As the global semiconductor landscape undergoes restructuring, major packaging and testing companies are actively establishing overseas advanced packaging capacities. According to a report from Commercial Times, semiconductor industry sources have indicated that, in terms of the clustering effect within the semiconductor industry, the primary targets currently include Japan, Malaysia, and Singapore.

Industry sources cited by the same report have pointed out that the global top ten packaging and testing companies are dominated by Taiwan, China, and the United States. Taiwan holds the lead with five industry giants including ASE Group, Powertech Technology, King Yuan Electronics CO. (KYEC), Chipbond Technology, ChipMos and Sigurd.

China boasts four key players such as Jiangsu Changjiang Electronics Technology Co., Tongfu Microelectronics, and Huatian Technology Co. Meanwhile, the United States is represented by Amkor, the world’s second-largest in scale. Japan’s pursuit of rebuilding the packaging and testing industry through a foundry model and seeking support from Taiwanese companies can be seen as a logical progression.

Given that nine out of the top ten packaging and testing companies are located in the Asia-Pacific region, the strategic positioning in Asia is particularly notable, with Japan, Malaysia, and Singapore all striving to make their mark.

Industry sources cited by the same report point out that Malaysia has been developing its semiconductor industry for decades, with Penang being a prominent semiconductor hub. Not only does Penang boast technological advantages, but it is also dubbed the “Silicon Valley of the East.”

As companies like TSMC, Samsung, and Intel expand their fabs to locations such as the United States and Europe, the downstream semiconductor testing and packaging activities are gradually forming clusters in Malaysia. This includes ASE Group’s significant investment in building a new testing and packaging facility in Penang, scheduled for completion in 2025.

Intel is also planning to establish advanced packaging facilities in both Penang and Kedah. Additionally, Texas Instruments from the United States has announced plans to build semiconductor testing and packaging facilities in Kuala Lumpur and Malacca.

While Malaysia’s testing and packaging sector has become a hub, industry sources cited by the report point out that despite many countries aggressively building their semiconductor industry chains, Japan is seen as the country, outside of Taiwan, with the most comprehensive semiconductor supply chain in the future, due to factors such as cultural traits, industrial development experience, geographical proximity to Taiwan, and long-standing close cooperation.

TrendForce has previously reported that Japan’s resurgence in the semiconductor arena is palpable, with the Ministry of Economy, Trade, and Industry fostering multi-faceted collaborations with the private sector. With a favorable exchange rate policy aiding factory construction and investments, the future looks bright for exports.

With Japan rapidly catching up in development, it becomes necessary for companies like ASE Group to strengthen their presence in Japan. The sources cited by the report are optimistic that Taiwanese-owned testing and packaging facilities may follow suit.

Recently, Powertech Technology Inc., Taiwan’s testing and packaging company, expressed openness to exploring opportunities in Japan, including seeking subsidies from the Japanese government, following the model set by TSMC.

Singapore is also actively strengthening its semiconductor industry chain. Per official Singaporean data, out of the 15 world-class chip design companies, 9 have established bases in Singapore. Additionally, there are 14 semiconductor fabs and 20 semiconductor assembly and testing facilities.

Coupled with the nearby established backend testing clusters in Malaysia, if Singapore constructs a more complete industry chain, it is poised to attract even more world-class testing and packaging companies to establish their presence there.

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Following TSMC’s announcement of investing USD 20 billion to build two plants in Kumamoto, Japan, industry sources cited by a report from Commercial Times has indicated that the major global semiconductor assembly and testing provider, ASE Group, is in discussions with the Japanese government to finalize subsidies and investment details.

Reportedly, ASE plans to invest nearly NTD 10 billion (roughly USD 306.3 million) to construct its first advanced packaging plant in Kumamoto, becoming the second Taiwanese semiconductor giant to set foot in the region.

Regarding the establishment of a plant in Kumamoto, ASE Group stated that it does not comment on market rumors.

During its earnings call last week, ASE Group announced a capital expenditure increase to expand related capacities due to the upward adjustment in advanced packaging projects. This year’s capital expenditure, originally estimated at around USD 2.1 billion with a year-on-year increase of over 40%, has been raised to a potential 50% increase (up to USD 2.25 billion), potentially reaching a historic high.

The semiconductor industry is witnessing a great era of global competition with various countries pouring money into subsidies. Recently, there have been rumors of the Japanese government actively reaching out to Taiwanese semiconductor companies and offering substantial subsidies, aiming to build a complete semiconductor industry chain covering upstream, midstream, and downstream sectors.

Apart from TSMC’s decision to establish two advanced semiconductor plants in Kumamoto, Intel is also considering establishing an advanced packaging research institution in Japan, and Samsung is planning to set up advanced packaging research facilities in Yokohama.

Industry sources cited by the same report point out that these signs have indicated that after mastering wafer manufacturing technology, the next phase for Japan is to enhance the establishment of the packaging industry.

Industry rumors have recently circulated that the Japanese government has been in discussions with senior executives from ASE Group for some time, and the relevant subsidy and investment details are generally agreed upon. The location for the new facility is expected to be in Kumamoto, near TSMC’s upcoming plant. As per the same report citing sources, there is a chance that ASE’s Kumamoto facility, like TSMC’s second plant in Kumamoto, will be planned to start production before the end of 2027.

In fact, as early as 2004, ASE Group acquired full ownership of an IC packaging and testing facility in Yamagata Prefecture, Japan, from NEC for USD 80 million. However, over the past two decades, Japan’s influence in the global semiconductor sector has waned, and ASE’s acquisition of the NEC facility has not made significant operational contributions.

ASE Group’s global footprint currently includes high-end product bases in Taiwan, as well as its packaging and testing capacities in China, Japan, Malaysia, South Korea, and Singapore.

ASE is continuing its expansion efforts in Taiwan, including Kaohsiung, Zhongli, and Tanzi. Evenmore, on February 22nd, ASE Group and semiconductor giant Infineon Technologies jointly announced the finalization of an agreement. ASE Group will invest EUR 62.589 million to acquire Infineon’s backend packaging facilities located in Cavite, Philippines, and Cheonan, South Korea.

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Henri Richard, head of Rapidus Design Solutions, the US subsidiary of Japan’s semiconductor foundry startup Rapidus, and former Chief Marketing Officer at processor giant AMD, indicates that Rapidus aims to position itself as a filler of market gaps during the interview with global media The Register.

Rapidus Design Solutions, established by Rapidus in this month, is expected to bolster ties with US semiconductor design companies and wafer manufacturing technology providers like IBM. Henri Richard reportedly notes that the AI boom is boosting the advanced semiconductor foundry market, albeit with understated demand and ongoing capacity constraints. Thus, in this market trend, he asserts that even if these technologies don’t necessarily confer a competitive edge, the limitations in capacity alone should suffice to ensure Rapidus’ success.

Established in August 2022, Rapidus was jointly founded by eight Japanese companies, including Toyota, Sony, NTT, NEC, Softbank, Denso, Kioxia (formerly Toshiba Memory Corporation), and Mitsubishi UFJ, who invested collectively in its establishment. As per Rapidus’ plan, they aim to commence mass production of 2-nanometer process technology in 2027, significantly lagging behind major global players like TSMC, Intel, and Samsung.

TSMC and Samsung previously planned to mass-produce 2nm chips in 2025, while Intel is anticipated to be the first to achieve commercialization of 2nm chips. Industry sources cited by the The Register’s report also view this timing as unfavorable for Rapidus.

However, Henri Richard believes that the semiconductor process technology has reached a turning point. Assessing the success of suppliers solely based on production timelines is narrow-minded; competitiveness stems from various factors beyond production schedules.

Based on these factors, Rapidus positions itself as a fill-in player in the advanced manufacturing market, targeting small AI chip design companies as its primary market. While competitors focus on serving large clients, Rapidus aims to win over these smaller clients by offering comprehensive support services. By serving numerous small chip design companies, Rapidus can better understand the specific needs of AI chip users, rather than insisting on the latest process technology for all chips.

Henri Richard emphasizes that Rapidus itself has limited scale and cannot initially serve too many clients simultaneously. It is expected that Rapidus’s initial client base will not exceed 6 companies, allowing them to accumulate experience and capabilities.

Although there are geopolitical issues currently, establishing facilities in the US is not on Rapidus’s immediate agenda. Meanwhile, Japan represents a relatively favorable geographic location for Rapidus, offering clients a risk-diversification option.

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(Photo credit: Rapidus)

Japanese digital infrastructure service provider Sakura Internet, backed by government subsidies, is enhancing its cloud services for generative AI. According to a report from MoneyDJ, Sakura Internet’s procurement of GPUs is set to increase fivefold from the initial plan, with purchases including NVIDIA’s latest product, the “B200,” unveiled in March.

On April 19th, Sakura announced that it has secured Japanese government subsidies to strengthen its cloud service “Koukaryoku” for generative AI. The company plans to expand the number of GPUs deployed in “Koukaryoku” to fivefold from the initially planned quantity, aiming to incorporate around 10,000 GPUs, including NVIDIA’s latest “NVIDIA HGX B200 system” introduced in March. The goal is to establish a large-scale cloud infrastructure with a computational power of 18.9 EFLOPS by the end of March 2028.

Sakura had previously received similar government subsidies in June 2023, marking this as the second time they have received such support.

Sakura announced that last June they invested JPY 13 billion, aiming to purchase approximately 2,000 NVIDIA GPUs (with a computational power of 2.0 EFLOPS) between July 2023 and March 2025. Due to significantly higher demand than expected, the procurement of these 2,000 GPUs is projected to be completed ahead of schedule by the end of June 2024.

This new investment plan, totaling around JPY 100 billion (including costs for server components other than GPUs and maintenance fees), targets additional procurement of approximately 8,000 GPUs (with a computational power of 16.9 EFLOPS) between April 2024 and December 2027.

The overall GPU procurement quantity of around 10,000 units will thus be five times the original plan of approximately 2,000 units. According to Japanese media reports, Sakura will provide server computing power equipped with these GPUs to companies engaged in generative AI research.

On April 19, the Ministry of Economy, Trade and Industry of Japan announced that in order to establish the necessary supercomputers for developing generative AI domestically in Japan, they will provide a maximum subsidy of JPY 72.5 billion to five Japanese companies, with Sakura receiving a maximum subsidy of JPY 50.1 billion.

The leading Dutch semiconductor equipment company ASML has reportedly predicted continued strong demand from Chinese customers, with approximately 20% of the company’s backlog attributed to them.

According to reports from Reuters and CNBC, ASML CEO Peter Wennink stated during the first-quarter (January-March) earnings call on April 17th that discussions are ongoing between the Dutch and U.S. governments regarding national security concerns.

In October 2023, the U.S. Department of Commerce expanded its export control regulations on China, with the new provisions taking effect from November 2023.

These regulations specifically restrict the Dutch company ASML from selling certain immersion Deep Ultraviolet (DUV) lithography equipment to Chinese facilities engaged in advanced semiconductor manufacturing. Consequently, Chinese customers turned to purchasing mature process equipment in large quantities, leading to nearly 2 consecutive months of surge in China’s equipment import at that time.

As per information disclosed by ASML during its earnings call, it is currently able to continue serving Chinese customers who have already installed its equipment.

ASML’s CFO Roger Dassen further indicated that Chinese customers account for approximately 20% of the company’s backlog orders. He noted that Chinese chip manufacturers are expanding their production for mature processes, with these chips falling outside the export restrictions of the United States and its allies, primarily used in appliances like refrigerators, phones, toys, and automobiles.

Dassen noted that demand from China is robust due to their expansion of production capacity. As a result, China’s global market share is expected to grow larger in the coming years, leading to increased self-sufficiency compared to the present.

Per ASML’s financial report, during Q1, machine revenue from the Taiwan and South Korean markets decreased from the previous quarter’s 13% and 25% to 6% and 19%, respectively. In contrast, machine revenue from the Chinese market increased significantly from 39% to 49%.

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• [News] Surge in Chip Manufacturing Equipment Imports from the Netherlands to China, Soaring Tenfold After U.S. Tightens Restrictions

(Photo credit: ASML)