Both TSMC and Samsung plan to start production on the 2nm process in 2025, triggering an early battle for related orders. According to sources reported by the Financial Times (FT), Qualcomm intends to shift production of its next-generation high-end mobile chips from TSMC to Samsung’s 2nm process. Samsung, offering substantial discounts, is aggressively pursuing orders from major players like NVIDIA, posing a challenge to TSMC’s dominance.

According to reports citing insider information, TSMC has showcased its 2nm prototype test results to major clients like Apple and NVIDIA. Additionally, sources indicate that Samsung is not only planning to introduce its 2nm prototype but is also offering discounted prices, attracting interest from prominent clients, including NVIDIA.

The report highlights that Qualcomm is planning to use Samsung’s “SF2” (2nm) process for the next generation of high-end smartphone chips. Samsung, as the first company to globally mass-produce 3nm (SF3) chips last year, is also the pioneer in adopting the new Gate-All-Around (GAA) transistor architecture.

Samsung indicated that, “We have fully deployed and can mass-produce SF2 in 2025. Since we are the first company to enter and transform the GAA architecture, we hope that the progress from SF3 to SF2 will be relatively smooth.”

However, insiders have disclosed that Samsung’s yield for the most basic 3nm chips is only 60%, significantly below customer expectations. Moreover, when producing chips with complexity equivalent to Apple’s A17 Pro or NVIDIA graphics processing units (GPUs), the yield may further decrease.

Global giants such as Qualcomm and NVIDIA follow a diversified wafer foundry strategy, but they still rely heavily on TSMC for now. Previously, NVIDIA’s Chief Financial Officer, Colette Kress, hinted during the UBS Global Technology Conference that NVIDIA may consider Intel for the production of its next-generation chips, potentially breaking away from the exclusive partnership with TSMC for AI chips.

Now, Qualcomm is also exploring collaboration with Samsung for the 2nm process, intensifying the pressure on TSMC to address potential order losses from two major clients in advanced semiconductor manufacturing.

TSMC, on the other hand, informed the Financial Times that the development progress of its 2nm process is proceeding smoothly, and it is scheduled for production in 2025. When launched, it will represent the industry’s most advanced semiconductor technology in terms of density and energy efficiency.

In a previous investor conference, TSMC stated that there is significant customer interest and engagement in 2nm for high-speed computing and smartphone applications. It is expected that 2nm, when introduced in 2025, will be the most advanced semiconductor technology in the industry, comparable or even superior to 3nm at the same stage.

TSMC plans to launch the 2nm backside power rail solution in the second half of 2025, with mass production scheduled for 2026.

Besides TSMC and Samsung actively advancing towards 2nm and more advanced processes, Intel has also joined the competition. The Financial Times characterizes this race for the 2nm process as “shaping the future of a USD 500 billion industry.”

Intel is progressing along its previously set 5 process nodes in a four-year trajectory. The Intel 4 process is ready for mass production, and the Intel 3 process is planned for launch later this year. Intel CEO, Pat Gelsinger, has previously showcased the Intel 20A wafer, which is expected to enter the pre-production phase in the first half of next year. The Intel 18A process is scheduled for mass production in the second half of 2024.

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• [News] Intense Competition in Advancing Processes at the 2nm by Samsung, Intel, and TSMC

(Photo credit: Samsung)

The shortage of advanced packaging production capacity is anticipated to end earlier than expected. Industry suggests that Samsung’s inclusion in providing HBM3 production capacity has led to an increased supply of memory essential for advanced packaging. Coupled with TSMC’s strategy of enhancing advanced packaging production capacity through equipment modifications and partial outsourcing, and the adjustments made by some CSP in designs and placing orders, the bottleneck in advanced packaging capacity is poised to open up as early as the first quarter of the upcoming year, surpassing industry predictions by one quarter to half a year, according to the UDN News.

TSMC refrains from commenting on market speculations, while Samsung has already issued a press release signaling the expansion of HBM3 product sales to meet the growing demand for the new interface, concurrently boosting the share of advanced processes.

Industry indicates that the previous global shortage of AI chips primarily resulted from inadequate advanced packaging capacity. Now the shortage in advanced packaging capacity is expected to end sooner, it implies a positive shift in the supply of AI chips.

Samsung, alongside Micron and SK Hynix, is a key partner for TSMC in advanced packaging. In a recent press release, Samsung underscores its close collaboration with TSMC in previous generations and the current high-bandwidth memory (HBM) technology, supporting the compatibility of the CoWoS process and the interconnectivity of HBM. Having joined the TSMC OIP 3DFabric Alliance in 2022, Samsung is set to broaden its scope of work and provide solutions for future generations of HBM.

Previously, the industry points out that the earlier shortage of AI chips stemmed from three main factors: insufficient advanced packaging capacity, tight HBM3 memory capacity, and some CSPs repeatedly placing orders. Now, the obstacles related to these factors are gradually being overcome. In addition to TSMC and Samsung’s commitment to increasing advanced packaging capacity, CSPs are adjusting designs, reducing the usage of advanced packaging, and canceling previous repeated orders – all of which are the key factors.

TSMC’s ongoing collaboration with OSATs(Outsourced Semiconductor Assembly And Test) to expedite WoS capacity expansion is gaining momentum. NVIDIA confirmed during a recent financial calls that it has certified other CoWoS advanced packaging suppliers’ capacity as a backup. Industry speculation suggests that certifying the capacity of other CoWoS suppliers for both part of the front-end and back-end production will contribute to TSMC and its partners achieving the target of reaching a monthly CoWoS capacity of approximately 40,000 pieces in the first quarter of the next year.

Furthermore, previous challenges in expanding advanced packaging production capacity, especially in obtaining overseas equipment, are gradually being overcome. With equipment optimization, more capacity is being extracted, alleviating the shortage of AI chip capacity.

(Image: Samsung)

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• • [News] Memory Titans Vie for Control in HBM Tech, Who Will Shape the Next-Gen?
  • [News] Samsung Boosts 2.5D Packaging Equipment to Compete for TSMC’s CoWoS Orders
  • [News] The Alliance among Apple, TSMC, and Amkor May Pose Challenges to Samsung’s Advanced Packaging Strategy

According to Economic Daily News’ report, after a prolonged period of economy downturn, the market has gradually become optimistic about memories. The effective production reduction by the top five memory manufacturers has led to an increase in memory prices.

This, in turn, has prompted downstream module manufacturers to actively increase their procurement efforts, resulting in shortages of certain products. Industry source indicates that manufacturers, including Samsung and Micron, are expressing intentions to raise prices.

Memory Manufacturers Keen to Raise Prices, Future Demand Monitoring Required

On December 7th, Western Digital had sent out price increase notifications to its customers. In the notification, Western Digital stated that the company would review hard drive product pricing weekly, anticipating a price increase in the first half of the coming year.

Regarding flash memory components, the company expects prices to cyclically increase over the next few quarters, with the cumulative increase likely surpassing 55% of current levels.

It’s worth noting that, at present, many in the industry are optimistic about the cessation and rebound of NAND chip prices. However, currently, suppliers are individually notifying customers of adjusted quotes. In this context, Western Digital has directly issued a price increase notice to customers, with an expected remarkable increase, marking the industry’s first comprehensive significant price hike.

Meanwhile, the latest financial reports of many companies in the memory industry chain show significant improvement compared to the previous period.

Samsung Electronics reported a net profit of KRW 5.5 trillion (approximately USD 4.17 billion) in Q3, transitioning from a loss to profitability. In early November, South Korean media Pulse, citing conversations with numerous insiders in the semiconductor industry, reported that as the Q4 inventory clearance phase nears its conclusion, Samsung is considering a sequential price increase of 20% for Q1 and Q2 of the coming year.

On December 11th, SSD controller chip manufacturer Phison announced its performance report for November, with consolidated revenue reaching NTD 5.407 billion (approximately USD 171.8 million), representing nearly a 5% monthly growth.

According to Phison, the total shipment volume of SSD controller chips continued to recover in November. Among them, the total shipment volume of PCIe SSD controller ICs is expected to grow by nearly 40% year-on-year, setting a new record for the same period in history. This further substantiates the news of a significant surge in the memory market.

In the latest financial report from memory module manufacturer ADATA, the company’s consolidated revenue for October was NTD 3.791 billion (approximately USD 120.4 million), reflecting a monthly increase of 13.43% and a year-on-year increase of 39.59%.

ADATA’s Chairman, Simon Chen, recently mentioned that they anticipate the completion of NAND Flash inventory clearance by the end of this year or the end of January next year. There is an expectation that both DRAM and NAND Flash may face supply shortages next year. 

In addition, DRAM manufacturer Nanya Technology observes a price increase in DDR5, while DDR4 prices have stabilized. There is an expectation of a slight improvement in DDR4 and DDR3 prices in the fourth quarter.

NAND Flash spot prices have surged since the end of September, driven by a collective production cut from suppliers. TrendForce analyst Avril Wu recently mentioned that Samsung’s production capacity has reduced by almost half from its peak, indicating that even cost-efficient manufacturers like Samsung can no longer endure losses. It is suggested that the average wafer price has likely passed its lowest point.

From the supply side, recent industry reports indicate that memory manufacturers are employing a “delaying tactic” in the supply of NAND Flash for the fourth quarter. Module manufacturers attempted to finalize orders for millions of chips in September, but memory manufacturers were reluctant to release the products, and even when they were willing, the quantities and prices were unsatisfactory. Meanwhile, Samsung is reportedly pausing quotations and shipments for NAND products.

Looking ahead to the fourth quarter, the estimated average selling price increase for all NAND Flash products is expected to reach 13%, with an overall quarter-over-quarter revenue growth rate of over 20% in the NAND Flash industry.

It is worth noting that according to TrendForce analyst Avril Wu, with demand not showing explosive growth, the market will be focused on three key considerations. First, after production cuts, the decline in memory manufacturers’ inventory levels has begun, but it remains to be seen whether inventory can continue to shift towards buyers.

Second, it is anticipated that memory manufacturers’ production capacity will slowly increase, and if the market warms up, an early resumption of capacity could lead to supply-demand imbalances again. Lastly, whether end-demand can meet expectations for a recovery, with a particular focus on the sustained orders related to AI, will be crucial.

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• [News] NAND Flash Wafer Surges 25% in November – Continued Price Increases Depend on Manufacturers’ Expansion

(Photo credit: Samsung)

According to TechNews’ report, in the midst of production cutbacks by Samsung, SK Hynix, and Micron, NAND Flash wafer prices are surging.

As the traditional peak season for end-user stockpiling comes to an end, memory module manufacturers wish to position themselves favorably during a dip in demand. However, the reduced supply resulting from production cutbacks paradoxically elevates the demand for NAND Flash, intensifying the momentum of price rebounds. Memory module manufacturers are left with no choice but to accept the price increases imposed by memory manufacturers.

Fueled by the expectation that memory manufacturers will continue to raise prices, memory module manufacturers continue aggressive purchasing, contributing to an upward price trend in December.

Major memory manufacturers Samsung, SK Hynix, and Micron had previously announced significant production reduction plans. Samsung initiated a decrease in NAND Flash production from the second quarter and further expanded the reduction to 50% of total capacity in September, focusing mainly on products with less than 128 layers. This move instilled confidence in price hikes among industry peers.

Due to the unexpectedly substantial reduction in production by major memory manufacturers, coupled with generally low inventory levels on the client side, NAND Flash prices continue to rise.

In the latter half of this year, the demand for Mobile DRAM and NAND Flash (eMMC, UFS) has not only been driven by the traditional peak season but also stimulated by the production expansion goals of other Chinese smartphone brands, including the Huawei Mate 60 series. This sudden influx of demand is contributing to the price hikes in fourth-quarter contracts.

The most significant price surge in this wave is undoubtedly in NAND Flash wafer prices. According to the latest research from TrendForce, the current industry situation indicates that module manufacturers’ inventories have rapidly depleted due to increased orders from customers. This has prompted module manufacturers to turn to memory manufacturers, requesting expanded supply.

However, with memory manufacturers persisting in their production reduction strategies, the imbalance between supply and demand has led to a robust rebound in NAND Flash wafer prices in the fourth quarter. According to TrendForce’s data, the month of November alone witnessed a price increase of over 25% for NAND Flash wafers.

Industry sources reveal that in the current scenario of limited supply and significantly increased demand, module manufacturers have no choice but to accept the forceful price hikes imposed by memory manufacturers. The industry, anticipating that memory manufacturers will continue to raise prices, has resulted in a situation where “Everyone just keeps scrambling for inventory.”

Based on the current market conditions, TrendForce believes that in December, with tight supply, NAND Flash prices will continue to rise. However, whether prices will continue to surge significantly in the first quarter next year depends on the production reduction strategies of NAND manufacturers and the state of demand.

It is reported that there are industry rumors suggesting that some memory manufacturers are considering increasing production capacity due to the strong downstream demand. If memory manufacturers decide to increase its capacity earlier, coupled with unclear improvements in demand, the extent of price increases may be noticeably limited.

(Photo credit: Samsung)

Nvidia CFO, Colette Kress, recently hinted again that the next-gen chips might be outsourced to Intel Corp. During the call with semiconductor analyst Tim Arcuri at the UBS Global Technology Conference on November 28th, she was asked whether Intel would be considered as a foundry partner for the next-gen chips.

In response, she stated that there are many powerful foundries in the market. TSMC and Samsung Electronics have been great partners. She said, “we’d love to have a third one,” when answering whether Nvidia want a third partner.

Kress also mentioned that, TSMC’s and others’ US fab may also be their options, and “there is nothing necessarily different but again in terms of different region. Nothing will stop us from potentially adding another foundry.”

Kress highlighted that Nvidia’s current data center GPUs designed for AI and high-performance computing (HPC) are predominantly outsourced to TSMC. However, in the previous generation, Nvidia’s gaming GPUs were mainly entrusted to Samsung for fabrication. According to Sedaily, Samsung’s foundry was responsible for manufacturing Nvidia’s GeForce RTX 30 series gaming GPUs based on the Ampere architecture.

Speaking of foundry partners for AI products, Nvidia anticipates that TSMC will remain a crucial foundry partner for producing AI Hopper H200 and Blackwell B100 GPUs. Any additional orders might be entrusted to Samsung.

Nvidia CEO previously said Intel’s next-gen process test chips “look good”

Additionally, reports from Barron also mentioned that on May 30th, during an interaction with journalists in Taiwan, Nvidia CEO Jensen Huang was asked whether Nvidia is considering diversifying its supplier base given the rising tensions between the U.S. and China. In response, Huang referred to Nvidia’s long-standing collaboration with TSMC and Samsung Electronics, stating, “We have a lot of customers depending on us. And so our supply chain resilience is very important to us. We manufacture in as many places as we can.”

At that time, Huang also expressed, “We’re open to manufacturing with Intel. And (Intel CEO) Pat (Gelsinger) has said in the past that we’re evaluating their process, and we’ve recently received the test chip results of their next generation process and the results look good.”

From Nvidia CFO’s talk in November and Nvidia CEO’s response in May, it is obvious that, beyond TSMC and Samsung, Nvidia is thinking about a potential third foundry partner.

(Image: NVIDIA Hopper Architecture – H100 SXM)