its yield rates and technologies in advanced nodes remains the company’s top priority.

Samsung posted better-than-expected revenue and profit numbers in Q2, as its revenue grew 23% YoY to 74.07 trillion won (USD 53.45 billion). Its operating profit, on the other hand, soared 1,462% YoY to 10.44 trillion won. However, the semiconductor giant didn’t disclose individual data for the foundry and LSI businesses respectively, but only providing the performance of the Device Solutions (DS) division as a whole.

In its press release, Samsung attributed the robust Q2 performance of its DS division to the market recovery driven by HBM, conventional DRAM and server SSDs. The move has brought up concerns on whether the foundry business is still grappling with losses.

The reports, citing Korean sources, indicate that Samsung’s semiconductor business (excluding the memory division) might have suffered a loss of nearly 300 billion won during the quarter. In addition, Samsung Securities predicts that the non-memory division recorded an operating loss as much as 457 billion won.

An earlier report by Business Korea noted that as the demand for 3nm has been rising, big techs, including NVIDIA, AMD, Qualcomm, MediaTek, Apple and Google, tend to allocate their orders to TSMC. Even Intel’s Lunar Lake, which is expected to make debut in September, is said to be manufactured with TSMC’s 3nm. The strong demand has reportedly prompted TSMC to raise the price of its 3nm process by over 20%.

Thus, the reports by ijiwei and Technews suggest that Samsung’s top priority would be to attract major clients for its foundry business. If Samsung can improve the yield rate of its 3nm GAA (Gate-All-Around) technology in a timely manner, it could potentially increase its order volume and market share by offering more competitive pricing.

On the other hand, the reports note that Samsung’s foundry business needs to shift its focus from the smartphone sector to the high-performance computing (HPC) segment, which means Samsung will need to apply technologies such as Backside Power Delivery Network (BSPDN) to enhance product performance and competitiveness. In response, Samsung plans to introduce BSPDN technology potentially ahead of schedule, aiming to boost its competitiveness when it begins mass production of its 2nm process technology in 2025.

Read more

• [News] Samsung to Intensify Efforts for Capturing Intel’s Advanced Packaging Orders Shifting from TSMC
• TrendForce: Top 10 Global Foundries at 4.3% QoQ Drop in 1Q24 Revenue as SMIC Climbed to 3rd Spot

(Photo credit: Samsung)

According to a report from Korea media outlet Yonhap News Agency, South Korea’s memory export to Taiwan has surged by 225% in the first half of the year.

The primary driver of this increase is reportedly due to South Korean chipmaker SK hynix’s supply of HBM to U.S. AI chip giant NVIDIA, which packages its AI accelerators at Taiwan’s TSMC.

A researcher at the Korea Institutes for Industrial Economics & Trade, Kim Yang-paeng, also noted that the sharp increase in exports is likely related to SK hynix’s supplies for TSMC’s final packaging of AI accelerators.

The report from Economic Daily News further highlights the strong momentum in NVIDIA’s AI chip shipments, with TSMC, as the key manufacturing partner, receiving steady advanced process orders.

The report from Yonhap News Agency also cited data from the industry ministry and the Korea International Trade Association released on August 11th, showing that South Korea’s memory exports to Taiwan in the first half of the year grew by 225.7% year-on-year, reaching USD 4.26 billion.

This growth significantly outpaces the overall increase in South Korea’s memory exports, which was 88.7%. Additionally, Taiwan has become South Korea’s third-largest market for memory exports in the first half of the year, climbing two spots to surpass Vietnam and the United States.

Another Korean media outlet, The Korea Herald, noted that since the 2010s, South Korea’s annual memory exports to Taiwan have ranged between USD 1 billion and 4 billion. The latest data indicates that this year’s export volume may set a new record, potentially reaching USD 8 billion.

Read more

• [News] SK hynix CEO: Demand for Memory Chips to Remain Robust until 1H25, Driven by HBM
• [News] Samsung’s 8-layer HBM3e to Start Mass Production in Q3, Driving HBM Sales to Soar 3-5 Times in 2H24

(Photo credit: SK hynix)

Japanese semiconductor equipment maker Tokyo Electron (TEL) has raised its profit forecast for the fiscal year 2024 (ending March 2025), expecting an operating profit of JPY 627 billion (approximately USD 4.3 billion), an 8% increase from its previous guidance.

Tokyo Electron contributed the strong growth trend compared to the previous fiscal year, driven by China’s significant investment in mature semiconductor nodes. The company has also raised its sales and profit outlook for the period from April to September.

For the quarter ending in June, Tokyo Electron reported revenue of JPY 555 billion, reversing a declining trend seen since 2022. Operating profit for these three months was JPY 165.7 billion.

Source: TEL

The past year, to Tokyo Electron, has been in turbulence year, as initial optimism from AI demand and the semiconductor manufacturing industry was tempered by U.S. export restrictions.

Regarding the matter, Hiroshi Kawamoto, finance division officer of Tokyo Electron, stated in a conference call that there are currently no signs of the U.S. implementing stricter restrictions on chip-making tools, while the company will continue to closely monitor the situation.

As of the quarter ending in March, over 47% of its revenue came from China due to increased equipment stockpiling in anticipation of potential U.S. sanctions. In the recent quarter, nearly 50% of revenue was generated from the Chinese market.

Source: TEL

Looking ahead to the next fiscal year (FY2025), Tokyo Electron expects double-digit growth, driven by strong demand for AI servers and an increase in AI-enabled PCs and smartphones.

This resurgence in demand is anticipated to boost the market. The company expects further expansion in DRAM production and a recovery in NAND investment due to inventory adjustments. However, investment in advanced logic and foundry services is expected to offset the slowdown in mature process technologies.