While Taiwanese foundries are reportedly facing price pressure in mature nodes and are said to be offering discounts, TSMC is also rumored to mull about offering discounts to its customers on mature nodes, particular for 7nm and 14nm, a report by Commercial Times indicates.

Sources cited by the report suggest that the foundry giant’s latest move would be a countermeasure to the competition from Samsung and other Chinese foundries.

A previous report by the Economic Daily News notes that local foundries in Taiwan, such as United Microelectronics Corp. (UMC), Vanguard International Semiconductor Corp. (VIS), and Powerchip Semiconductor Manufacturing Corp. (PSMC), are already offering discounts on mature process orders in the fourth quarter, marking a shift from the relatively stable pricing seen in the third quarter.

Now, TSMC seems to follow suit. The report by Commercial Times indicates that this move will boost capacity utilization for TSMC’s mature processes, while offsetting the risk of declining average selling prices (ASP) due to heated competition.

Looking ahead to next year, the pricing pressure on mature processes will likely persist, as TSMC may lead the way in offering discounts for some of its mature nodes, the report notes. Volume would reportedly play a key role in securing discounts, as TSMC may allow more flexibility in pricing with massive orders.

It is worth noting that Chinese foundries, which had previously been aggressive in cutting prices, have held firm this time. As these companies are struggling to make profit, they have signaled potential price increases, according to the report.

Therefore, it is indicated that certain Taiwanese IC design companies have increased their orders with local foundries. By working on price negotiations with different suppliers, they can further optimize their cost structure.

Sources in the supply chain cited by the report also indicate that in the past, Taiwanese foundries were often forced to follow their Chinese rivals in cutting prices due to aggressive competition. However, as Chinese manufacturers have been gradually balancing their supply and demand, Taiwanese companies hope to seize this opportunity by offering greater pricing flexibility this time, allowing their customers to negotiate based on the volume to expand market share and boost capacity utilization.

The other three major foundries in Taiwan, as mentioned above, had seen their utilization rates rising above 70% in the third quarter, the report suggests. However, if the foundries aim to further increase their capacity utilization, they will inevitably need to move away from the relatively passive order-taking strategies they used to adopt.

In terms of the market demand in 2025, sources from IC design firms cited by the report note that there may still be room for price adjustments. For now, the demand for advanced nodes, which are driven by AI and smartphones, seems to remain solid. However, the demand from automotive and industrial control sectors has yet to show a clear recovery, which may be inferred from the moderate price discounts offered by Taiwanese manufacturers, according to the report.

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• [News] Weak Demand Drags Down Semiconductor Mature Process Pricing, May Decline for Two Quarters

(Photo credit: TSMC)

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)

Amid the rising of emerging applications in the AI market, the booming demands for high-performance computing (HPC), high-bandwidth memory (HBM), CoWoS advanced packaging, and high-performance storage, have energized the wafer foundry industry.

Given the broader applicability of 12-inch wafer in advanced process chips, the global expansion of 12-inch wafer production has accelerated in recent years. Leading companies like TSMC, Intel, UMC, Vanguard International Semiconductor (VIS), SMIC, and Huahong have successively released production capacity.

• VIS’ Singapore 12-Inch Fab Got Approved

On September 4, VIS and NXP jointly announced the approval of their Singapore-based 12-inch wafer fab joint venture by regulatory authorities in Taiwan, Singapore, and other regions.

The joint venture, named VisionPower Semiconductor Manufacturing Company (VSMC), will begin construction of its first 12-inch (300mm) wafer fab in the second half of this year.

VIS estimates that trial production will begin in 2027, with profitability expected by 2029. TSMC will provide technological support, and the market holds a favorable long-term outlook for the company’s operations.

Upon its mass production, both companies may consider building a second fab. Currently, VIS operates five 8-inch fabs located in Taiwan and Singapore. Three of the 8-inch fabs are in Hsinchu, and one in Taoyuan. The average monthly capacity of its 8-inch fabs in 2023 was about 279,000 wafers.

• TSMC Expands Production Worldwide

On August 20, TSMC held a groundbreaking ceremony for its new German fab, ESMC, which is set to begin construction by the end of the year and aims to start production by the end of 2027.

The project involves an investment of over EUR 10 billion and is expected to have a monthly capacity of 40,000 12-inch wafers, utilizing TSMC’s 28/22nm planar CMOS and 16/12nm FinFET process technologies.

In early September, Taiwan’s Ministry of Economic Affairs announced that TSMC plans to build a third fab in Japan to produce advanced semiconductors, with construction expected after 2030.

TSMC’s first fab in Kumamoto, Japan, officially opened on February 24, 2023, and will begin mass production in Q4 this year using 28/22nm and 16/12nm process technologies, with a monthly capacity of 55,000 wafers.

The second fab in Kumamoto is planned, with construction expected to start by the end of this year and operations to begin by the end of 2027, targeting 6/7nm nodes.

Additionally, TSMC’s 2nm fabs in Hsinchu (Fab 20) and Kaohsiung (Fab 22) in Taiwan are scheduled to start mass production next year.

In the U.S., TSMC’s first fab in Arizona is scheduled to begin producing chips using 4nm technology in the first half of 2025. The second fab will produce both 3nm and 2nm chips using next-generation nanosheet transistors, with production starting in 2025.

Plans for a third fab are also underway, with production of chips using 2nm or more advanced processes expected to begin in 2028.

• UMC’s Fab 12i in Singapore has Set Equipment in Place

On May 21, UMC held a ceremony for the settlement of equipment at its expanded Fab 12i in Singapore with the arrival of the first equipment.

UMC has operated 12-inch fabs in Singapore for over 20 years, and in February 2022, it announced the plan to invest USD 5 billion to expand Fab 12i, adding a new 12-inch fab with a monthly capacity of 30,000 wafers, focusing on 22/28nm processes. Mass production is expected by early 2026.

• Toshiba’s 12-Inch Wafer Fab Completed

On May 23, Toshiba Electronic Devices & Memory Corporation announced the completion of its new 300mm power semiconductor manufacturing fab, with a total investment of JPY 100 billion and plans to begin production in March 2025.

The fab will be built in two phases, with the first phase starting production within the 2024 fiscal year. Once fully operational, Toshiba’s power semiconductor capacity will be 2.5 times that of 2021. Equipment installation is underway, with mass production expected in the second half of FY2024.

• Powerchip Begins Construction of Two New 12-Inch Fabs

On March 13, Powerchip held a groundbreaking ceremony for a 12-inch wafer fab in partnership with India’s Tata Group, located in Dholera, Gujarat, with a total investment of INR 910 billion rupees (about USD 11 billion).

The fab will have a monthly capacity of 50,000 wafers and will produce chips using 28nm, 40nm, 55nm, 90nm, and 110nm nodes.

In early May, Powerchip also announced plans for a new 12-inch fab to expand advanced packaging capacity to support growing demand for AI devices. Powerchip’s chairman stated that the company will provide interposers, one of the three components in CoWoS packaging technology.

• Texas Instruments Built Three New 12-Inch Fabs

Texas Instruments is currently expanding its 300mm capacity to meet future demand for analog and embedded processing chips. TI plans to invest USD 30 billion in building up to four interconnected fabs (SM1, SM2, SM3, SM4) in the coming decades.

According to its 2022 roadmap, TI will build six 300mm fabs by 2030, with RFAB2 in Richardson, Texas, and LFAB (acquired from Micron) already starting production in 2022 and 2023, respectively. Two of the Sherman fabs were completed in 2023, with two more planned for 2026-2030.

In addition to the plan mentioned above, TI also announced the plan for a second 300mm fab in Lehi, Utah in February 2023, adjacent to its existing 12-inch fab, with production estimated to begin in 2026, focusing on producing analog and embedded processing chips. These fabs will be combined into one once the construction is completed.

On August 16, Texas Instruments announced that it received USD 1.6 billion in funding from the U.S. CHIPS Act. This funding will be used to build a cleanroom for the SM1 fab and complete the pilot production line, construct a cleanroom for LFAB2 to begin initial production, and build the shell for the SM2 fab.

• Intel Focuses on U.S. Projects in Arizona and Ohio

Intel has disclosed chip expansion plans in multiple regions, including Arizona, New Mexico, Ohio, Oregon, Ireland, Israel, Magdeburg, Malaysia, and Poland. However, due to market challenges and poor financial results, some of Intel’s expansion plans have been delayed.

Currently, Intel is advancing the construction of large semiconductor manufacturing plants in Arizona and Ohio for the production of cutting-edge semiconductors, as well as working on equipment development and advanced packaging projects at smaller facilities in Oregon and New Mexico.

• GlobalFoundries Revved up Investment in the U.S. and Portugal

On February 19, the U.S. government announced a USD 1.5 billion subsidy for GlobalFoundries. According to a preliminary agreement with the U.S. Department of Commerce, GlobalFoundries will establish a new semiconductor manufacturing facility in Malta, New York, and expand its existing Fab 8 plant in the same location.

The facility will leverage manufacturing technology already implemented in GlobalFoundries’ plants in Germany and Singapore to produce automotive chips, effectively introducing mature-node technology into Fab 8.

In February of this year, GlobalFoundries also announced a partnership with Amkor Technology to build a large packaging facility in Portugal.

It plans to transfer the 12-inch wafer-level packaging production line from its Dresden plant to Amkor’s facility in Porto, Portugal, aiming to establish Europe’s first large-scale backend facility. GlobalFoundries will retain ownership of the tools, processes, and IP transferred to Porto.

• China’s 12-Inch Wafer Production Lines Entered New Stages

In China, companies like SMIC, Huahong, CR Micro (Shenzhen), and Zensemi (Guangzhou) are making new progresses in 12-inch wafer production.

SMIC expects its monthly 12-inch wafer capacity to increase by 60,000 by the end of the year.

Huahong is speeding up the construction of its new 12-inch fab in Wuxi, with the first lithography machine installed on August 22, aiming for production in 1Q24.

CR Micro’s 12-inch fab in Shenzhen has entered the stage of equipment installation and debugging, with production expected to start in late 2024.

Zensemi’s 12-inch wafer manufacturing production line has went into production.

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• [News] Wafer Foundry Market Shows Signs of Recovery
• [News] Two Contrasting Trends Emerge in Wafer Foundry Industry

(Photo credit: TSMC)

AI industry has been driving semiconductor industry to advance forward. Benefited from the surge in AI-driven demand for advanced process chip, foundry industry is experiencing a gradual turnaround, while demands for consumer chip and automotive chip have not yet fully recovered, and competition remains fierce in the mature process chip sector, representing a stark contrast within the wafer foundry industry.

• Financial Results Indicate Strong AI Development but Weak Automotive Terminal Demands

Recently, several major foundries released their Q2 financial reports and shared outlook on future market conditions.

For the second quarter ending June 30, TSMC reported consolidated revenue of approximately USD 20.82 billion, up 32.8% YoY and 10.3% QoQ, which was attributed to strong demand for its 3nm and 5nm technologies.

As per the financial report, revenue from advanced technologies (7nm and below) accounted for 67% of TSMC’s total wafer revenue in 2Q24. In terms of application areas, HPC has replaced mobile business as the core driver of the company’s growth, contributing 52% of revenue.

Additionally, although TSMC’s automotive electronics revenue grew 5% QoQ, the company warned of a potential downturn in the automotive market this year.

UMC reported Q2 revenue of TWD 56.8 billion, up 4% QoQ. UMC expected customer inventories in the communications, consumer electronics, and computer sectors to return to seasonal levels as usual in the second half of this year, and to reach healthy levels by the end of the year.

However, demand in the automotive end market remains weak, which may extend the period of inventory adjustment, with healthy levels anticipated only by the first quarter of next year.

On August 6, GlobalFoundries released its latest financial report.

In the second quarter of this year, the company achieved revenue of USD 1.63 billion, a year-on-year decrease of 12% and a quarter-on-quarter increase of 5%. Net profit was USD 155 million, a year-on-year decrease of 35% and a quarter-on-quarter increase of 16%.

Industry sources cited by the report from WeChat account DRAMeXchange believe that during the pandemic, customers in sectors such as IoT, mobile device, and data center accumulated high inventory, which impacted GlobalFoundries’ revenue.

Moreover, the company is experiencing a cyclical downturn due to soft demands in the automotive, industrial, and other sectors.

• Advanced Processes Continue to Thrive while Mature Processes Face Intense Competition

The adoption of AI generative models keeps on the rise, driving high demand for AI chip. In this context, advanced processes have been well-received, leading to price increase and production expansion.

TrendForce’s survey in June showed that TSMC is seeing full capacity utilization in its 5/4nm and 3nm nodes due to strong demand from AI applications, new PC platforms, HPC applications, and high-end smartphones.

Its capacity utilization is expected to exceed 100% in the second half of the year, with visibility extending into 2025. Given cost pressures from overseas expansion and rising electricity prices, TSMC plans to raise prices for its advanced processes, which are experiencing strong demand.

TSMC is seeing full capacity utilization in its 5/4nm and 3nm nodes due to strong demand from AI applications, new PC platforms, HPC applications, and high-end smartphones. Its capacity utilization is expected to exceed 100% in the second half of the year, with visibility extending into 2025.

Given cost pressures from overseas expansion and rising electricity prices, TSMC plans to raise prices for its advanced processes, which are experiencing strong demand.

As per other sources cited by the same report, TSMC informed customers of a price increase for 5/3nm process products in 2024 at the beginning of this year.

In late July, TSMC notified several customers that due to rising costs, prices for 5/3nm process products will increase again starting January 2025, and the increase will range from 3-8%, depending on the tape-out plan, product, and partnership.

Meanwhile, the surge in demand for advanced packaging driven by AI will also lead to higher CoWoS prices.

To seize the significant opportunities brought by AI, many companies are actively investing in advanced processes. Currently, the 3nm process is the most advanced in the industry.

Meanwhile, TSMC, Samsung, Intel, and Rapidus are vigorously promoting the construction of 2nm fabs. Previously, TSMC and Samsung intended to produce 2nm chip at scale in 2025, while Rapidus planed to start trial production in 2025.

Following 2nm, 1nm chip will be the next goal for these fabs. According to their plans, the industry is likely to see the mass production of 1nm chip from 2027 to 2030.

Unlike the rising prices and volume in advanced process chip, mature process chip faces some uncertainty due to weaker-than-expected recovery in end-user demand, and sees more intense competition among manufacturers.

TrendForce’s survey reveals that the capacity utilization rates of PSMC and Vanguard is expected to improve more than anticipated in the second half of the year. However, overall demand for mature processes remains weak, with average capacity utilization still around 70–80%—indicating no significant shortages.

TrendForce further pointed out that in 2024, concerns over global inflation and weak recovery in end-demand may result in inconsistent momentum in replenishing inventory. Many foundries might offer price incentives to attract customers and boost capacity utilization, leading to a decline in overall ASP.

Furthermore, a significant amount of new capacity is expected to come online in 2025, including TSMC JASM, PSMC P5, SMIC’s new Beijing/Shanghai plants, HHGrace Fab9, HLMC Fab10, and Nexchip N1A3.

This increase in mature process capacity could intensify competition and impact future pricing negotiations.

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• [News] Intel and NVIDIA’s New Platform Orders Rolling Out, TSMC Unaffected by Market Turbulence
• Foundry Market Shows Mixed Conditions with Price Adjustments for Specific Chinese Processes and Anticipated Price Increases for Taiwanese Advanced Processes, Says TrendForce

(Photo credit: TSMC)

Automotive chip market, previously enjoying robust growth among the semiconductor sector, is now showing signs of slowing down.

According to a report from WeChat account DRAMeXchange, the major foundry UMC announced that it expects customer inventories in the communications, consumer electronics, and computer sectors to return to seasonal levels as usual in the second half of this year, and to reach healthy levels by the end of the year.

However, demand in the automotive end market remains weak, which may extend the period of inventory adjustment, with healthy levels anticipated only by the first quarter of next year.

Another foundry giant, TSMC, warned in its latest financial statement that the automotive market might decline this year in spite of a quarter-on-quarter increase of 5% in the revenue of its automotive electronics end market in 2Q24.

Meanwhile, the sluggish growth trend in the automotive chip market is also exemplified by the business performance of three leading automotive chip companies—Texas Instruments, STMicroelectronics, and NXP as they all saw declines in revenues.

Texas Instruments’ revenue for 2Q24 was USD 3.82 billion, down 16% YoY and the sales of its industrial and automotive business continue to decrease.

STMicroelectronics delivered revenue of USD 3.23 billion, down 25.3% YoY, with automotive business revenue falling short of expectation, offsetting growth in personal electronics sales.

NXP’s achieved revenue of USD 3.13 billion, down 5.2% YoY and its automotive business generated revenue of USD 1.728 billion, down 7.4% YoY, indicating the decline widened compared to the first quarter.

Despite the strong growth in the automotive chip market in 2023, the industry believes that as the overall automotive end market fails to advance as expected and there is an overcapacity in some automotive chip markets, automotive chip market growth will slow down in 2024, with the growth rate dropping to single digits in the coming years.

It’s learned that automotive semiconductor can be broadly categorized into microcontroller (MCU), computing chip (CPU, GPU, NPU, etc.), sensing chip (radar, image sensor, photoelectric sensor, etc.), memory chip (DRAM, NAND Flash, etc.), communication chip (CAN bus chip, connectivity chip, etc.), and power chip (IGBT, silicon carbide, etc.), among others.

In the view of the industry, current MCU and other chips are facing significant inventory pressure due to the declining automotive end market demand. However, power chip and autonomous driving chip continue to see strong demand driven by the wave of automotive electrification and intelligence.

Therefore, while the automotive semiconductor market may slow down in the short term, the automotive chip market still possesses growth potential in the long run with the continuous adoption of silicon carbide and autonomous driving chips in the increasingly popular EV and smart vehicle markets.

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• [News] UMC Optimistic About Second Half Business Outlook, While AI Could Capture 10-20% Market Share
• [News] EU Reportedly Delays Decision on Imposing Tariffs on Chinese Electric Cars

(Photo credit: Pixabay)