Semiconductor giants like Intel, TSMC, Samsung and Micron have received huge amount of grants from the U.S. government, funded through the CHIPS and Science Act. However, chip making equipment maker Applied Materials is said to be in a different scenario. According to reports by Bloomberg and Tom’s Hardware, the company’s application to gain U.S. funding for a USD 4 billion R&D center in Silicon Valley was rejected by U.S. Department of Commerce.

The reports note that Applied Materials had announced plans to build the facility a year ago, as it tried to seek government subsidies through the CHIPS and Science Act. The facility was scheduled for completion in 2026.

However, according to sources familiar with the matter, Commerce Department officials turned down the plan on Monday, stating that project did not meet the eligibility criteria, Bloomberg reports. This decision marks a major setback for the company’s efforts to establish a significant facility in Silicon Valley, which it aims to develop next-generation chip making tools.

In addition, though it is reported that as there are over 670 companies with interests in the gaining the fund under the CHIPS and Science Act, and the Commerce Department has warned that limited resources will force it to reject many applications, the rejection of Applied Materials’ project is particularly unexpected. For it is a U.S. semiconductor company, and the project closely aligns with the Biden administration’s goals of revitalizing the domestic semiconductor industry.

It is worth noting that though the U.S. keeps tightening the export controls on the semiconductor sector, major chip equipment makers seem to become increasingly dependent on the Chinese market. From February to April, China accounted for 43% of the total sales of Applied Materials, a 22 percentage point increase YoY.

Applied Materials has reportedly received subpoenas from the US Securities and Exchange Commission as well as the US Attorney’s Office of the District of Massachusetts in February, and said to be under investigation for allegedly sending equipment to SMIC, China’s leading chip maker, through South Korea without export licenses.

The CHIPS and Science Act, signed into law in August 2022, allocated approximately USD 280 billion in new funding to enhance domestic chip making research and development.

Previously, the U.S. government announced that Intel would receive USD 8.5 billion in federal subsidies and USD 11 billion in loans. On the other hand, US administration is set to provide USD 6.6 billion and USD 6.4 billion in aid to TSMC and Samsung, respectively.

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• [News] US Reportedly Expands Investigation into Applied Materials, Possibly due to Concerns of Shipments to SMIC
• [News] China Contributes Over 40% of U.S. Chip Equipment Makers’ Revenue despite Export Controls

(Photo credit: Applied Materials)

Though the U.S. keeps tightening the export controls on the semiconductor sector, major chip equipment makers seem to become increasingly dependent on the Chinese market. According to a report by Nikkei, citing financial data such as Applied Materials and Lam Research, China’s share of sales have exceeded the threshold of 40%.

According to the latest forecast by SEMI, the global chip equipment sales are expected to grow by 3.4% to USD 109 billion in 2024, with China anticipated to reach a record-high USD 35 billion, accounting for over 30% of the global market.

The strong demand of China is also reflected in the sales of major U.S. chip equipment makers. Citing the latest financial data, Nikkei notes that from February to April, China accounted for 43% of the total sales of Applied Materials, a 22 percentage point increase YoY.

Similarly, from January to March, China accounted for 42% of the total sales of KLA Corporation, a 20 percentage point increase YoY.

The development appears to contradict Washington’s export control plans targeting China. In 2022, the US government restricted the export of advanced semiconductor production equipment to curb Beijing’s progress in this field. However, the manufacturing equipment for traditional chips above 28nm is not subject to these controls.

Citing sources familiar with the matter, Nikkei states that if it was not because of the regulation, the proportion of their business in China would be even higher, with sales growth in China occurring only in the non-advanced equipment sector.

The report also notes that though Washington’s policy of building a local ship supply chain does seem to benefit U.S. equipment manufacturers, they still find it difficult to reduce the reliance on China. In 2023, the U.S. accounted for 15% of Applied Materials’ total revenue, up 6 percentage points from 2021.

In order to confront the semiconductor sanctions from the U.S., China has been doubling down on the efforts by setting up its largest-ever semiconductor state investment fund. Earlier in May, it established the third phase of the National Integrated Circuit Industry Investment Fund, with investment totaling USD 47.5 billion.

The aim for China’s Big Fund is to leverage fiscal funds to attract private capital, focusing on key segments of the integrated circuit industry chain, including chip design, manufacturing, packaging and testing.

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• [News] China Lists Semiconductor Self-Reliance Challenges, Excluding Lithography Equipment
• [News] China’s Big Fund Phase Three Commences, Injecting 344 Billion RMB into Semiconductor Industry

(Photo credit: Applied Materials)

Global semiconductor giants are concentrating their R&D efforts on advanced packaging technologies to drive performance enhancements. According to a report from Commercial Times, as packaging technology progresses from 2.5D to 3D, chip stacking technologies have become a showcase for the competitive prowess of major companies.

“Hybrid Bonding” is seen as the key technology for future chip connections. In addition to international companies like Applied Materials and Besi actively positioning themselves, Taiwanese companies led by TSMC, including Gallant Micro, MPI Corporation, E&R Engineering Corporation, C SUN, Saultech, and Grand Process Technology, are also developing and seizing opportunities in Hybrid Bonding.

The report also cited industry sources, pointing out that Grand Process Technology has been supplying TSMC since the inception of InFO (Integrated Fan-Out Packaging). It is revealed that Grand Process Technology is also actively participating in future SoIC (System on Integrated Chips) advanced packaging, focusing on wafer cleaning and photoresist removal in etching processes.

It is indicated by the report that Grand Process Technology’s capacity will be operating at full speed until the first quarter of next year, with lead times extended to nine months. Last year’s orders are currently being installed gradually, with most concentrated on advanced packaging.

Semiconductor equipment manufacturer C SUN and its investment company Gallant Micro are currently investing in Hybrid Bonding-related equipment. C SUN primarily focuses on developing the best solutions for permanent bonding to enhance yield rates. Meanwhile, Gallant Micro leverages its relative advantage in chip sorting machines within its product line.

MPI Corporation, a testing interface vendor, has also entered the initial stages of inspection and analysis for Hybrid Bonding processes. Development of related products is nearing completion.

E&R Engineering Corporation also emphasizes that its top-tier plasma cleaning equipment is currently aimed at achieving high cleanliness of bonding surfaces to enhance adhesion.

Saultech Technology holds a positive outlook on the future market trends of Hybrid Bonding as well. The company has introduced equipment that corresponds to both Hybrid Bonding and Fan-Out technologies. Saultech has independently developed key technologies including bonding and die cleaning processes.

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• [News] Samsung and SK hynix to Implement Hybrid Bonding with 3D DRAM
• [News] The HBM4 Battle Begins! Memory Stacking Challenges Remain, Hybrid Bonding as the Key Breakthrough
  

(Photo credit: Applied Materials)

TSMC’s capital expenditure is set to surge again in 2025 due to strong demand. According to a report from Economic Daily News citing sources, due to continued investment in the most advanced 2nm process and strong demand for 2nm technology, production capacity will be allocated to the Southern Taiwan Science Park. TSMC’s capital expenditure in 2025 is expected to reach between USD 32 billion to USD 36 billion, marking the second-highest in its history, with a year-over-year increase of 12.5% to 14.3%.

Reportedly, the market notes that ASML and Applied Materials will be the main beneficiaries of the increased capital expenditure by the leading manufacturer, and related suppliers are likely to benefit as well. TSMC has declined to comment on market rumors and reiterated that information regarding capital expenditure, and the progress of the 2nm process should be based on the content of the April earnings call next year.

TSMC emphasized at its April earnings call that its capital expenditure and capacity planning are based on long-term structural market demand. Capital expenditure for 2024 is expected to range between USD 28 billion and USD 32 billion. The 2nm process is scheduled to enter mass production as planned in 2025, with the production curve expected to be similar to that of 3nm.

In response to media questions at this year’s shareholder meeting, TSMC Chairman C.C. Wei stated that the previously announced USD 100 billion investment plan over three years was successfully achieved last year. He highlighted that AI presents a bright future for TSMC. He mentioned that capital expenditure and capacity planning are being carefully considered in line with market demand, and whether spending will exceed previous plans remains to be seen.

The sources cited by the same report have further reported that the demand from TSMC’s 2nm customer base has been unexpectedly strong. The related capacity expansion plans are also said to be directed towards the Southern Taiwan Science Park, facilitating process upgrades and creating space for new production.

In the 2nm client landscape, Apple remains a frontrunner, earmarking the technology for flagship smartphones. Intel has also expressed interest, with AMD, NVIDIA, and MediaTek expected to follow suit.

TSMC continues to push forward with its goal of 2nm mass production by 2025. The first fab in Baoshan for 2nm will have equipment installed by April 2024, and the second Baoshan fab will also maintain its schedule. The Kaohsiung fab is planned for 2nm expansion, with the earliest equipment installation expected by the third quarter of 2025. If the STSP also joins in production, mass production could continue to expand from late 2025 into 2026.

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• [News] TSMC Achieved a New Step in the Construction of its Third 2nm Fab
• [News] Apple Not Adopting TSMC 2nm for iPhone 17? A19 Pro Chip Rumored to Use N3P Process

(Photo credit: TSMC)

Applied Materials, the largest US semiconductor equipment manufacturer, has received subpoenas from the US Securities and Exchange Commission as well as the US Attorney’s Office of the District of Massachusetts in February, according to the latest report by Reuters.

Citing sources familiar with the matter, the report noted that Applied Materials is currently under investigation for allegedly sending equipment to SMIC, China’s leading chip maker, through South Korea without export licenses.

Previously, in November 2023, the semiconductor heavyweight received a subpoena from the US Commerce Department, requesting the company to provide information regarding specific shipments to Chinese customers, according to Reuters.

According to the financial report Applied Materials released in mid-May, China contributed 43% of its total revenue in the second quarter, while the country marked a 21% revenue share a year ago, showing a significant increase. On the other hand, Taiwanese and Korean markets contributed 15% of its total revenue, respectively, while the US market contributed 13%.

Recently, the U.S. government has been tightening sanctions on companies regarding their exports to China, in order to hinder the country from getting access to advanced technologies. In early May, the U.S. administration revoked the licenses of Intel and Qualcomm to supply semiconductor chips used in laptops and handsets to Huawei.