Recently, wafer foundry market has seen various dynamics from related manufacturers.

TSMC is reportedly planning to build its third plant in Japan, while Samsung has delayed the construction of its Pyeongtaek P4/P5 chip plants to 2026, prioritizing the Texas Taylor wafer plant instead.

Meanwhile, SMIC, Huahong Group, and Nexchip have all released their semi-annual reports, showing steady improvements in capacity utilization rates. SMIC expects its 12-inch monthly capacity to increase by around 60,000 wafers in late 2024 compared to the end of last year.

Huahong is accelerating the construction of its new 12-inch production line in Wuxi, which is expected to start production in the first quarter of next year.

According to a survey by TrendForce, strong demand for AI server has driven the total output value of the world’s top ten wafer foundries to increase by 9.6% quarter-on-quarter in the second quarter, reaching USD 32 billion.

TSMC, Samsung, SMIC, Huahong Group, and Nexchip ranked first, second, third, sixth, and tenth, respectively, among the world’s top ten wafer foundries.

• TSMC Plans to Build the Third Plant in Japan After 2030

J.W. Kuo, head of Taiwan’s economic department, recently stated in an interview that TSMC plans to build its third plant in Japan to produce advanced semiconductors, with the construction expected to commence after 2030.

TSMC’s first plant in Kumamoto, Japan, (Kumamoto P1) is expected to start mass production in 4Q24 (October-December), using 28/22nm and 16/12nm process technologies, with a monthly capacity of 55,000 wafers.

The second planned plant, also located in Kumamoto, is scheduled to commence construction at the end of 2024, with operations starting in late 2027, focusing on 6/7nm processes.

The combined monthly capacity of TSMC’s Kumamoto P1 and P2 is expected to exceed 100,000 wafers. TSMC Chairman C.C.Wei mentioned in June that after the first and second plants are operational, TSMC may consider building a third plant in Kumamoto if the local residents agree.

• Samsung Delays the Construction of Pyeongtaek P4/P5 Plants to 2026, Prioritizing Texas Taylor Plant

Per global media reports on September 2, Samsung has postponed the construction of the second and fourth phase production lines of the Pyeongtaek P4 and P5 plants to 2026. Samsung is currently focusing on building a wafer plant in Taylor, Texas.

It is reported that Samsung did not conduct the necessary financial review for the Pyeongtaek P5 plant by the end of July 2024, leading to delays in the construction plans for both P5 and P4 plants.

However, the first-phase production line of P4 plant, which produces NAND Flash, is expected to start production soon. The third-phase production line is currently under construction, with plans to install power equipment after the Mid-Autumn Festival.

The original plan for P4 plant was to first build a memory production line (Phase 1), then a wafer foundry line (Phase 2), followed by additional memory and wafer foundry lines (Phases 3 and 4) to complete P4 plant.

However, it is reported that the wafer foundry business at this production line failed to meet expectations, prompting Samsung to prioritize the construction of memory production lines.

The sources cited by DRAMExchange revealed that the product lineup for the P4 Phase 2 production line is expected to be finalized between January and February 2025.

The Taylor plant began construction in the first half of 2022 and is expected to put into operation in 2026. The project’s investment scale is approximately USD 17 billion, with wafer manufacturing originally planned for the 4nm node.

However, industry news from June 2024 indicates that Samsung has added 2nm advanced process technology to meet the demand driven by the AI wave.

In April 2024, Samsung signed an agreement with the U.S. Department of Commerce to receive USD 6.4 billion in subsidies under the CHIPS Act.

• SMIC’s Revenue Grows by 23.2% Year-on-Year

Recently, SMIC released its half-yearly financial results, showing that the company achieved a revenue of CNY 26.269 billion, a year-on-year increase of 23.2%.

The net profit attributable to the parent company was CNY 1.646 billion, a year-on-year decrease of 45.1%, and the net profit after deducting non-recurring gains and losses was CNY 1.288 billion, a year-on-year decrease of 27%.

In terms of capacity utilization, SMIC’s 8-inch utilization rate has rebounded. The company stated that its 12-inch capacity has been near full load in recent quarters, with additional effective capacity added in the first half of this year, and the new capacity has been rapidly put into production.

The company’s overall capacity utilization rate increased to 85%, up 4 percentage points from the previous quarter.

These financial results highlight two key indicators that send an important signal to the market. Although SMIC’s profits fell short of expectations, its revenue continued to rise, reflecting signs of recovery in downstream markets.

Beyond the recovery in revenue, the increase in capacity utilization is a major highlight of the report.

Data indicates that the main drivers of SMIC’s revenue turnaround were the smartphone and consumer electronics business, further demonstrating signs of recovery in the semiconductor market.

As to wafer revenue by size, demand for 8-inch wafers has rebounded, with the revenue share increasing to 26%, up 2 percentage points from the previous quarter, while the revenue share for 12-inch wafer is 74%.

Regarding capacity expansion, SMIC expects its 12-inch monthly capacity to increase by around 60,000 wafers by the end of this year compared to the end of last year. SMIC provided guidance for the third quarter, projecting a revenue growth of 13% to 15% quarter-on-quarter, with a gross margin between 18% and 20%.

• Huahong’s Capacity Utilization Rate Exceeded 100% in Q2

Huahong achieved operating income of around CNY 6.732 billion in the first half of the year, a year-on-year decrease of 23.88%. The net profit attributable to shareholders was CNY 265 million, a year-on-year decrease of 83.33%.

It expects third-quarter sales revenue of CNY 500 million to 520 million, with a gross margin between 10% and 12%.

In terms of capacity utilization, Huahong reported that the company’s 8-inch capacity utilization rate surpassed 100% in the second quarter, with the 12-inch capacity utilization rate closed to full capacity.

The overall capacity utilization rate was 97.9%, a significant improvement from 91.7% in the first quarter, but still below the 102.7% capacity utilization rate in the second quarter of last year, indicating that Huahong has not yet returned to its peak level.

On product mix, Huahong’s major revenue contributors are discrete device and embedded non-volatile memory. In the second quarter of this year, the combined revenue share of these two segments was 60.5%.

Regarding production, the company is accelerating the construction of its new 12-inch production line in Wuxi.

In August, Huahong announced that the first phase of Wuxi base currently has a capacity of 94,500 wafers per month, with nearly all process platforms steadily scaling up production.

The second phase of Wuxi, after about a year of construction, is now 80% of completion, with the first equipment installation scheduled for the end of August. The production line is expected to be completed by the end of the year, with capacity to be released starting in the first quarter of next year.

• Nexchip Turned Profitable Compared to the Same Period of Last Year

Nexchip achieved a revenue of CNY 4.398 billion, a year-on-year increase of 48.09%, and a net profit attributable to the parent company of CNY 187 million, turning losses into gains year on year. The company’s gross margin was 24.43%.

Nexchip mainly engages in 12-inch wafer foundry services, providing wafer foundry services for DDIC and other process platforms.

In 1H24, the revenue share from CIS has significantly increased, making it the company’s second-largest product segment, with CIS capacity running at full load.

The company’s current wafer foundry capacity is 115,000 wafers per month, and it plans to expand capacity by 30,000 to 50,000 wafers per month in 2024, focusing on 55nm and 40nm nodes, with a primary focus on advanced CIS.

From a quarter-on-quarter perspective, the semi-annual reports of the three major foundries, SMIC, Huahong, and Nexchip, indicate a gradual upturn in business performance and steady improvement in capacity utilization rate.

Industry sources cited by DRAMExchange suggested that this signals an accelerated speed of recovery in the semiconductor market, and the second half of the year may see more positive surprises.

Read more

• [News] TSMC to Build Third Fab in Japan? The Timing May Be Reportedly after 2030
• [News] Two Contrasting Trends Emerge in Wafer Foundry Industry

(Photo credit: TSMC)

Novatek has unveiled its AI and related domain strategies during its year-end investor conference. According to a report from Taiwanese news outlet Tai Sounds, Novatek anticipates that the demand for AI will drive an enhancement in display specifications and necessitate the integration of edge devices such as security systems.

Transmission interfaces stand as the core focus of Novatek, with subsequent products extending towards high-speed transmission. In both its driver IC and SoC product lines, Novatek maintains customized product lines, with expectations for growth in customized chips this year.

As per sources cited by Taiwanese news outlet Tai Sounds, Novatek is rumored to be venturing into the IP domain and may have opportunities to collaborate with ARM, a subsidiary of SoftBank Group.

Further clarification from the source also indicates that Novatek specializes in customized power management chips for mobile devices, while Realtek offers USB4 hub solutions.

Read more

• [News] Possible 30% Cut in Orders for New iPad Pro, Impacting TSMC, Foxconn, and Novatek
• [News] Taiwan’s Chip Act Takes Effect in February, TSMC to Benefit from Historic Tax Incentives

(Photo credit: Novatek)

According to a report by China’s financial media outlet Yicai, in 2023, China’s import quantity and value of integrated circuits experienced a significant decline, influenced by factors such as the overall downturn in the global chip market and the U.S. ban on the sale of chips to China.

The latest data from the Chinese Customs Administration indicates that in 2023, China imported a total of 479.5 billion integrated circuits, a 10.8% decrease compared to 2022, with an import value of $349.4 billion, marking a 15.4% year-on-year decline.

Industry experts suggest that the soft importation of integrated circuits and semiconductor equipment in China reflects the global economic headwinds in 2023, especially the impact of sluggish sales of Chinese smartphones and laptops. Simultaneously, Chinese companies are striving to increase domestic chip production to reduce dependence on imported chips.

Despite the time required for China to achieve mass production in the field of artificial intelligence chips, the push by the Chinese government to establish a more resilient chip supply chain has motivated local manufacturers to actively increase production capacity in mature nodes. These chips are used in devices such as automobiles and home appliances, unaffected by the current U.S. restrictions.

Public information reveals that SMIC, Hua Hong Group, and Nexchip are among the most active in expanding production, focusing on specialty processes such as driver ICs, CIS/ISP, and power semiconductor ICs.

With China’s significant investment in mature nodes, it is positioned at a time when the global chip industry is poised for recovery. According to a recent TrendForce’s data, China currently has 44 operational semiconductor wafer fabs, with an additional 22 under construction. By the end of 2024, 32 Chinese wafer fabs will expand their capacity for 28-nanometer and older mature chips.

TrendForce predicts that by 2027, China’s share of mature process capacity in the global market will increase from 31% in 2023 to 39%, with further growth potential if equipment procurement progresses smoothly.

(Image: SMIC)

According to a report from IJIWEI, research by Barclays analysts indicates that China’s chip manufacturing capacity is expected to more than double within the next 5 to 7 years, surpassing market expectations significantly. The analysis of 48 chip manufacturers with production facilities in China suggests that 60% of the expected additional capacity may come online within the next 3 years.

TrendForce statistics reveal that, excluding 7 dormant wafer fabs, China currently has 44 wafer fabs, with 25 of them being 12-inch facilities, 4 of them 6-inch, and 15 8-inch wafer fabs/lines. Additionally, there are 22 wafer fabs under construction, with 15 of them being 12-inch facilities and 8 being 8-inch wafer fabs.

Companies like SMIC, Nexchip, CXMT and Silan plan to construct 10 more wafer fabs, including 9 12-inch and 1 8-inch wafer fab, by the end of 2024, bringing the total to 32 large-scale wafer fabs, all focusing on mature processes.

Chinese firms have accelerated the procurement of crucial chip manufacturing equipment to support capacity expansion. According to the previous report from South China Morning Post, the import value of lithography equipment from the Netherlands, a primary exporter, surged by 1050%, reflecting substantial orders for semiconductor equipment from China in 2023.

Barclays analysts suggest that most of the new capacity will be used for producing chips using older technologies. These mature semiconductors (28nm and above) lag behind the most advanced chips by at least a decade but are widely used in household appliances and automotive systems.

While these chips could theoretically lead to a market oversupply, Barclays believes it will take several years, possibly as early as 2026, depending on quality and any new trade restrictions.

Earlier, TrendForce released statistics projecting a global ratio of mature (>28nm) to advanced (<16nm) processes around 7:3 from 2023 to 2027. With China’s mature process capacity expected to grow from 29% to 33% by 2027, driven by policies promoting local production, giants like SMIC and HuaHong Group are anticipated to lead the charge, potentially causing a flood of mature processes into the global market and triggering a price war.

TrendForce notes that as China’s mature process capacities emerge, localization trends for Driver IC, CIS/ISP, and Power Discretes will become more pronounced, leading to risks of client attrition and pricing pressures for second and third-tier foundries with similar processes.

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)