Semiconductor giants like Intel, TSMC, Samsung and Micron have received huge amount of grants from the U.S. government, funded through the CHIPS and Science Act. However, chip making equipment maker Applied Materials is said to be in a different scenario. According to reports by Bloomberg and Tom’s Hardware, the company’s application to gain U.S. funding for a USD 4 billion R&D center in Silicon Valley was rejected by U.S. Department of Commerce.

The reports note that Applied Materials had announced plans to build the facility a year ago, as it tried to seek government subsidies through the CHIPS and Science Act. The facility was scheduled for completion in 2026.

However, according to sources familiar with the matter, Commerce Department officials turned down the plan on Monday, stating that project did not meet the eligibility criteria, Bloomberg reports. This decision marks a major setback for the company’s efforts to establish a significant facility in Silicon Valley, which it aims to develop next-generation chip making tools.

In addition, though it is reported that as there are over 670 companies with interests in the gaining the fund under the CHIPS and Science Act, and the Commerce Department has warned that limited resources will force it to reject many applications, the rejection of Applied Materials’ project is particularly unexpected. For it is a U.S. semiconductor company, and the project closely aligns with the Biden administration’s goals of revitalizing the domestic semiconductor industry.

It is worth noting that though the U.S. keeps tightening the export controls on the semiconductor sector, major chip equipment makers seem to become increasingly dependent on the Chinese market. From February to April, China accounted for 43% of the total sales of Applied Materials, a 22 percentage point increase YoY.

Applied Materials has reportedly received subpoenas from the US Securities and Exchange Commission as well as the US Attorney’s Office of the District of Massachusetts in February, and said to be under investigation for allegedly sending equipment to SMIC, China’s leading chip maker, through South Korea without export licenses.

The CHIPS and Science Act, signed into law in August 2022, allocated approximately USD 280 billion in new funding to enhance domestic chip making research and development.

Previously, the U.S. government announced that Intel would receive USD 8.5 billion in federal subsidies and USD 11 billion in loans. On the other hand, US administration is set to provide USD 6.6 billion and USD 6.4 billion in aid to TSMC and Samsung, respectively.

Read more

• [News] US Reportedly Expands Investigation into Applied Materials, Possibly due to Concerns of Shipments to SMIC
• [News] China Contributes Over 40% of U.S. Chip Equipment Makers’ Revenue despite Export Controls

(Photo credit: Applied Materials)

According to a report from Commercial Times, IC design giant MediaTek is making its move into the AI accelerator sector. MediaTek CEO Rick Tsai emphasized that MediaTek aims to be the best partner for edge AI, focusing on advanced technologies and 3nm process to optimize the power consumption and efficiency of its SoCs (system-on-chips).

Tsai mentioned that MediaTek will unveil its Dimensity 9400 flagship series of chips in October, designed to perfectly support most large language models on the market. He expressed confidence in achieving a more than 50% year-over-year revenue increase for flagship devices.

For the ASIC (Application-Specific Integrated Circuit) market, MediaTek has confirmed its entry into the AI accelerator field and will integrate CPUs as needed. ASICs are expected to start the revenue contribution  in the second half of next year.

Additionally, the TAM (Total Addressable Market) for generative AI is still in its early stages. MediaTek focuses on providing leading interconnect capabilities, such as SerDes IP and Ethernet PHY.

Regarding AI technology in the smartphone sector, Rick Tsai believes that flagship smartphones are seeing an increase in ASP, and there is a gradual shift towards high-end smartphones in the Chinese market. He noted that Chinese brands are actively developing AI, particularly in model development, such as open-source models like LLaMA 3.

At MediaTek’s earnings call on July 31st, Rick Tsai noted that the company anticipates a return to normal seasonal patterns in the second half of the year. The outlook for the fourth quarter will largely depend on consumer product demand.

Regarding the outlook in the third quarter, MediaTek expects the revenue to be flattish, ranging from NTD 123.5 billion to NTD 132.4 billion, compared with NTD 127.27 billion last quarter. Gross margin is projected to slide to 45.5-48.5%, from 48.8%, down 3.6 percentage points quarter over quarter and up 1.3 percentage points year-over-year.

Aside from the boost expected from the Dimensity 9400 flagship release, the company’s fourth-quarter market demand is projected to be relatively moderate, which is why the annual outlook remains unchanged. MediaTek expects its full-year gross margin to be between 46% and 48%.

Regarding TSMC’s pricing adjustments, Rick Tsai remains unperturbed, noting that all industry peers face similar cost pressures. MediaTek aims to reflect cost increases through pricing, with a gross margin target of 47% for new products. Progress has also been made in 3nm and 2nm processes, and MediaTek has secured its capacity needs for 2025 with TSMC.

Moreover, MediaTek and NVIDIA are collaborating on automotive chips, with plans to launch their first chip in early 2025. Rick Tsai mentioned that details are yet to be disclosed, but significant advancements in the automotive sector are expected between 2027 and 2028.

Read more

• [News] MediaTek Reportedly Designing ARM-Based Chips for Microsoft’s AI PCs, Launch Expected by End of Next Year
• [News] MediaTek Reportedly Partners with Meta, Entering the Battleground of AI against Apple and Qualcomm

(Photo credit: MediaTek)

After announcing the end of eight consecutive quarters of losses on July 30, according to a report from Economic Daily News, Innolux’s board of directors decided to authorize Chairman Jim Hung to handle real estate matters, confirming the rumors that the buildings at its 4th Plant in Tainan (5.5-generation LCD panel plant), which was closed last year, will be sold.

It is reported that two buyers, Micron and TSMC, are still in the bidding stage. Regardless of who wins the bid, Innolux will gain significant non-operating income.

According to Innolux’s announcement, to boost company operations and future development momentum, as well as to enhance operating funds, they plan to dispose of the TAC plant-related real estate at the Southern Taiwan Science Park (STSP) D section. Per a report from anue, the STSP D section refers to the 5.5-generation LCD panel plant that was closed last year.

Innolux has been promoting the transformation of its fully depreciated old plants. The 3.5-generation line at the Tainan facility has been repurposed for advanced packaging with Fan-Out Panel Level Packaging (FOPLP), and the 4-generation line has been converted to produce X-ray sensors (through Raystar Optronics), both of which are related to semiconductor products.

Regarding the 4th Plant developments at Tainan, as per a previous report from the Economic Daily News, Innolux stated on June 16 that, based on flexible strategic planning principles, the company continues to optimize production configurations and enhance overall operational efficiency. Some production lines and products are being adjusted to streamline and strengthen the group’s layout and development.

Read more

• [News] Venturing into AI, Innolux Reportedly Partners with Memory Giants, While Its 4th Plant in Tainan to Focus on Packaging Applications
• [News] TSMC Pushes for FOPLP Mass Production by 2027, Reportedly Eyeing on Innolux’s Plant

(Photo credit: Innolux)

As the U.S. presidential election approaches, uncertainties also arise. Compared with the stance in President Biden’s term, U.S. presidential candidate Trump shows a remarkably different attitude regarding the “Taiwan issue,” while he highlights the “America First” agenda further.

However, according to a report by Technews, Trump may overlook the fact that Taiwan’s semiconductor is closely tied to shaping the “America First” stance that he values. By standing as a crucial ally in semiconductor, Taiwan could help the U.S. secure a foothold in the arms, AI, and technology race. Without Taiwan’s support, it is hard to say whether U.S. may face the risk of being overtaken by China, as the latter is developing semiconductor at full throttle. Read below for more analysis from Technews:

Intel’s “Five Nodes in Four Years” Roadmap: Details of Intel 20A Still Vague

Let’s look at Intel’s progress first. The tech giant has announced a plan to advance through five nodes in four years (5N4Y), as the latest update includes Intel 14A in its top-tier node strategy.

However, in the chart below, Intel 7, which has been categorized as a mature process, is already being caught up by SMIC’s 7nm and 5nm processes. This is happening despite the U.S.-China trade war, with the U.S. placing SMIC on the entity list and imposing equipment restrictions.

From the perspective of advanced nodes, Intel’s latest Lunar Lake platform will be manufactured with TSMC’s 3nm process this year. In addition, its next-generation Nova Lake processors will also adopt TSMC’s 2nm process, with a potential release date in 2026.

Intel CEO Pat Gelsinger has stated that the first-generation Gate-All-Around (GAA) RibbonFET process, Intel 20A, is expected to launch this year, with Intel 18A anticipated to go into production in the first half of 2025.

However, it is worth noting that Intel 20A was originally reported to be used for Arrow Lake and Lunar Lake processors, but Gelsinger confirmed at COMPUTEX that the latter will use TSMC’s 3nm process, with no mention of Arrow Lake’s progress. The market expects that some Arrow Lake processor orders may be outsourced to TSMC, which also suggests that the progress of Intel 20A may not meet expectations.

On the other hand, SMIC, limited by equipment constraints, has progressed to 7nm but faces delays with 5nm, so it will advance gradually with N+1, N+2, and N+3 processes.

Without Taiwan’s Semiconductor Manufacturing, the AI Computing Power of the U.S. May Eventually Be Caught up by China

Industry experts believe that without Taiwan’s semiconductor manufacturing, it would be difficult for the industry to progress, especially for AI and HPC chips that require significant computing power and advanced processes.

Currently, AI chips primarily adopt TSMC’s 4nm and 3nm nodes and will continue to use the 2nm process in the future. Without TSMC’s technology, the U.S., if it solely relies on Intel for its foundry and capacity, may progress relatively slow in AI computing power, which may make the country eventually lose the AI race with China, falling behind in future commercial and military equipment advantages.

According to a report by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) in December last year, the global semiconductor IC design industry was valued at USD 248 billion in 2022, while integrated device manufacturers (IDM) were valued at USD 412 billion, totaling USD 660 billion. The U.S. accounted for 53% of this value, while Taiwan only accounted for 6%.

On the other hand, the global foundry services in 2022 was valued at USD 139 billion, while the packaging and testing industry was valued at USD 50 billion, totaling USD 190 billion. Taiwan accounted for 63%, while the U.S. only accounted for 8%.

Despite this, the overall semiconductor industry value in the U.S. remains at USD 365 billion, making it the largest beneficiary in the sector. That of Taiwan, on the other hand, is only USD 159 billion, less than one-third of the U.S. total.

Sanctioning Taiwan Would Be “Shooting Oneself in the Foot,” Making the U.S.  Harder to Win the Tech War with China

Regarding government subsidies, China is launching the third phase of its Big Fund, with a registered capital of 344 billion RMB (about USD 47.5 billion), which is significantly higher than the previous two phases. This represents a nationwide effort to invest in semiconductors, with a focus on enhancing semiconductor equipment and the overall supply chain.

The U.S. CHIPS Act, on the other hand, has a scale of USD 52.7 billion, which is comparable to China’s subsidies. However, as technology and arms races are long-term competitions, how related policies may evolve would also be subject to the results of the election.

On the other hand, China is currently working hard to better its semiconductor eco-industrial chain, expand its market share in mature processes, and continue advancing to more advanced process technologies, which may further shorten its gap with the U.S.

As the U.S. IC design sector is closely related to Taiwan’s semiconductor manufacturing technology, Taiwan’s role in the game has become a key factor for the U.S. to maintain its leading edge with China. Without Taiwan’s technological support, the techonological dominance of the U.S. might be threatened, as China’s semiconductor industry has gradually catching up.

According to a report from Nikkei, Japanese government is considering introducing a certain bill to provide guaranteed loans to the government-backed chip startup Rapidus. This measure is expected to help the company attract private investment and reduce its reliance on government subsidies.

Rapidus is reportedly building a plant in Chitose, Hokkaido, with the goal of mass-producing 2-nanometer chips by 2027. Before reaching this milestone, the company may need between JPY 3 trillion and 4 trillion (approximately USD 19 billion to 25 billion) in funding.

Yoshihiro Seki, one of the senior Japanese Liberal Democratic Party (LDP) figures on semiconductor policies, stated that most of this funding would likely come from bank loans, but he acknowledged that seeking loans without any output from Rapidus could deter financial institutions.

Established in August 2022, Rapidus was jointly founded by eight Japanese companies, including Toyota, Sony, NTT, NEC, Softbank, Denso, Kioxia (formerly Toshiba Memory Corporation), and Mitsubishi UFJ, which have collectively invested JPY 7.3 billion per Nikkei. However, this amount is still far short of the funds needed for mass production. 

The Japanese government has pledged to inject JPY 1 trillion into Rapidus. However, Yoshihiro Seki remarked that given Japan’s fiscal situation, it is indeed quite difficult to provide several trillion yen in funding to Rapidus annually. He hopes Rapidus can adapt to the trend and quickly become self-reliant, without depending on government financial aid.

Japanese Prime Minister Fumio Kishida recently visited Rapidus’s plant in Hokkaido and stated that the government would promptly submit a bill to the National Diet to support Rapidus in mass-producing the next generation of semiconductors. Seki revealed that the Japanese government is expected to submit the bill before the autumn session of the Diet.

Japanese law prohibits the government from providing guaranteed loans to specific companies unless the funding benefits the public. In the past, the Japanese government provided loans to Tokyo Electric Power Company (TEPCO) to compensate victims of the Fukushima nuclear disaster.

Some sources cited in Nikkei’s report question Rapidus’ competitiveness and the extent of government aid, as the company’s timeline for producing 2-nanometer chips lags behind major competitors like TSMC and Samsung Electronics by two years. Despite this, Yoshihiro Seki remains confident in Rapidus’s potential for success, citing the anticipated rapid growth of AI applications as one reason for optimism.

Read more

• [News] Rapidus Partners RISC-V Player Esperanto, Targeting Low-Power AI Chip
• [News] Rapidus Focuses on Small Clients, Diversifies into Japan to Mitigate US Geopolitical Risks

(Photo credit: Rapidus)