Under the grand banner of China’s domestic substitution policy, the wave of locally produced chips is swiftly spreading to the realm of Power Management ICs (PMICs).

Over the past three years, the number of fundraisings for Chinese PMIC manufacturers has shot up. We’ve seen an increase from 18 rounds in 2020 and 19 rounds in 2021 to a whopping 24 rounds in 2022 – a substantial leap from the figures in 2018 and 2019.

Looking at the number of IPO last year, 23 Chinese automotive-grade chip companies went public, with another 25 poised to follow suit. Among these 48 automotive chip firms, 12 boast PMICs, making it the largest product sector in these investments.

New Energy Vehicles Fuel China’s PMIC Market

Both the data points signal a golden era for Chinese PMIC industry, with the new energy vehicles(NEV)emerging as a key driving force.

Compared to traditional vehicles with internal combustion engines, NEV requires a greater number of PMICs, like DC/DC converters, to manage voltage conversions. This, in turn, propels overall PMIC growth. From 2021, automotive PMICs have entered a phase of rapid growth. TrendForce forecasts that the scale of automotive PMICs will reach $7.65 billion by 2023, marking a year-on-year growth of 4.2%.

Government’s subsidy incentives and a booming domestic demand for NEV are the primary reasons for nudging the Chinese semiconductor industry to embrace PMICs more quickly. This trend aligns perfectly with the growth trajectory of China’s power semiconductors.

Chinese Manufacturers Plant Flags in Automotive PMICs

Over the past year, several domestic PMIC manufacturers, including SG Micro, Etek, Shanghai Belling, and Halo Micro, have rolled out automotive-grade PMICs. Some of these chips have even entered mass production and are being adopted by domestic vehicle bands.

Foundries are equally keen to seize the golden opportunity. For instance, GTA Semiconductor has successfully raised over 10 billion yuan in recent years. The company has earmarked a portion of the funds specifically for the R&D of automotive-grade PMIC.

However, the opportunities come with their fair share of challenges. New entrants must navigate stringent automotive certifications, ensure product resilience across extreme temperature ranges from -40°C to 125°C, guarantee a product lifespan exceeding ten years, and manage prolonged validation cycles. These demanding requirements significantly raise the entry barriers for newcomers.

On a global scale, international IDM giants like Infineon, NXP, TI, and Renesas are well entrenched in the PMIC sector, boasting a diverse range of products. In contrast, Chinese PMICs supply chain are just off the starting blocks of the race. To gain trust from customers, expand their product portfolio, and penetrate the global market, they are bound to confront a succession of hurdles, which will persistently scrutinise the enduring R&D capabilities and business strategies of each manufacturer.

The US ban on Chinese industries has left China struggling with a seemingly severe shortage of chips. However, China’s tech giants refuse to surrender; instead, they’re pivoting quickly to survive the game.

Since 2019, the US Department of Commerce has added Chinese leading companies like Huawei to its entity list. Restrictions were expanded in 2020 to include semiconductor manufacturing, making a huge impact on SMIC’s advanced processes below 14nm.

Starting in 2021, the US has been intensifying its control by placing more IC design houses on the list, which include Jingjia (GPU), Shenwei (CPU), Loongson Tech (CPU), Cambricon (AI), Wayzim (RF&GPS), and Yangtze (NAND Flash). Furthermore, the export of advanced EDA tools, equipment, CPUs, and GPUs to China has also been banned.

The goal of such measures is to hinder China’s progress in high-tech fields such as 5G/6G, AI, Cloud computing, and autonomous driving by eroding the dominance of its tech giants over time.

China has been aggressively pursuing a policy of domestic substitution in response to the US’s increasing control. As part of this effort, leading domestic IC design companies like Horizon, Cambricon, Enflame, Biren, Gigadevice, and Nations Technologies have been ramping up their efforts for comprehensive chip upgrades in a variety of applications.

Chinese Brands Ramping up for ASICs

There is a particularly intriguing phenomenon in recent years. Since 2019, China’s leading brands have been venturing into chip design to develop highly specialized ASICs (Application Specific Integrated Circuits) at an unprecedented speed. This move is aimed at ensuring a stable supply of chips and also advancing their technical development.

A closer look at how top companies across diverse application fields integrate ASIC chips into their technology roadmap:

• AI Cloud computing: Alibaba, Baidu, Tencent

China’s tech giants are leveraging advanced foundry processes, such as TSMC’s 5nm and Samsung’s 7nm, to produce cutting-edge AI chips for high-end applications like cloud computing, image coding, AI computing, and network chips.

Alibaba launched its AI chip, Hanguang 800, and server CPU, Yitian 710, in 2019 and 2021, respectively. Both chips were manufactured at TSMC’s 5nm process and are extensively used on Alibaba’s cloud computing platform.

In December 2019, Baidu released its AI chip, Kunlun Xin, which uses Samsung’s 14nm process, followed by its 2nd generation, which uses a 7nm process, for AI and image coding.

• Smartphone: Xiaomi, Vivo, OPPO

Due to the high technical threshold of SoC technology used in smartphones, mobile phone brands mainly develop their own chips by optimizing image, audio, and power processing.

In the year of 2021, Xiaomi released the ISP Surge C1, followed by the PMIC Surge P1. Vivo first released the ISP V1 in September 2021, followed by an upgraded product, V1+, in April 2022, and then V2 in November 2022.
OPPO, on the other hand, unveiled the MariSilicon X NPU in December 2021, which enhances the image processing performance of smartphones, using TSMC’s 6nm process, and later revealed the MariSilicon Y Bluetooth audio SoC TSMC’s 6nm RF process later in 2022.

• Home appliance: Konka, Midea, Changhong, Skyworth

The brands are focusing primarily on MCU and PMIC chips that are essential to a wide range of home appliances. They’re also incorporating SoC chips into their smart TVs.

For example, Hisense has jumped into the SoC game in January 2022 by releasing an 8K AI image chip for their smart TVs. Changhong manufactured an MCU with RISC-V architecture and a 40nm process in December 2022.

• Autonomous driving: NIO, Xiaopeng, Li Auto, BYD

The leading companies are developing ISP and highly technical SoC chips for autonomous driving, which has resulted in a slower development process.

In 2020, NIO formed a semiconductor design team for Autonomous driving chips and ISP. Xiaopeng started its Autonomous driving and ISP chip R&D project in the first half of 2021. Li Auto established two subsidiaries in 2022, with a primary focus on power semiconductors and ISP chips.

Finally, BYD, which has a long history of working on MCU and power semiconductor components, also announced its entry into the autonomous driving chip market in 2022.

Navigating the US’ Tech Crackdown

So why are these brands investing so heavily in self-developed ASICs?

One reason is to avoid the risks associated with export control policies from the US and its allies. Developing their own chips would mitigate the risk of supply chain disruptions caused by potential blockades, ensuring a stable supply and the sustainability of their technology roadmap.

In addition, there are many internal incentives for these brands – for instance, companies that have self-developed chips will be eligible for more government subsidies, as this aligns with the government’s aggressive policy to foster the semiconductor industry. Brands can also reduce their reliance on external suppliers by using their own ASIC chips, which can further lower the operating costs.

Technology wise, ASIC chips allow brands to enhance the features they require and enable better integration with the software, which could provide efficiency gains at system level – similar strategies are also being employed by Google and AWS with their AI chips, as well as by Apple with its M1 SoC.

With all things considered, it is certainly possible that we will see a persistent trend of more self-developed ASIC chips made by Chinese brands, which could potentially lead to significant changes in China’s semiconductor supply chain from the ground up.

As the struggle between China and the United States continues, in order to avoid upcoming geopolitical risks, not only have Taiwanese ODM manufacturers begun to shift some production locations, but market research firm TrendForce has also observed that American OEM companies have started to take action, discussing with partners how to reduce the proportion of Chinese supply chains and components.

TrendForce points out that, at present, American cloud service providers (CSPs) and OEM manufacturers have not yet been able to completely cut ties with Chinese-produced components. Among these, passive components and mechanical assemblies are more difficult to relocate due to factors such as cost and yield. However, other components (such as PCBs and power management control ICs) have plans to move out of China.

But where will these component manufacturers go if they want to move out of China? According to TrendForce’s analysis, PCB manufacturers are currently eyeing shifts to Thailand, Malaysia, Vietnam, and India; power management ICs and control ICs have already moved out of China and relocated to Taiwanese factories; mechanical assemblies and MLCC capacities still mainly come from China, with the former being requested to move but facing challenges due to cost and yield considerations.

TrendForce notes that the aforementioned production line and material shifts are primarily led by American CSPs. The overall server supply chain’s subsequent changes still need to be observed. For example, major players like Google, AWS, and Meta have not only moved most of their L6 production lines to Taiwan but also plan to establish bases in Southeast Asia after 2024 to handle cases within the United States, and reserve flexible production lines along the US-Mexico border, which will significantly increase utilization within this year.

Intel officially confirmed on February 15 that it will acquire Israeli foundry Tower Semiconductor for nearly US$6 billion, and the deal will likely contribute to the growth of Intel’s foundry business if it reaches a successful conclusion, according to TrendForce’s latest investigations. Tower was 9th place in the global ranking of foundries by revenue for 4Q21 and operates a total of seven production sites across Israel, the US, and Japan. Tower’s foundry capacity in 12-inch wafer equivalents accounts for about 3% of the global total. The majority share of Tower’s foundry capacity is for 8-inch wafers, and Tower’s share of the global 8-inch wafer foundry capacity is around 6.2%. Regarding manufacturing process platforms, Tower offers nodes ranging from 0.8µm to 65nm. It has a diverse range of specialty process technologies for manufacturing products in relatively small quantities. Products that Tower has been contracted to manufacture are mostly RF-SOI components, PMICs, CMOS sensors, discretes, etc. As such, the Tower acquisition is expected to help Intel expand its presence in the smartphone, industrial equipment, and automotive electronics markets.

Although Intel undertook a series of business strategies to compete with TSMC and Samsung, IFS (Intel Foundry Services) has historically manufactured with platform technologies for processors such as CPUs and GPUs. Furthermore, competition still persists between Intel and certain foundry clients that require advanced processes below the 10nm node, such as AMD and Nvidia, which have long histories of developing server products, PC CPUs, GPUs, or other HPC-related chips. Intel’s preexisting competitive relationship with these companies may become a barrier to IFS’ future expansion because IFS will be relatively unlikely to attract them as customers.

Taking the aforementioned factors into account, TrendForce believes that the Tower acquisition will likely expand IFS’ business presence in the foundry industry through two considerations. First of all, the acquisition will help Intel both diversify its mature process technologies and expand its clientele. Thanks to advancements in communication technologies and an increase in demand for new energy vehicles, there has been a recent surge in demand for RF-SOI components and PMICs. Tower’s long-term focus on the diverse mature process technologies used to manufacture these products means it also possesses a long-term collaborative relationship with clients in such markets. By acquiring Tower, Intel is therefore able to address IFS’ limited foundry capabilities and limited clientele. The second consideration pertains to the indigenization of semiconductor manufacturing and supply allocations, which have become increasingly important issues in light of current geopolitical situations. As Tower operates fabs in Asia, EMEA, and North America, the acquisition is in line with Intel’s current strategic aim to reduce the disproportionate concentration of the foundry industry’s supply chain in Asia. As well, Intel holds long-term investments and operates fabs in both the US and Israel, so the Tower acquisition will give Intel more flexibility in allocating production capacities, thereby further mitigating risks of potential supply chain disruptions arising from geopolitical conflicts.

In addition to the aforementioned synergy derived from acquiring Tower, it should also be pointed out that Intel is set to welcome an upcoming partnership with Nuvoton. Tower’s three Japan-based fabs were previously operated under TowerJazz Panasonic Semiconductor, a joint venture created by Tower and Panasonic in 2014, with Tower and Panasonic each possessing 51% and 49% ownership, respectively. After Nuvoton acquired PSCS (Panasonic Semiconductor Solutions Co.) in 2020, Panasonic’s 49% ownership of the three fabs was subsequently transferred to Nuvoton. Following Intel’s Tower acquisition, Intel will now possess the 51% majority ownership of the fabs and jointly operate their production lines for industrial MCUs, automotive MCUs, and PMICs along with Nuvoton. Notably, these production lines also span the range of CIS, MCU, and MOSFET technologies previously developed by Panasonic.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

Ukraine is a major supplier of raw material gases for semiconductors including neon, argon, krypton, and xenon, according to TrendForce’s investigations. Ukraine supplies nearly 70% of the world’s neon gas capacity. Although the proportion of neon gas used in semiconductor processes is not as high as in other industries, it is still a necessary resource. If the supply of materials is cut off, there will be an impact on the industry. TrendForce believes that, although the Ukrainian-Russian conflict may affect the supply of inert gas regionally, semiconductor factories and gas suppliers are stocked and there are still supplies from other regions. Thus, gas production line interruptions in Ukraine will not halt semiconductor production lines in the short term. However, the reduction in gas supply will likely lead to higher prices which may increase the cost of wafer production.

Inert gases are primarily used in semiconductor lithography processes. When the circuit feature size is reduced to below 220nm, it begins to enter the territory of DUV (deep ultraviolet) light source excimer lasers. The wavelength of the DUV light generated by the energy beam advances circuit feature sizes to below 180nm. The inert gas mixture required in the DUV excimer laser contains neon gas. Neon gas is indispensable in this mixture and, thus, difficult to replace. The semiconductor lithography process that requires neon gas is primarily DUV exposure, and encompasses 8-inch wafer 180nm to 12-inch wafer 1Xnm nodes.

TrendForce research shows, in terms of foundries, global production capacity at the 180~1Xnm nodes accounts for approximately 75% of total capacity. Except for TSMC and Samsung, who provide advanced EUV processes, for most fabs, the proportion of revenue attributed to the 180~1Xnm nodes exceeds 90%. In addition, the manufacturing processes of components in extreme short supply since 2020, including PMIC, Wi-Fi, RFIC, and MCU all fall within the 180~1Xnm node range. In terms of DRAM, in addition to Micron, Korean manufacturers are gradually increasing the proportion of 1alpha nm nodes (using the EUV process) but more than 90% of production capacity still employs the DUV process.  In addition, all NAND Flash capacity utilizes DUV lithography technology.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com