Last week, following TSMC’s release of better-than-expected third-quarter earnings, the U.S. S&P 500 index hit a new record high. In the bond market, U.S. Treasury yields remained largely unchanged, with the 10-year minus 2-year yield spread holding at 13 bps. Meanwhile, the U.S. dollar index continued to rise to around 103, reflecting the weakened economic outlook in Europe, which has led the European Central Bank (ECB) to adopt a more accommodative stance.

Key Economic Data Review for Last Week:

U.S. Retail Sales (September): Retail sales in September grew by 0.4% month-over-month (previous: 0.1%), surpassing the market expectation of 0.3%. Core retail sales increased by 0.7% (previous: 0.3%). Overall, U.S. consumer spending remains robust. According to a Federal Reserve survey, the current growth in retail sales is likely driven by higher-income groups, whose asset prices have risen significantly due to the wealth effect during the pandemic, making their consumption more resilient.

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Eurozone Interest Rate Decision: As expected, the ECB cut interest rates by 25 bps, bringing the deposit facility rate, the main refinancing rate, and the marginal lending facility rate down to 3.25%, 3.40%, and 3.65%, respectively. The ECB indicated that inflation is expected to rise in the coming months before falling back to the target range next year. Recent data, however, shows that economic growth has been weaker than anticipated, particularly in the manufacturing sector and exports. Although easing policy restrictions and rising real wages may boost economic growth, overall risks to growth remain tilted to the downside.

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China’s Monthly Data & GDP (10/18): China’s September economic data showed initial signs of improvement. Retail sales grew by 3.2% year-over-year (previous: 2.1%), exceeding the market expectation of 2.5%. Industrial output grew by 5.4% year-over-year (previous: 4.1%), also beating the market expectation of 4.6%. However, third-quarter GDP grew by 4.6% year-over-year (previous: 4.7%), with cumulative GDP growth for the first three quarters at 4.8%, still below the full-year target of 5.0%.

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Key Economic Data Review for This Week:

China LPR (10/21): In mid-September, the People’s Bank of China (PBoC) implemented a series of large-scale monetary easing policies, including interest rate cuts, reserve requirement ratio (RRR) reductions, and housing loan rate cuts. At the end of September, the PBoC also lowered the 7-day reverse repo rate by 0.2% to 1.5%. The market expects that the 7-day reverse repo rate will guide the 1-year and 5-year Loan Prime Rates (LPR) down by 25 bps to 3.1% and 3.6%, respectively.

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Canada Interest Rate Decision (10/23): In its September monetary policy decision, the Bank of Canada cut interest rates by 25 bps to 4.25%. With inflation and growth risks in Canada continuing to rise, the market expects the central bank to implement its fourth consecutive rate cut this month, with the possibility of a larger 50 bps cut this time.

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According to a report by the Economic Daily News, U.S. chip giant Marvell Technology has announced that it will raise prices across its entire product line starting January 1 next year, marking the first major price hike in the optical communications sector.

Marvell’s strong financial performance last quarter, fueled by surging demand for AI-related products like ASICs and silicon photonics for data centers, surprised the market. The decision to raise prices is seen by industry insiders as not only a move to capture emerging opportunities but also a reflection of the continued investment in cutting-edge and innovative product development to meet growing market demand.

The Economic Daily News cited a leaked price hike notification letter signed by Marvell’s Senior Vice President of Global Sales, Dean Jarnac. The letter highlighted that the global demand for accelerated computing and AI is driving unprecedented investments across the semiconductor supply chain, including expanding production capacity and establishing diverse manufacturing bases. Marvell is no exception, and it plans to continue investing heavily in innovation to deliver advanced products and technologies to its customers.

Jarnac explained that the price increases, effective January next year, are necessary to support expanded investment levels. He assured customers that Marvell will minimize the price hike’s impact as much as possible and urged them to place orders based on delivery schedules and provide accurate demand forecasts.

Marvell’s stellar quarterly results were driven by the booming AI demand, which boosted its data center business far beyond market expectations. Key growth drivers included optical products like 800G PAM and 400ZR data center interconnect (DCI) solutions.

“Marvell’s second quarter revenue grew 10% sequentially, above the mid-point of guidance driven by strong demand from AI. We saw strong growth from our electro-optics products, and our custom AI programs began to ramp,” said Matt Murphy, Marvell’s Chairman and CEO, in an August press release. “Next quarter, we expect our combined enterprise networking and carrier end markets to return to growth, while our data center end market growth accelerates. As a result, for the third quarter of fiscal 2025, we expect all our end markets to grow sequentially, with consolidated revenue forecasted to grow 14% sequentially at the mid-point, accompanied by a significant increase in operating leverage.”

(Photo credit: Marvell)

Rumors have been circulating for a while that China’s tech giants are capable of manufacturing chips in advanced nodes even without the need for extreme ultraviolet (EUV) lithography machines by ASML, and that local foundry SMIC has reportedly produced 5nm chips for Huawei. Now there seems to be a new member joining the ranks of the elite. According to the reports by MyDrivers and Wccftech, Xiaomi has successfully taped out its first 3nm SoC.

Though more details are yet to be confirmed, Wccftech indicates that it is possible that Xiaomi will launch the 3nm chipset sometime next year.

Xiaomi, according to the reports, has been developing its own custom chipsets for years. The first product is believed to be Surge S1, which was released with the Mi 5c smartphone in 2017. The report by MyDrivers suggests that the Surge S1, built on 28nm node, is a 64-bit octa-core processor.

Following the Surge S1, Xiaomi went on to develop several chips, reportedly including the Surge C1, Surge G1, and Surge T1, according to MyDrivers.

The information of Xiaomi’s recent success in its 3nm chip tape-out is reportedly disclosed by Tang Jianguo, Chief Economist of Beijing Municipal Bureau of Economy and Information Technology, at Beijing Satellite TV, MyDrivers notes. Citing Tang’s remarks, Wccftech indicates that the achievement is described as a historic milestone for China.

Wccftech further notes that as companies like Huawei have been prohibited from doing business with TSMC or Samsung due to U.S. trade sanctions, if Xiaomi does have reached the tape-out stage for its 3nm chipset, it could enable other Chinese companies, including Huawei, to leverage this technology in their devices.

However, more details are yet to be confirmed, as there are no updates on whether the SoC will use TSMC’s N3E process or the more advanced N3P node, according to Wccftech. Additionally, details about the chipset’s CPU cluster, GPU, or whether it will feature ARM designs or a custom architecture remain unknown. Therefore, it would be better to approach this rumor with caution.

Read more

• [News] Xiaomi Reportedly to Launch In-House Processor in 2025, Manufactured with TSMC’s 4nm
• [News] SMIC Reportedly to Manufacture 5nm Chips for Huawei Without EUV Machinery

(Photo credit: Xiaomi)

TSMC has passed the test of the market with flying colors as it reported record high profit in the third quarter at the earnings call. By confirming that the AI demand is “real,” TSMC Chairman C.C. Wei stated that the foundry giant is expected to enjoy healthy growth over the next five years. But which node would be the one most clients show strong interest in?

According to the reports by the Economic Daily News and MoneyDJ, customer inquiries for 2nm are even higher than those for 3nm, while A16 is highly attractive for AI server applications.

TSMC’s 3nm has already shown robust momentum this year, as its shipments accounted for 20% of total wafer revenue in the third quarter, rising from 9% and 15% in the first and second quarter, respectively.

According to an industrial source cited by MoneyDJ, TSMC started the mass production of 3nm in 2022, while the 2nm is expected to enter volume production in 2025, indicating that the generation cycle for a node has been expanded to three years.

Thus, supported by TSMC’s major clients, the contribution from 3nm will continue to rise next year and remain a key revenue driver in 2026, while the 2nm process is expected to replicate or even surpass the success of 3nm, MoneyDJ notes. According to previous market speculations, tech giants such as Apple, NVIDIA and AMD are believed to be the first batch of TSMC’s 2nm customers.

Citing C.C.Wei, the Economic Daily News notes that the high-performance computing (HPC) applications demand more powerful processors, which accelerates the development of chiplet designs. However, the trend does not seem to impact the adoption of 2nm, and clients are showing even stronger interests for the node compared with 3nm.

And TSMC does plan to expand its 2nm capacity thanks to the strong demand, as the schedule of mass producing 2nm in 2025 remains on track.

According to a previous report from MoneyDJ, TSMC’s 2nm fabs in Hsinchu’s Baoshan and Kaohsiung will achieve a monthly capacity of approximately 30,000 to 35,000 wafers, respectively. By 2027, their combined capacity is set to exceed 100,000 wafers, marking the mainstream transition to the next generation of processes.

As for TSMC’s angstrom-level A16 process, it is creating a buzz even before mass production in 2026. Citing C.C.Wei’s remarks, the report by the Economic Daily News notes that the A16 is highly attractive for AI server applications, and TSMC is actively preparing the related production capacity to meet customer demand.

Read more

• [News] TSMC’s C.C. Wei Declares No Interest in Acquiring Intel’s Fab, Emphasizes ‘AI is Real’
• [News] TSMC 3Q24 EPS Hits Record High, Reaches NT$12.54

Recently, Wuhan Taiziwei Optoelectronics Technology Co., Ltd. in China launched its T150 A photoresist product, which has successfully passed mass production validation for semiconductor processes. With a fully self-designed formula, this achievement is expected to pave the way for a new era in China’s domestic semiconductor lithography manufacturing.

The T150 A product is benchmarked against the mainstream KrF photoresist series from leading international companies. Compared to the widely recognized UV1610 product in the same series, the T150 A demonstrates an extreme resolution of 120nm during the lithography process, offers greater process tolerance, higher stability, and excellent film retention after post-baking

Additionally, it is more compatible with subsequent etching processes. Validation revealed that dense patterns made with T150 A exhibit outstanding verticality of sidewalls in the underlying dielectric after etching.

Industry insiders have commented that, among KrF series photoresist products, the UV1610 product, which T150 A is benchmarked against, is considered a “commonly used resist” with high demand. Currently, Chinese manufacturers such as Beijing Kehua and Xuzhou Bokang have the capability to produce UV1610.

Currently, China’s semiconductor photoresist, especially for high-end products, is still heavily reliant on imports, with Japan being China’s largest source of photoresist imports.

According to data from China’s General Administration of Customs, the total import value of photosensitive chemicals in China reached USD 2.177 billion in 2023, with imports from Japan amounting to USD 1.149 billion, accounting for 52.8% of the total.

From January to June 2024, imports from Japan amounted to USD 638 million, up 16.7% year-on-year. In Q2 of 2024 alone, the total import value was USD 338 million, a year-on-year increase of 15.6% and a 12.6% rise compared to the previous quarter. Japan’s share of imports averaged around 51.5%, remaining at a historically high level in recent years.

Globally, the photoresist market is dominated by Japanese and American manufacturers. Six major companies—JSR Corporation (Japan Synthetic Rubber), Tokyo Ohka Kogyo (TOK), DuPont-Rohm and Haas (USA), Shin-Etsu Chemical (Japan), Sumitomo Chemical (Japan), and Fujifilm Electronic Materials (Japan)—hold a significant monopoly over the semiconductor photoresist market.

Moreover, leading manufacturers in Japan, South Korea, Europe, and the US have already achieved mass production of high-end photoresists. In contrast, the localization rate of China’s photoresists remains low. According to industry data, the domestic production rate of KrF photoresist in China is less than 5%, while the rate for ArF photoresist is less than 1%.

Despite these challenges, China’s photoresist industry has experienced rapid growth in recent years. China has now become one of the largest photoresist markets globally. There are dozens of domestic companies involved in the photoresist industry, and some have achieved significant progress. Notable examples include bcmaterial, RedAvenue, Jingrui, Shanghai Sinyang, and Nata Optoelectronic Material.

(Photo credit: Fujifilm Electronic Materials)