TSMC’s fab in Kikuyo, Kumamoto Prefecture, Japan (Kumamoto Fab 1) is expected to begin mass production by the end of 2024, with plans for a second fab in the region. Thus, the influence of TSMC’s presence continues to expand, as per the latest estimates from local financial institutions.

Over the next decade, from now until 2031, the economic spillover effect of TSMC’s operations in Kumamoto is projected to surpass 10 trillion yen, marking a 60% increase from a previous estimate in August 2023.

According to a report from Nikkei citing Kyushu Financial Group (Kyushu FG), a new impact estimate has been released on September 5, showing that TSMC’s operations in Kumamoto Prefecture are projected to generate an economic spillover effect of approximately JPY 11.2 trillion over the next 10 years, until 2031.

This marks a 60% increase from the previous estimate of JPY 6.9 trillion published in August 2023. The projected impact on Kumamoto Prefecture’s GDP over the same period has also risen from JPY 3.4 trillion to JPY 5.6 trillion.

Reportedly, the previous estimate from Kyushu FG last August only considered the benefits of TSMC’s Kumamoto Fab 1. The latest report, however, includes the planned construction of the Kumamoto Fab 2 in its evaluation.

The upward revision is attributed to the expanded magnetic pull of TSMC’s Kumamoto operations (both fabs). The number of companies expected to set up or invest in the region has increased to 171, roughly double the previous estimate.

Initially, the first Kumamoto fab attracted strong interest from suppliers like Sony and Mitsubishi Electric. Following TSMC’s announcement in February to build a second fab, further investments are expected, not only from within Kumamoto but also from other prefectures and overseas suppliers, particularly from Taiwan.

Additionally, the economic impact is expected to extend to wage levels in Kumamoto Prefecture, with an estimated increase of JPY 380,000 in per capita annual income.

Meanwhile, as stated in an report from Bloomberg on May 11th, Kumamoto’s newly appointed governor, Takashi Kimura, once claimed that he would spare no effort to persuade TSMC to establish a third fab in the region.

In addition, a recent report from Kyodo News citing the interview with Taiwanese Minister of Economic Affairs J.W. Kuo has also hinted that TSMC plans to build a third fab in Japan, but with a projected timeline after 2030.

If the third fab is realized, the economic spillover effect is anticipated to expand further.

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(Photo credit: JASM)

To counter the U.S.’s ongoing semiconductor restrictions launched the U.S., China has outspent the U.S., South Korea, Japan, and Taiwan combined on chip manufacturing equipment in the first half of this year.

However, sources cited by a report from Commercial Times have warned that China’s excessive investment could soon lead to global overcapacity issues in traditional chip production, which is similar to the oversupply problems seen in the electric vehicle and solar energy sectors in recent years.

Per the data cited by CNBC from the Semiconductor Equipment and Materials International (SEMI), China spent USD 24.73 billion on chip manufacturing equipment in the first half of 2024, surpassing the combined USD 23.68 billion spent by the U.S., South Korea, Japan, and Taiwan during the same period. This surge in spending is driven by China’s efforts to achieve semiconductor self-sufficiency amid U.S.-China tensions.

The report further notes that since the U.S. implemented stricter export restrictions in October 2022, Chinese companies have been rapidly accelerating their procurement. SEMI data suggests that China’s total procurement this year is expected to exceed USD 35 billion.

Citing Clark Tseng, Senior Director at SEMI, the report indicated that the current equipment stockpiling trend may continue into the second half of this year and is expected to ease only by 2025 as companies work to absorb excess capacity.

Citing Alex Capri, a Senior Lecturer at the National University of Singapore and Research Fellow at the Hinrich Foundation, CNBC pointed out that Chinese companies are preemptively stockpiling chip manufacturing equipment in response to the risk of further export restrictions from Washington before the U.S. presidential election.

Capri highlighted that as China is making smooth progress in traditional chip production, the world might soon face an oversupply of traditional chips, similar to the overcapacity issues seen in electric vehicles and solar panels.

As a result, companies outside China could struggle to compete in the sector with lower-priced products from Chinese companies.

A previous report from Bloomberg pointed out that China has thus become the largest market by revenue for top global chip equipment suppliers. The latest quarterly financial reports from companies such as Applied Materials, Lam Research, and KLA show that China contributes approximately 40% of their revenue.

For Japanese company TEL and Dutch company ASML, the contribution from the Chinese market is even more significant, with nearly half of their revenue coming from China.

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(Photo credit: SMIC)

At the SEMICON Taiwan 2024, Samsung’s Head of Memory Business, Jung Bae Lee, stated that as the industry enters the HBM4 era, collaboration between memory makers, foundries, and customers is becoming increasingly crucial.

Reportedly, Samsung is prepared with turnkey solutions while maintaining flexibility, allowing customers to design their own basedie (foundation die) and not restricting production to Samsung’s foundries.

As per anue, Samsung will actively collaborate with others, with speculation suggesting this may involve outsourcing orders to TSMC.

Citing sources, anue reported that SK hynix has signed a memorandum of understanding with TSMC in response to changes in the HBM4 architecture. TSMC will handle the production of SK hynix’s basedie using its 12nm process.

This move helps SK hynix maintain its leadership while also ensuring a close relationship with NVIDIA.

Jung Bae Lee further noted that in the AI era, memory faces challenges of high performance and low energy consumption, such as increasing I/O counts and faster transmission speeds. One solution is to outsource the basedie to foundries using logic processes, then integrate it with memory through Through-Silicon Via (TSV) technology to create customized HBM.

Lee anticipates that this shift will occur after HBM4, signifying increasingly close collaboration between memory makers, foundries, and customers. With Samsung’s expertise in both memory and foundry services, the company is prepared with turnkey solutions, offering customers end-to-end production services.

Still, Jung Bae Lee emphasized that Samsung’s memory division has also developed an IP solution for basedie, enabling customers to design their own chips. Samsung is committed to providing flexible foundry services, with future collaborations not limited to Samsung’s foundries, and plans to actively partner with others to drive industry transformation.

Reportedly, Samsung is optimistic about the HBM market, projecting it to reach 1.6 billion Gb this year—double the combined figure from 2016 to 2023—highlighting HBM’s explosive growth.

Address the matter, TrendForce further notes that for the HBM4 generation base die, SK hynix plans to use TSMC’s 12nm and 5nm foundry services. Meanwhile, Samsung will employ its own 4nm foundry, and Micron is expected to produce in-house using a planar process. These plans are largely finalized.

For the HBM4e generation, TrendForce anticipates that both Samsung and Micron will be more inclined to outsource the production of their base dies to TSMC. This shift is primarily driven by the need to boost chip performance and support custom designs, making further process miniaturization more critical.

Moreover, the increased integration of CoWoS packaging with HBM further strengthens TSMC’s position as it is the main provider of CoWoS services.

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(Photo credit: TechNews)

SK hynix President Justin Kim shared insights on SK hynix’s current memory products and HBM-related offerings in a speech titled “Unleashing the Possibilities of AI Memory Technology.” Per a report from TechNews, he announced at Semicon Taiwan that the company would begin mass production of 12-stack HBM3e by the end of this month, marking a pivotal moment in the HBM battlefield.

He also stated that AI development is only at its first stage, with future growth expected to reach a fifth stage, where AI will interact with humans through intellect and emotion. Kim outlined AI’s key challenges, including power, heat dissipation, and memory bandwidth requirements.

The biggest challenge currently, according to Kim, is power shortages, with data centers expected to need twice the power they do now. Relying solely on renewable energy will not meet this demand, and increased power use will also generate more heat, requiring more efficient heat dissipation solutions.

Thus, SK hynix is working on AI memory that is more energy-efficient, lower in power consumption, and has greater capacity, while also offering solutions tailored to different applications.

Kim then shared the latest progress on HBM3e, noting that SK Hynix was the first supplier to produce 8-layer HBM3e and will begin mass production of 12-layer HBM3e by the end of the month. Additionally, SK Hynix introduced its latest products in DIMM, enterprise SSDs (QLC eSSD), LPDDR5T, LPDDR6, and GDDR7 as well.

Regarding technology development, Kim highlighted that HBM4 will be the first product based on a base die, combining SK hynix’s advanced HBM technology with TSMC’s cutting-edge manufacturing to achieve unparalleled performance. Mass production schedules will be aligned with customer demands.

On a global scale, Kim announced the establishment of a new facility in Yongin, South Korea, with plans to begin mass production in 2027, positioning Yongin as one of the largest and most advanced semiconductor hubs.

Moreover, SK hynix will invest in Indiana, USA, expected to start operations at a new plant in 2028, focusing on advanced HBM packaging.

Eventually, Kim stated that SK hynix will concentrate on AI business, looking to build AI infrastructure with SK Group. This includes integrating power, software, glass substrates, and immersion cooling technology, and working to become a core player in the ecosystem, overcoming challenges with partners to achieve goals in the AI era.

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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

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(Photo credit: TSMC)