A major collaboration between Taiwan and Japan on semiconductors has been halted, as PSMC suddenly informed SBI Holdings in late September that it was unable to proceed with the plan of constructing a fab in Japan as it had promised a year ago. With various speculations circulating concerning the reason behind, SBI Holding Chairman and CEO Yoshitaka Kitao has made his stance.

By harshly criticizing PSMC on his personal Facebook account, he accused the company of dishonesty, according to a report by TechNews.

Kitao referred to the breakup as “a blessing in disguise,” for the partnership has been terminated before any damage has been done, the report notes. He even quoted the saying of Confucius, a well-known Chinese philosopher, to express his disappointment in PSMC. ‘Without trust, one cannot stand,” he said.

According to Kitao, this is the first time SBI Holdings has had to dissolve a partnership almost unilaterally, even after making significant concessions.

According to TechNews, Kitao elaborated on his Facebook by saying that he and Frank Huang, Chairman of PSMC, had met with key government officials together, as well as providing a detailed explanation to the other party regarding the conditions for receiving subsidies from the Japanese government.

However, it is “unbelievable” that the Taiwan-based foundry company went back on their previous commitments and acted with extreme dishonesty, he accused.

According to a previous report by Nikkei, PSMC informed SBI Holdings in September that it was not willing to assume the risks linked to the project. As a result, the two companies will dissolve their partnership aimed at constructing the facility in Miyagi Prefecture in northeastern Japan, which was originally expected to begin mass production by 2027.

Nikkei also notes that PSMC has been struggling with mature nodes due to the oversupply from Chinese firms, resulting in operating losses for five consecutive quarters since Q2 2023.

According to TechNews, PSMC claimed that its collaboration with SBI would follow the Fab IP model, in which the former would provide consulting for the factory establishment, personnel training, and technology transfer, charging service fees and royalties to its Japanese partner, and it has no plans to invest in or lead the operations of the new factory.

Moreover, PSMC reportedly claimed that the subsidy policy of Japan’s Ministry of Economy, Trade and Industry (METI), stipulates that recipients must guarantee continuous production at the new facility for at least 10 years.

Given SBI’s background in finance and that it is without experience in the semiconductor industry, METI required PSMC to share responsibility for this guarantee, as PSMC claimed that being a publicly listed company in Taiwan, guaranteeing the operations of a Japanese factory without holding a controlling stake would violate Taiwan’s Securities and Exchange Act, TechNews notes.

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(Photo credit: PSMC)

In August, 2023, PSMC announced its partnership with Japan’s SBI to construct a chipmaking plant in Japan. However, the plan has been halted last Friday, with reports indicating that PSMC’s deteriorating financial performance may be the reason. However, the Taiwan chipmaker refuted the speculation, claiming the termination of the fab is not related to its financial status, according to a report by CNA.

PSMC (Powerchip Semiconductor Manufacturing Corp) explained that its collaboration with SBI follows the Fab IP model, in which the former provides consulting for the factory establishment, personnel training, and technology transfer, charging service fees and royalties to its Japanese partner, the report noted. Therefore, Powerchip has no plans to invest in or lead the operations of the new factory.

Citing the remarks by PSMC, the report notes that the company’s board has confirmed the halt of the collaboration plan, and has sent personnel to the Ministry of Economy, Trade and Industry (METI) in Japan to explain the situation, while notifying SBI Holdings in the meantime.

According to a previous report by Nikkei, PSMC informed SBI Holdings last Friday that it was not willing to assume the risks linked to the project. As a result, the two companies will dissolve their partnership aimed at constructing the facility in Miyagi Prefecture in northeastern Japan. However, SBI stated that it plans to carry out the project by finding new partners.

The factory is originally expected to begin mass production by 2027, focusing on automotive semiconductors, with the total planned investment amounting to ¥800 billion, according to Nikkei.

Nikkei notes that PSMC has been struggling with mature nodes due to the oversupply from Chinese firms, resulting in operating losses for five consecutive quarters from April to June 2024.

It is interesting to note that this decision comes after PSMC’s announcement on Thursday that it will provide technology for a chip plant to be built in India by Tata Group, one of the country’s largest conglomerates.

The company announced on the 26th that it has signed a definitive agreement with Tata Electronics in New Delhi to collaborate on building India’s first 12-inch wafer fab in Dholera, Gujarat. PSMC will transfer mature process technologies and train local employees as part of the partnership.

According to PSMC, the USD 11 billion facility, with a monthly capacity of 50,000 wafers, is expected to create over 20,000 high-tech jobs in the region.

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• [News] PSMC’s Frank Huang Explores Global Expansion through Fab IP, Diverging from TSMC’s Path
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(Photo credit: PSMC)

Taiwanese semiconductor foundries are facing price pressure in mature process as demand remains sluggish, according to a report from the Economic Daily News. Sources indicate that local foundries are offering discounts on mature process orders in Q4, marking a shift from the relatively stable pricing seen in Q3. Prices could continue to decline into the first quarter of next year, marking two consecutive quarters of downward pressure.

United Microelectronics Corp. (UMC), Vanguard International Semiconductor Corp. (VIS), and Powerchip Semiconductor Manufacturing Corp. (PSMC) are the key players in Taiwan’s mature process foundry space. UMC told the Economic Daily News that its Q3 pricing remained stable, with Q4 details to be revealed in its next earnings call. Vanguard also said it would disclose its Q4 outlook during its earnings release.

The report notes that VIS previously indicated the competitive pricing environment would ease this quarter, with utilization rates improving to around 70% or higher. The company expects utilization rates to rise to 70-80% next year, though whether they reach the higher end will depend on demand.

However, the pricing pressure in Taiwan’s mature foundry processes stems largely from weak demand for power management ICs and driver ICs, with some prices expected to decline by single-digit percentages over two quarters. Notably, Chinese foundries, which had previously been aggressive in cutting prices, have held firm this time, contrasting with the more flexible pricing strategies of their Taiwanese counterparts.

An unnamed source in the driver IC industry cited by the Economic Daily News said that some Taiwanese foundries are willing to offer single-digit percentage price cuts in Q4 to maintain utilization rates, while Chinese foundries are less inclined to lower prices.

Another industry source attributed Chinese foundries’ reluctance to cut prices to improved utilization rates and the fact that previous rounds of price cuts had already created a significant gap between their pricing and that of Taiwanese competitors.

According to the report, negotiations over mature process pricing are ongoing, with volume playing a key role in securing discounts. Some microcontroller unit (MCU) makers revealed that certain foundries are offering project-based discounts of single-digit percentages for large orders in Q4, while keeping base prices steady.

The industry is currently negotiating pricing for the first quarter of next year, with expectations that some foundries may continue to lower prices, though likely not by a significant margin.

(Photo credit: UMC)

According to sources cited by Indian media outlet Financial Express, Apple is said to be in talks with Micron, Tata Group, and other Indian chip manufacturers to procure USD 12 billion worth of chips locally for iPhones produced in India.

Reportedly, Apple plans to shift 26% of its iPhone production to India by 2026. Industry sources cited by the report further suggest that by then, Apple will become the largest single buyer of Indian-made semiconductors, surpassing any other sectors such as defense, aerospace, and automotive.

Sources further point out that if Micron and Tata are able to produce chips that meet Apple’s requirements, a significant portion of the chips needed for iPhones will come from these companies, potentially creating substantial opportunities for the Indian semiconductor industry.

Before the outbreak of the pandemic, Apple iPhones and almost all other consumer products were manufactured in China. Following the introduction of the Production-Linked Incentive (PLI) scheme by the Indian government, potentially prompting Apple to begin shifting its production lines.

In 2022, the Indian government launched a USD 10 billion PLI scheme to stimulate domestic semiconductor production. To date, India has approved five chip manufacturing projects with a total value of roughly USD 18 billion and has reserved USD 1.2 billion for future projects.

Meanwhile, Micron’s chip plant in Gujarat, India, is expected to begin operations this year, marking the company’s first chip facility in India.

Additionally, Tata Group, in collaboration with PSMC, plans to build a packaging plant in Gujarat, with operations slated to commence in 2026, producing chips using 28nm, 40nm, 55nm, 90nm, and 110nm nodes.

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(Photo credit: Tata Group)

The intense price competition among Chinese mature process foundries is nearing its end. According to a report from the Economic Daily News, it has indicated that Hua Hong Semiconductor, the second-largest foundry in China, plans to raise prices by 10% in the second half of the year.

This marks the end of a two-year decline in mature process foundry prices, signaling that the industry is emerging from its correction phase and moving towards a healthier path. Consequently, Taiwanese foundries specializing in mature processes, such as UMC, VIS, and PSMC, are also expected to see a rise in their prices, boosting their operations.

Industry sources cited in the same report also note that due to geopolitical factors, Chinese foundries primarily focus on the domestic market, which is gradually diverging from the customer base of Taiwanese foundries. However, if Hua Hong’s price increase materializes, it would be a significant indicator.

Since the end of the COVID-19 pandemic, mature process foundry prices have been continuously adjusting downward. A price increase would indicate a rebound in demand for consumer electronics.

Reportedly, the industry sources believe that if the market for mature process foundries rebounds, UMC will be the primary beneficiary. As demand for consumer electronics and mobile phones picks up, related products such as OLED panel driver ICs, image signal processors (ISP), and WiFi chip will see improvements in inventory levels across the computer, consumer, and communication sectors, reaching healthier levels.

VIS and PSMC are also expected to benefit from the industry’s recovery trend. Although VIS does not comment on pricing issues, the company previously mentioned that inventory levels for consumer electronics are expected to return to normal by 2024. Despite ongoing adjustments in industrial and automotive inventories, the company remains optimistic about moderate growth in the second half of the year.

PSMC is anticipated to experience a gradual return of orders as well. The company emphasizes its commitment to adapting to market competition and continuously adjusting its production and sales strategies. With the positive effects of these adjustments becoming evident and customer inventory levels returning to healthy standards, along with new business opportunities at the Tongluo plant, PSMC expects its revenue to gradually recover.

Read more

• [News] UMC Optimistic About Second Half Business Outlook, While AI Could Capture 10-20% Market Share
• [News] Foundries Face Price Pressure in Mature Process Amid Oversupply, Indicating Q3 Price Decline
  

(Photo credit: UMC)