As Intel has reportedly been working out options to navigate the company through crisis, its possible moves are said to include selling off Altera, putting a halt to its investment project in Germany, and though, less unlikely, sale of its foundry business. However, if this restructuring does happen, according to South Korean media outlets The Korea Times and The Korea Herald, Samsung and TSMC are unlikely to be buyers for Intel’s foundry operations.

A Risky Move for Samsung to Make

Intel’s thoughts on its foundry business has been casting ripples in the global semiconductor industry, as the market has been speculating who the buyers might be and whether the falling giant will take action on the potential divestiture of its foundry operations.

Nevertheless, a report by The Korea Times notes that as Intel’s foundry market share is currently small, the impact to its competitors may be minimum. Therefore, it is unlikely that this sale will immediately boost Samsung’s chip market share.

According to TrendForce’s latest analysis, top five rankings in the foundry sector remained unchanged in the second quarter, with TSMC (62.3%), Samsung (11.5%), SMIC (5.7%), UMC (5.3%), and GlobalFoundries (4.9%) stood steadfast in their positions.

Moreover, industry officials cited by the report notes that it could be a risky move for Samsung to make another large investment in Intel’s foundry. Samsung’s non-memory chip division, which encompasses foundry and large-scale system integration devices, reportedly incurred an operating loss of 300 billion won (USD 2.24 million) in the second quarter of this year, according to the report.

On the other hand, Washington’s attitude could also pose a challenge for current market players like TSMC and Samsung, the report indicates. Given that the U.S. regards semiconductor manufacturing as a matter of national security, GlobalFoundries might be the most likely buyer, as it is a U.S. company and aligns with the policy of protecting U.S. national security, according to a semiconductor industry official cited by the report.

An Emerging Foundry Opportunity for Samsung: AI Chips

A report by The Korea Herald observes that Samsung, in a way, has been facing similar difficulties with Intel, as the company finds it challenging in securing significant orders from big techs. While TSMC is known for having close ties with tech giants, Samsung, on the other hand, is seeing increased orders from startups and automotive firms.

However, a turning point may have arrived. IBM unveiled its new AI chips for servers, the IBM Telum II Processor and IBM Spyre Accelerator, at Hot Chips 2024 last week. The report notes that these upcoming chips will be manufactured by Samsung using its 5nm process technology.

The report further suggests that it would be more advantageous for Samsung to focus on identifying potential clients in the AI industry and securing their orders, rather than trying to compete with TSMC on all areas of the logic chips sector.

Read more

• [News] AMD Could Emerge as a Prospective Buyer for Intel’s Potential Sale of Altera
• [News] TSMC May Benefit from Intel’s Potential Altera Sale Due to Close Ties with Buyers

(Photo credit: Samsung)

According to an earlier report from Bloomberg, the Dutch government may restrict ASML’s after-sales services for Chinese customers. Regarding the matter, the Dutch Prime Minister Dick Schoof has stated that the government’s decisions will prioritize ASML’s actual interests to avoid jeopardizing its global position, according to a report by Reuters.

ASML derives about 20% of its total revenue from after-sales services. Per the same Reuters’ report, while Dick Schoof did not comment on rumors that Netherlands would put more curbs on ASML’s China chip business, he highlighted that negotiations are progressing smoothly.

Moreoever, the Dutch government is particularly focused on balancing ASML’s interests with other risks, as the authority has acknowledged that the economic interests are extremely crucial, he noted.

He reiterated that ASML represents an extremely important and innovative industry for the Netherlands and should not face any setbacks, as that would harm its global standing, according to Reuters.

ASML plays a crucial role in the global semiconductor supply chain, as the production of advanced chips heavily reliant on its lithography machines.

Per another Reuters report, in 2023, China became ASML’s second-largest market, accounting for 29% of its total revenue, following Taiwan. This surge in China’s market share was driven by a rush to purchase ASML’s DUV machines before stricter U.S. export restrictions took effect.

Due to U.S. government pressure, the export of the most advanced Extreme Ultraviolet (EUV) lithography machines to China has been banned.

Recently, ASML has expressed dissatisfaction with the Dutch government’s lack of support, with former CEO Peter Wennink even reportedly threatening to relocate the company’s headquarters if its development continues to be constrained.

Wennink has publicly opposed export restrictions to China, warning that such measures could stimulate China to develop new technologies and compete with ASML.

Read more

• [News] ASML Might Not Be Able to Provide Advanced Chipmaking Maintenance Services to China as Early as 2025
• [News] ASML Claims the World Counts on China for Legacy Chips; So Do Chip Equipment Giants

(Photo credit: ASML)

On September 2, Huawei announced that it will hold its new product launch event on September 10, coinciding with Apple’s fall product launch, signaling the intense competition between these two smartphone giants. Richard Yu, Chairman of Huawei’s Consumer Business Group (BG), hinted at the unveiling of a “disruptive product” on that day.

Richard Yu described the product as a groundbreaking one that others may have envisioned but failed to create – an achievement of five years of dedication, which turns science fiction into reality.

He Gang, Huawei’s Consumer Business Group CEO, also emphasized the uniqueness of this upcoming product.

Per a report from the Economic Daily News, it is expected that Huawei will unveil its new flagship smartphone, the Mate70, at the upcoming product launch event, along with other new products such as a triple-foldable device and is anticipated to be priced over CNY 20,000 (approximately USD 2,800). This launch, hours after Apple’s event, is seen as a direct challenge to Apple’s new iPhone 16 series.

Notably, despite being restricted by U.S. sanctions from conducting business with Taiwanese semiconductor manufacturers, Huawei continues to collaborate closely with Taiwanese companies in key component areas not affected by these restrictions.

Among these, Largan Precision not only supplies the main camera lenses for the iPhone 16 series but also provides high-end camera lenses for Huawei’s flagship devices. With Huawei’s new product launch clashing with Apple’s, Largan Precision stands to benefit significantly from its role with both companies.

On the other hand, according to a report from Chinese media Sina, Huawei’s new patent for the triple-foldable device reveals additional design details, including three housings, two hinges, and a flexible screen.

The hinges allow the housings to fold and unfold relative to each other, with a special design that reduces thickness and weight when folded.

Huawei’s foldable devices primarily depend on key bearing components supplied by Fositek. Recently, Huawei is said to have extended its exclusive supply contract with Fositek, signaling that Fositek will exclusively provide bearings for Huawei’s triple-foldable device.

Compared to the traditional smartphone market, which easily reaches sales volumes of over one billion units, TrendForce estimated that the shipments of foldable phones are expected to reach 17.8 million units in 2024, making up only 1.5% of the smartphone market. Despite high repair rates and costs, market penetration is projected to climb to 4.8% by 2028.

Read more

• [News] Huawei’s Net Profit in 1H24 Hit Record High amid U.S. Sanctions, Surpassing CNY 50 Billion for the First Time
• [News] Huawei Unveils Tri-folding Phone Details, Reportedly Launching in September

(Photo credit: Huawei)

As the unwinding of yen carry trades came to an end, the market returned to a more stable state, though it remains highly sensitive to economic data. The S&P 500’s gains narrowed due to underperformance in some tech stocks, while it also faced the challenge of reaching new highs. Meanwhile, U.S. 2-year and 10-year Treasury yields edged higher due to shifting expectations around rate cuts, though the overall yield spread narrowed to a range of -10 to 0 basis points. The U.S. Dollar Index also saw a slight increase, driven by reduced expectations of rate cuts from the Federal Reserve.

Economic Data Review for Last Week:

• U.S. PCE (July): The July Personal Consumption Expenditures (PCE) price index rose by 2.5% year-on-year (same as the previous month) and 0.2% month-on-month (up from 0.1%). Within the details, goods inflation was flat at 0% year-on-year (up from -0.2%), while services inflation increased 3.7% year-on-year (down from 3.8%), as both factors have a limited impact on overall inflation decline. Core PCE, which excludes food and energy, increased by 2.6% year-on-year (unchanged from the previous month) and 0.2% month-on-month (also unchanged), both in line with market expectations.

Read more at Datatrack

• China CPI (July): The July Consumer Price Index (CPI) rose by 0.5% year-on-year (up from 0.2%), marking the sixth consecutive month of positive growth and exceeding market expectations. The increase was mainly driven by food prices, which were affected by extreme weather conditions. Excluding volatile food and energy prices, core CPI rose by only 0.4% year-on-year, down from 0.6% in the previous period.

Read more at Datatrack

Key Data to Watch This Week:

• U.S. ISM Manufacturing PMI (9/3): The U.S. ISM Manufacturing PMI for July came in at 46.8 (down from 48.5). The decline in July mainly reflects reduced investment in manufacturing due to high interest rates, along with continued weakness in goods demand, leading companies’ production and revenue to contract prompting them to implement cost-saving measures such as layoffs and hiring freezes. The market expects the Manufacturing PMI to recover slightly to 47.5, but it is still expected to remain in contraction territory.

Read more at Datatrack

• Bank of Canada Monetary Policy Meeting (9/4): The Bank of Canada (BOC) has cut rates by 50 basis points since June. As inflation continues to decline, the BOC has increasingly shifted its focus to cope with economic weakness. The market expects the BOC to announce another 25 basis point rate cut at its September meeting, with two more cuts likely by the end of the year.

Read more at Datatrack

• U.S. ISM Non-Manufacturing PMI (9/5): The U.S. ISM Non-Manufacturing PMI (NMI) for July was 51.4 (up from 48.8). The rebound in July mainly reflects strong business activity, although respondents indicated potential challenges ahead, and they remain cautious due to the upcoming U.S. presidential election. The market expects the NMI to decline slightly to 50.9, but it is still anticipated to remain in expansion territory.

Read more at Datatrack

• U.S. Employment Situation Report (9/6): In the household survey, the unemployment rate rose to 4.3% in July (up from 4.1%), mainly reflecting an increase in labor supply and reduced hiring by companies. In the establishment survey, nonfarm payrolls increased by 114,000 in July (down from 206,000), significantly below the 12-month average of 215,000. Overall, the labor market appears to have returned to a balanced state, with no signs of widespread layoffs, though ongoing developments should be closely monitored. The market expects the unemployment rate to fall back to 4.2%, with nonfarm payrolls expected to rise by 164,000 in August.

Read more at Datatrack

Reuters previously reported that Intel is considering selling its stake in Altera, a FPGA (Field-Programmable Gate Array) manufacturer, as part of its business restructuring and cost-cutting efforts, as AMD and Marvell are said to be potential buyers.

As per a report from Economic Daily News citing sources, it’s believed that if the sale goes through, a significant portion of Altera’s orders could be redirected to TSMC, which would be highly beneficial for the Taiwanese foundry giant.

The same report indicated that Altera used to be a major customer of TSMC. However, after Intel acquired Altera in 2015, the orders were redirected to Intel. TSMC’s rapid growth, bolstered by orders from clients like Apple, AMD, and NVIDIA, helped mitigate the impact of losing Altera’s business though.

If Altera is no longer part of Intel, as it might be is acquired by companies like AMD or Marvell, which are currently key clients of TSMC, it is likely that Altera’s orders may return to TSMC in significant volumes.

Intel acquired Altera for USD 16.7 billion in 2015, and has previously indicated plans to sell a portion of its stake through an initial public offering (IPO), though no specific date has been set.

Citing sources familiar with the matter, Reuter’s report suggested that Intel’s plan does not currently include splitting up the company or selling its foundry business to buyers like TSMC, Reuters notes.

Intel had already begun segregating its wafer foundry business into an independent division and financials, starting from the first quarter of this year.

Per Reuters, the company has established a wall between its foundry and IC design business to ensure that the design division’s potential customers cannot access the confidential technologies of Intel’s foundry clients.

Read more

• [News] AMD Could Emerge as a Prospective Buyer for Intel’s Potential Sale of Altera
• [News] Intel Reportedly Mulls to Sell FPGA Unit Altera and Freeze USD 32 Billion German Project amid Crisis

(Photo credit: Intel)