Contract chip manufacturer United Microelectronics Corp has partnered with Intel to develop a 12-nanometer technology platform and will commence production at three Intel facilities in Arizona, USA. According to a report by Nikkei, mass production for chips destined for communication and other applications is slated to begin in 2027

During an interview at the Intel IFS Direct Connect event in February, Jason Wang, Co-President of UMC, stated that both UMC and Intel are pioneering innovative collaboration models. They aim to provide customers with foundry services with competitive pricing through vertical specialization. The two companies will leverage complementary advantages to accelerate the development timeline and expand their global presence.

The foundry market is generally divided into advanced chips and mature chips. Advanced chips, which constitute the brains of smartphones and other devices, are predominantly led by TSMC and Samsung Electronics.

In the realm of mature chips, around 10 companies from Taiwan, China, South Korea, and the United States are competing for the demands of telecommunications equipment, Vehicular communication systems, and other technology manufacturers.

Intel is changing its vertically integrated business model to compete with TSMC and Samsung in contract manufacturing demands.

In March of this year, the US government announced that Intel would receive up to USD 8.5 billion in subsidies for the development of advanced chips. By collaborating with UMC on mature chips, Intel may focus more resources on cutting-edge technologies like 1.4nm.

For UMC, partnering with Intel enables it to mass-produce chips that are more advanced than its mainstream 22nm to 28nm products. Obtaining production facilities in the United States will also help the company win North American clients, as revenue from this region currently accounts for less than 30% of its total.

TSMC is also constructing a semiconductor plant in Arizona, utilizing US assistance to produce advanced 4nm chips. In contrast, the collaboration between UMC and Intel will focus on relatively mature chips.

UMC has long been one of the pillars of the semiconductor industry in Taiwan. Established in 1980, seven years before TSMC, the company has been vying for the position of industry leader until the 2000s.

During the 2010s, UMC lagged behind TSMC in advanced chip development, as the latter made significant investments in the semiconductor market following the global financial crisis. Since then, UMC has reportedly put more emphasis on mature chips.

The company is currently at a turning point. Benefiting from the global chip shortage, its performance continued to grow from 2020 to 2022. However, as of December 2023, annual revenue declined by 20% to 222.5 billion New Taiwan dollars ($6.9 billion), marking the first decrease in four years. This is approximately one-tenth of TSMC’s revenue.

UMC’s downturn in 2023 also signifies an intensification in mature process technologies, especially as Chinese semiconductor enterprises’ mature process technologies and equipment remain unaffected by US export restrictions. In an effort to overcome US restrictions, China is heavily investing in mature process.

Per data from TrendForce, China’s share of mature chip production at 28nm and above is expected to increase from the current 31% to 39% by 2027, as production volumes grow.

Joanne Chiao stated that semiconductors for applications such as general sensors and display controllers are expected to face fierce price competition.

On the other hand, UMC continues to face competition from Taiwanese foundries. TSMC plans to produce mature chips at a new plant in Japan by the end of 2024 and at a plant in Germany by the end of 2027. With subsidies from the Japanese and German governments, TSMC will form joint ventures with buyer customers to ensure stable production capacity.

Powerchip Semiconductor Manufacturing Corporation (PSMC) announced at the end of February its plans to assist Tata Group in building a chip plant in India. PSMC stated that it would provide intellectual property for the project without investment, aiming to generate licensing revenue.

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(Photo credit: UMC)

As various governments actively court semiconductor foundries in Taiwan, PSMC, in partnership with India’s Tata Group, held a groundbreaking ceremony for India’s first 12-inch fab on March 12th. As per a report from TechNews, PSMC has been collaborating with Japan and India recently to establish a semiconductor manufacturing path distinct from TSMC’s, marking Chairman Frank Huang’s latest overseas strategy amidst geopolitical shifts.

Due to various countries actively developing the semiconductor industry and seeking assistance from Taiwan, PSMC Chairman Frank Huang stated that this year is a transformative year for PSMC. In addition to optimistically viewing the new foundry opportunities brought about by geopolitical shifts, PSMC will also focus on a global development strategy centered around “Fab IP.”

“Taiwan’s semiconductor strength is formidable because no one else can do what Taiwan is doing,” said Frank Huang. He mentioned that, following President Tsai Ing-wen’s directive to assist India in building a semiconductor plant, it serves as a path for Taiwanese companies to understand the foundational cooperation model in India.

Therefore, PSMC decided to provide technology, with India responsible for building the plant and providing funding. The investment structure involves 70% from the Indian government and 30% from the Tata Group.

Global Expansion Through “Fab IP”

PSMC’s Fab IP strategy leverages its long-term accumulated experience in plant construction and semiconductor manufacturing technology to assist other countries in building semiconductor plants while earning royalties for technology transfers.

Frank Huang pointed out that the company has established a “Manufacturing IP Transfer Department” which does not invest money but only provides technology transfer. Its main focus is assisting other countries in building plants, extending from Japan and India to countries in the Middle East and Europe, all of which represent opportunities for Taiwan.

PSMC General Manager Brian Shieh believes that overseas plant construction requires a thorough consideration of operations and future costs. Therefore, PSMC tends to assist in building plants without assuming operational responsibilities. Instead, they only provide services, which differs from TSMC’s overseas cooperation model.

Due to the keen interest of various countries in IP technology transfer, Frank Huang believes that IP transfer will also become one of the important sources of revenue in the future. “Up to 7-8 countries have approached PSMC,” including Vietnam, Thailand, India, Saudi Arabia, France, Poland, Lithuania, and others.

He mentioned that from Japan to India, they have been actively engaged in IP transfer and are currently in discussions with two other countries. The source cited by the report also indicates that Vietnam is actively negotiating with PSMC, although PSMC has not responded to this.

Read more

• [News] PSMC Assists Tata in Fab Establishment through Technology Transfer
• [News] Tata Group Rumored to Invite Taiwanese Businesses to Establish Fabs in India, Possibly Partnering with UMC or PSMC

(Photo credit: PSMC)

According to TechNews, Taiwan’s semiconductor foundry, PSMC (Powerchip Semiconductor Manufacturing Corporation) recently announced its collaboration with Tata Electronics in India to establish the country’s first 12-inch wafer fabrication plant in Dholera, Gujarat. In an interview on the 4th, Chairman Frank Huang stated that Powerchip’s role primarily involves technology transfer, rather than financial investment, with Tata Group’s wafer plant expected to break ground on March 12.

Huang disclosed that the initiative is 70% funded by the Indian government, which had actively sought Taiwanese semiconductor firms to assist in India. This partnership with India will see PSMC aiding in the plant’s construction, while the operational responsibilities will wholly fall under India’s purview.

Following the agreement between the two parties on February 6, the groundbreaking ceremony, to be presided over by the President of India, is scheduled for this month on the 12th, with Huang himself attending.

Furthermore, Huang mentioned three major projects by the Indian government, including the collaboration between PSMC and Tata, support for Micron Technology’s manufacturing presence in India, and a back-end packaging initiative. Through PSMC’s assistance, the Tata Group plans to produce power management ICs, display drivers, microcontrollers, and high-performance computing logic chips at the 12-inch wafer facility, targeting automotive, computing and data storage, wireless communication, and artificial intelligence application markets.

(Image: PSMC)

The semiconductor supply chain is accelerating its globalization strategy. On February 29th, PSMC announced its collaboration with Tata Electronics in India to construct the country’s first 12-inch fab in Dholera, Gujarat. The construction of the fab is expected to commence within this year.

According to Tata’s press release, following the approval from the Indian government for Tata Group and PSMC to establish India’s first fab in Dholera, Gujarat, the investment for the fab is estimated at INR 91,000 crores (roughly USD 11 billion) and will generate over 20,000 direct and indirect skilled jobs in the region . The preliminary plan outlines a monthly production capacity of 50,000 wafers.

Cited from PSMC’s press release, Frank Huang, Chairman of PSMC, pointed out that Tata Sons Group is India’s largest and internationally-renowned company. India not only has the world’s largest population, it also has a huge domestic market. At this critical moment of the global restructuring of high-tech supply chain, the cooperation between PSMC and Tata Sons Group is indeed timely.

Randhir Thakur, CEO of Tata Electronics, stated as follows, “We will be able to serve our global customers’ requirements for supply chain resilience and meet the growing domestic demand.”

As per PSMC’s press release, Tata Electronics plans to produce power management IC, display driver IC as well as microcontrollers and high-performance computing logic at the Dholera 12-inch fab, in order to enter the automotive, computing and data storage, wireless communications, artificial intelligence and other application end markets.

As key countries worldwide continue actively building their own semiconductor supply chains, TSMC has taken the lead in initiating globalization efforts. UMC, through its collaboration with Intel to develop a 12-nanometer process platform, not only advances in process technology but also expands its presence into the United States.

On the other hand, after entering the Japanese market last year, PSMC further declared yesterday its partnership with Tata to establish India’s first 12-inch fab. This marks the first time a Taiwanese semiconductor foundry has entered the Indian semiconductor supply chain.

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• [News] Tata Group Rumored to Invite Taiwanese Businesses to Establish Fabs in India, Possibly Partnering with UMC or PSMC
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(Photo credit: PSMC)

Foundry is a crucial sector in the semiconductor industry and a focal point of attention for many professionals in the industry. Recently, three foundries have released their outlook for the first half of 2024, all indicating a cautious outlook for the first quarter.

According to Taiwanese News outlet Commercial Times, United Microelectronics Corporation (UMC), Powerchip Semiconductor Manufacturing Corporation (PSMC), and Vanguard International Semiconductor Corporation (VIS) anticipate a subdued first quarter due to factors such as off-season effects and holidays.

With conservative estimates on wafer shipments, average selling prices (ASP), and gross margins for the first quarter, there remains a high likelihood of a continued decline in performance compared to the previous quarter.

• VIS: Visibility of the Market Conditions Limited to about Only 2 to 3 Months

VIS stated in a recent conference that semiconductor demand entered the traditional off-season at the beginning of the year.

It is expected that the supply chain will continue inventory adjustments and maintain a cautious approach to orders. Assuming an average exchange rate of NTD 30.9, shipments are expected to decrease by 6-8% quarterly, with average selling prices roughly remaining flat and gross margins falling between 21-23%.

VIS believes that the industry is still undergoing inventory adjustments, and the overall economic situation remains sluggish. Currently, the visibility of the market is limited to only two to three months. In the first quarter, due to continuous inventory adjustments in the supply chain and a cautious approach to ordering, capacity utilization will decrease to 50%.

In addition, regarding the investment in 12-inch fabs, VIS Chairman Leuh Fang stated that due to the significant investment required for 12-inch fabs, there must be definite demand and leading technological sources before deciding to proceed with construction.

Currently, the decision is still in the cautious evaluation stage, and no plants will be built hastily until the technology sources are confirmed.

• PSMC: A Conservative Outlook

PSMC’s General Manager, Brian Shieh, stated during a mid-January earnings call that the company expects a seasonal decline of approximately 5-6% in revenue for the first quarter due to fewer working days.

Regarding inventory, PSMC noted that client inventory levels are currently at normal, with the semiconductor manufacturing segment performing relatively well. It is anticipated that capacity utilization rates for the first quarter of 2024 could rebound to 70% to 75%, offering promising prospects for operations in the latter half of the year.

Overall, PSMC aims for a capacity utilization rate of over 90% for the full year, with the goal of continuously filling the new capacity at the Tongluo plant in the second half of the year. The company estimates that the Tongluo plant can be fully operational in the latter half of the year, primarily focusing on 55nm and 40nm logic products.

• UMC: Visibility of the Market Conditions for 2024 is Relatively Limited

UMC forecasts a modest increase of 2-3% in wafer shipments for the first quarter of 2024, with ASP quoted in USD expected to decrease by 5%, leading to a slight decline in gross margin to around 30%. This is primarily attributed to adjustments in pricing and changes in product mix. Capacity utilization is anticipated to remain at low 60%.

In terms of production lines, stable demand is projected for communication and consumer sectors, maintaining flat revenue trends, while automotive and industrial segments are expected to undergo inventory adjustments, resulting in a seasonal decline in revenue for the first quarter of 2024.

UMC estimates that the revenue contribution from special processes will reach 30% in the first quarter of this year, with sales from a predominant single customer making a significant contribution.

Regarding the medium to long-term outlook for the full year, UMC stated that the semiconductor market is expected to grow at a mid-single-digit rate annually, while the foundry industry is forecasted to grow at a high single-digit rate, approaching 10%.

UMC’s revenue is expected to align closely with the growth rate of the wafer foundry industry. UMC holds a cautiously optimistic outlook for demand in 2024, as smartphone and PC inventory levels returned to relatively normal levels in the fourth quarter of 2023.

Additionally, on January 25th of this year, Intel and UMC announced a collaboration to develop 12nm technology. Both parties will share the expenses, with Intel taking charge of operating the facility.

UMC stated that the capacity expansion will significantly impact the company’s operational performance once production starts. The technology is expected to enter the Process Design Kit (PDK) stage in 2025, begin trial production in 2026, and commence supply in 2027. The 12nm technology represents a potential market worth billions, and the collaboration does not include IP licensing.

Regarding this matter, TrendForce believes that this partnership, which leverages UMC’s diversified technological services and Intel’s existing factory facilities for joint operation, not only aids Intel in transitioning from an IDM to a foundry business model but also brings a wealth of operational experience and enhances manufacturing flexibility.

For UMC, this collaboration is a game-changer as it allows the company to agilely leverage FinFET capacity without the pressure of heavy capital investments.

This move positions UMC to carve out a unique niche in the fiercely competitive mature process market. Furthermore, by co-managing Intel’s US facility, UMC can expand its global footprint, smartly diversifying geopolitical risks. This partnership is shaping up to be a win-win for both.

Overall, TrendForce views this alliance as a significant step. UMC brings its plentiful experience in mature processes, while Intel contributes its advanced technological prowess.

This partnership is not just about mutual benefits at the 10nm process level; it’s a watchpoint for potentially deeper and more extensive collaboration in their respective fields of expertise. In the dynamic world of semiconductor manufacturing, this Intel-UMC alliance is a fascinating development to keep an eye on.

Read more

• [News] NVIDIA and AMD Clash in AI Chip Market, as TSMC Dominates Orders with Strong Momentum in Advanced Processes
• [News] Intel Teams Up with UMC to Pursue 12-Nanometer Technology, Production Expected by 2027

(Photo credit: UMC)