China is actively investing in chips with a mature process of 20nm and above. According to Chosun Ilbo, some insiders signal a potential shift of over 50% of global mature-node chips production to China within the next 2 to 3 years. As semiconductors focusing on mature process account for 75% of overall chip demand, China’s growing influence in this sector raises significant security concerns.

During the APEC SME Technology Conference and Fair in Qingdao on the 9th of this month, Wei Li, former Vice President of SMIC, emphasized the necessity for China to prioritize the localization of semiconductors with a 20nm process and above. This category includes semiconductors focusing on mature process, where Li acknowledged China’s technology lags behind international counterparts by more than 5 years.

Despite China’s efforts for independent development, the semiconductor industry faces comprehensive restrictions from the United States, heavily relying on imports for materials, equipment, and design software, with only about 10% being domestically produced. China, holding over 1/3 of the global chip market, struggles with a self-sufficiency rate below 15%, hindering its industrial progress, especially with foreign countries imposing export controls on advanced process and equipment.

According to South Korean media reports, concerns have arisen within the industry about the potential impact on the global semiconductor supply chain as China expands its mature processes. Despite the recent surge in demand for advanced chips like AI chips and servers, semiconductors focusing on mature process still constitute 75% of overall demand. These chips are crucial not only in autonomous vehicles, automobiles, and home appliances but also in military applications. If China monopolizes this market, it could lead to a severe security crisis.

China is rapidly increasing its market share in the mature-node chips sector, with the government offering up to a 10-year corporate tax exemption for new domestic semiconductor plants. Last year, SMIC invested USD 8.9 billion in Shanghai to build a 28nm plant.

Data from TrendForce indicates that China plans to construct 32 semiconductor plants by 2024, surpassing Taiwan’s 19 and the United States’ 12.

China’s Wafer Fabs Hits 44 with Future Expansion 32, Mainly Targeting on The Mature Process

China’s Expansion into the mature process market poses big challenges for Korean enterprises. Chinese companies are gaining ground in various sectors, including the image sensor market, encompassing DDI semiconductors used in OLED panels. Beyond manufacturing capabilities, China has achieved noteworthy levels of design expertise in semiconductor technologies.

On the other hand, in previous press release, TrendForce predicted China’s mature process capacity to grow from 29% this year to 33% by 2027. Leading the charge are giants like SMIC, Hua Hong Group, and Nexchip, while Taiwan’s share is estimated to consolidate from 49% down to 42%.

TSMC, UMC, and Samsung are the frontrunners in this technology currently. Yet, Chinese players like SMIC and Nexchip are hot on their heels, swiftly closing the gap. SMIC’s 28HV and Nexchip’s 40HV are gearing up for mass production in 4Q23 and 1H24, respectively—narrowing their technological gap with other foundries.

China’s Share in Mature Process Capacity Predicted to Hit 29% in 2023, Climbing to 33% by 2027, Says TrendForce

As China enhances its influence over mature-node chips, both the U.S. and the EU are contemplating countermeasures. Despite months of discussions, there are still no concrete results regarding these potential measures.
(Image: SMIC)

With 32 mature process wafer fabs set to be completed in China by the end of next year, Taiwanese wafer foundries are gearing up early in response to the “red alert.”

Faced with the pricing war, semiconductor insiders reveal that mature process foundries in Taiwan are anticipating a roughly 10% reduction in prices in the first quarter. The aim is to seize orders ahead of the competition and maintain high capacity utilization rates.

In contrast to traditional sales discounts, major semiconductor foundries like TSMC, UMC, and PSMC have recently introduced a “diversified” pricing strategy for IC design, including:

1. Volume Discounts: Significant price reductions are offered for orders exceeding ten thousand units, with pricing flexibility increasing as the order quantity grows.
2. Volume Tied Pricing: Maintaining a certain order volume, pricing has a degree of flexibility based on market conditions.
3. Deferred Wafer Delivery: Allowing the extension of the original wafer delivery timeline by one year or even longer, providing IC design firms with flexibility and reduced pressure when placing orders.
4. Dynamic Pricing: Rapid negotiations for urgent orders, reducing the risk of volume pressure for IC designers, albeit with relatively limited price flexibility.
5. Wafer Bank: Transforming wafers into semi-finished products stored in foundries, facilitating on-demand packaging and delivery when needed.

These initiatives are strategically positioned to capitalize on the anticipated recovery in consumer electronics demand next year.

Insiders reveal that due to the sluggish market conditions in the first quarter and the impact of an upcoming extended holiday, demand for the next quarter may not just be “cool” but could freeze.

Industry experts characterize this downturn as an “L-shaped bottom,” and if orders are taken by Chinese foundries before the recovery, Taiwanese foundries will lose out on the subsequent rebound. Consequently, the three major mature process wafer foundries in Taiwan are compelled to lower prices in advance, with an estimated price reduction of around 10% for the next quarter. However, the foundries refrain from commenting on pricing.

Historically, major domestic mature process fabs maintained stable prices but offered discounts by shipping more wafers than ordered. In an effort to boost high capacity utilization and secure orders early, these fabs will no longer stick to stable pricing in the first quarter of next year.

Instead, they have adopted a direct price reduction of 10% for orders exceeding 10,000 wafers. IC design companies estimate that as benchmark fabs initiate price reductions, other industry players will inevitably follow suit.

While the extent of price reduction varies depending on products and processes, an average price reduction of 10-20% for wafer foundry services in the first quarter of next year is anticipated.

Read more

• TrendForce Foresees China’s Mature Wafer Processes to Expand to 33% by 2027, Japan Secures Advanced Processes

(Photo credit: TSMC)

In recent years, the dynamics of the memory market have undergone significant changes, with South Korean memory giants Samsung and SK Hynix facing intense competition from Chinese firms. They are experiencing heightened competitive pressures, and the technological gap is steadily narrowing.

As per reports from South Korean media outlet Business Korea, insiders in the market have disclosed that with China increasing its support for the memory industry, after several years of development, the technological gap in NAND Flash with leading global enterprises has now narrowed to approximately two years. However, in the case of DRAM, the original technological gap of about five years is still maintained.

The report indicates that the primary reason for the shortened gap is that the threshold for NAND Flash technology is relatively lower, allowing for a faster catch-up speed, and this acceleration is continuously progressing, thereby further reducing the technological disparity.

China’s largest memory semiconductor company, YMTC (Yangtze Memory Technologies Co.), officially unveiled its fourth-generation 3D TLC NAND Flash memory, named X3-9070, based on the Xtacking 3.0 architecture, at the 2022 Flash Memory Summit (FMS).

YMTC has also taken the lead over Samsung and SK Hynix by achieving production of NAND Flash memory with a higher number of layers.

It is understood that in the year 2022 alone, investments from the Chinese government and state-owned investment funds amounted to approximately CNY 50 billion. The continuous and substantial funding is aimed at supporting development efforts, encompassing both technological catch-up and faster market penetration.

The report emphasizes that as semiconductor circuit miniaturization approaches its limits, China may seize another opportunity to narrow the technological gap, particularly in advanced packaging techniques.

China, being the world’s second-largest packaging technology market, boasts a more comprehensive ecosystem. Companies like JCET, Tongfu Microelectronics Co., and HT-Tech have all secured positions in the top ten semiconductor packaging enterprises globally, while no Korean companies made the list.

TrendForce pointed out that there is indeed a technological difference of about two years between South Korean memory giants and Chinese firms. YMTC has the research and development capabilities but is primarily hindered by the lack of key equipment for mass production. The subsequent developments depend on whether China can acquire crucial semiconductor equipment. If successful, YMTC may have the opportunity to transition to higher levels, such as 300 layers, and proceed to mass production.

(Photo credit: Samsung)

Under strong government support, South Korean automakers are making remarkable strides in the global automotive market. Hyundai Motor, the largest car manufacturer in South Korea, reported a significant surge in its third-quarter operating profit, doubling year-on-year, primarily fueled by the robust sales of high-profit SUVs and EVs.

According to reports from news outlets such as Yonhap News Agency, Hyundai Motor announced its financial results on October 26, 2023. In the third quarter of 2023, the company witnessed an 8.7% year-on-year increase in revenue, reaching 41 trillion Korean won. Furthermore, the operating profit soared to 3.8 trillion Korean won (approximately 2.8 billion USD), marking a remarkable 146.3% increase compared to the same period last year. These results exceeded market expectations of 3.62 trillion Korean won and set a historic high for the same period.

In the midst of a semiconductor industry downturn, long-standing economic leader Samsung Electronics has faced operational setbacks. In contrast, Hyundai Motor has thrived as South Korean automakers dominate the global automotive market, securing its position as South Korea’s most profitable company for three consecutive quarters and causing a shift in rankings.

In terms of sales volume, Hyundai Motor sold 1.05 million vehicles globally in the third quarter, marking a 2% year-on-year growth. Notably, the company’s focus on expanding its EV product lineup, including the introduction of the IONIQ, resulted in a significant 33.3% increase in global sales of eco-friendly vehicles, reaching 169,000 units.

The luxury brand under Hyundai Motor, Genesis, achieved a 5.1% share of total sales in the third quarter, an increase from 4.9% in the same period last year. SUVs, known for their profitability, accounted for 54.7% of total sales in the third quarter (excluding Genesis), up from 50.6% in the previous year. When including Genesis SUV models, this figure rises to 57.8%.

Amid growing tensions in the Middle East and globally sustained high-interest rates, notable figures like Elon Musk of Tesla and giants like General Motors have warned of potential weak consumer demand for EVs in 2024. Nevertheless, Hyundai Motor’s Vice President, Seo Gang-hyun, has affirmed that the company’s $5 billion investment plan to establish a factory in Georgia is proceeding as planned and is set to commence production in the first half of 2024, six months ahead of the initial schedule.

Read more

• [News] Ford Shifts EV Investment Focus Amidst Fierce Price Competition
• [News] Volkswagen Group Reports Strong 45% Growth in EV Sales for the First Three Quarters of 2023

(Image credit: Hyundai’s Facebook)

DB HiTek, a Specialty IC foundry in South Korea, is intensifying its research efforts in the Silicon Carbide (SiC) and Gallium Nitride (GaN) semiconductor domains to support future business growth, Jiwei reported.

DB HiTek’s recent investments aim to bolster its 8-inch wafer manufacturing capabilities. Nevertheless, due to a slow market recovery, reports suggest that the operation of the 8-inch wafer foundry may face challenges, and the transition to a 12-inch wafer foundry operation remains a question mark. In light of this situation, DB HiTek’s future development will pivot towards new power semiconductors such as GaN and SiC.

The company has reportedly initiated investments in essential equipment for next-generation GaN and SiC power semiconductors, a move set to expedite their research and development.

It is reported that DB HiTek, housing an 8-inch wafer foundry, is gearing up to venture into the SiC market, while the 6-inch wafer foundry remains the norm in this sector. As part of government policy initiatives, this specialized foundry is collaborating with Busan Techno Park for Silicon Carbide development.

In GaN semiconductor manufacturing, DB HiTek is partnering with the fabless company A-PRO Semicon to fine-tune their foundry processes.

As per the company’s website, DB HiTek operates two wafer foundries, producing ICs across a range of manufacturing nodes from 350nm to 90nm. Fab 1 in Bucheon City, Gyeonggi-do, offers chip solutions within the 150nm to 350nm nodes, including mixed-signal, power, and analog chips. Fab 2 in Eumseong County, Chungcheongbuk-do, provides solutions suitable for the 90nm to 180nm process nodes, including mixed-signal and CMOS image sensors (CIS), among other applications.
(Image: DB HiTek)

Read more:

• [News] Strategic Shift in Samsung’s Personnel Focuses on SiC