According to a report from Commercial Times, with expectations that tensions between the U.S. and China remain unresolved for the time being, and China’s continued production in mature process semiconductor foundries and communication equipment, the trend of decoupling from China is likely to expand.

The U.S.-China trade war has continued for several years, with the U.S. announcing in May an additional tariff on Chinese imports, including a substantial 50% tariff on semiconductor products manufactured in China by 2025. This move has further intensified the trade conflict between the two superpowers.

Thus, as per the same report, as concerns over overcapacity in various industrial products in China heighten this year, coupling with the unresolved U.S.-China relations, Taiwanese foundries including UMC, VIS, Powerchip, and networking companies such as WNC, SERCOM and Arcadyan may be benefited from the potential increased outsourcing orders.

Consequently, despite aggressive pricing competition from Chinese mature process foundries, the average selling price (ASP) and overall operational performance of Taiwan’s major mature process foundries have exceeded expectations in the first half of this year.

TrendForce previously indicated that, the supply chain’s order-shifting has become more proactive with the imposition of US tariffs. Qualcomm, which began cooperation discussions with Vanguard in 2021, has made its production plans more aggressive this year. This has prompted Vanguard to expand the first-phase capacity of its new Fab5 plant by 3Q24 and to complete cross-plant validation for Qualcomm’s PMIC to meet demand. Since 2022, MPS has also started shifting orders, including plans with both Vanguard and PSMC.

In recent years, the limitations on Chinese companies’ expansion in the U.S. have also allowed Taiwanese networking companies to capture significant American infrastructure opportunities. WNC covers optical fiber, 5G FWA, and enterprise networking businesses, with over 60% of its revenue from the Americas. SERCOMM Corporation has penetrated the North American optical fiber broadband upgrade market, securing key North American telecom operators. Meanwhile, Arcadyan Technologys’ optical fiber products have entered top-tier North American telecom operators.

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(Photo credit: iStock)

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.

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• [News] UMC Optimistic About Second Half Business Outlook, While AI Could Capture 10-20% Market Share
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(Photo credit: UMC)

Due to the impact of international situations and uncontrollable factors, the global semiconductor supply chain is undergoing a shift. According to a report from WeChat account DRAMeXchange, the Southeast Asian region, with its advantages in labor and development conditions, has become the preferred location for major global companies. Countries such as Malaysia, India, and Singapore have been targeted by many manufacturers, who are rapidly setting up operations to secure a foothold.

On June 5, Taiwan-based contract chipmaker Vanguard International Semiconductor Corp. (VIS) announced to team up with Netherlands-based semiconductor supplier NXP Semiconductors N.V. to set up a joint venture, VisionPower Semiconductor Manufacturing Company (VSMC), and build a 12-inch fab in Singapore.

The fab will have an investment of approximately USD 7.8 billion. VIS will invest USD 2.4 billion and take a 60% stake, with NXP to invest USD 1.6 billion and a 40% share. The fab will be operated by VIS.

Besides, both parties have promised to allocate a total of USD 1.9 billion of long-term capacity security deposit and usage fees, with the remaining funds (Loans included) to be provided by third parties.

VSMC will run as an independent wafer manufacturing service provider, offering a certain proportion of its capacity to both partners. By 2029, the fab’s monthly 12-inch wafer capacity is expected to reach 55,000 pieces, which is projected to create around 1,500 jobs in Singapore. Following the successful mass production of the first fab, both sides will consider building a second one.

This fab will use 130nm to 40nm technologies to produce mixed-signal, power management, and analog products for markets including automotive, industrial, consumer electronics, and mobile terminals. Relevant technology licensing and transfers are expected to come from TSMC. VSMC will commence construction of the first fab in 2H24 , pending approval from relevant regulatory authorities, and it is expected to start mass production in 2027.

Currently, VIS has five 8-inch fabs, respectively located in Taiwan and Singapore. Three of them are based in Hsinchu (Taiwan) and one in Taoyuan (Taiwan). In 2023, the average monthly capacity was about 279,000 8-inch wafers.

On this collaboration with NXP, VIS Chairman Fang Leuh stated that both parties wish to own a 12-inch fab as they currently only have 8-inch fabs. More than half of the new fab’s capacity has already reserved upon long-term commitments from customers, including NXP. He also noted that setting up a fab in Singapore offers several advantages.

Since VIS is held by TSMC, industry experts believe that the establishment of the new VIS fab is driven in part by the need to meet the demands of TSMC’s mature process customers. Mature processes above 90nm account for a small single-digit percentage of TSMC’s revenue but retaining all customers is also necessary to match orders from various manufacturing capacities.

As such, VIS will take over TSMC’s customer orders. Influenced by multiple factors, the order transfer effect is expanding, and VIS has recently received new orders from several customers, like Qualcomm and MPS. That means order transfer effect in 2H24 has become evident.

It is worth noting that Singapore is being seen as a critical hub of the Asian semiconductor industry. It currently boasts a complete semiconductor industry chain, covering design, manufacturing, packaging, test, equipment, materials, and distribution, with more than 300 semiconductor-related companies already established.

According to another report from WeChat account DRAMeXchange, multitudes of semiconductor companies, including Texas Instruments, STMicroelectronics, Infineon, Micron, GlobalFoundries, TSMC, UMC, VIS, and ASE, have set up branches or expanded production in Singapore.

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(Photo credit: VIS)

According to a report from Liberty Times, Taiwanese foundry UMC stated yesterday that the company’s operations in the second quarter would see a slight increase compared to the first quarter, and the second half of the year would be better than the first half.

With UMC’s technology and processes, the company estimated that it can capture about 10-20% of the AI foundry market share, which is expected to drive future business growth.

• Edge Computing to Become Widespread in 4 Years

At UMC’s shareholder meeting yesterday, Co-General Manager Jason Wang stated that semiconductor applications are becoming increasingly diverse and important. The most promising growth areas include autonomous vehicles, AI servers, and AI PCs.

UMC sees significant growth potential in high-speed transmission and power management. In high-performance computing (HPC), UMC will focus on back-end integration, including interposers and advanced 3D IC packaging.

Jason Wang pointed out that AI is currently in early stages, and thus more focused on building the infrastructure for high-speed computing. However, once the infrastructure is complete, the market will gradually expand to the widespread adoption of edge computing, which he estimates will take about four years.

UMC plans to position itself early, developing technologies that align with customer applications. UMC is optimistic about the market prospects and has high expectations for the future, Wang noted.

UMC’s CFO Chitung Liu stated that while UMC does not have advanced processes for producing HPC chips in the AI field, it has made significant progress in edge computing and related process technologies. With UMC’s technology, processes, and capacity, it is estimated that the company can still capture a 10-20% share of the AI foundry market, which is considerable and will be a major driver of future operational growth.

UMC currently produces CoWoS advanced packaging-related silicon interposers at its Singapore plant, with monthly capacity doubling to 6,000 wafers this year. UMC will continue to invest according to market conditions, according to Liu.

• Effects of U.S.-China Trade War Order Transferring Take At Least Six Month to be Seen

Regarding the benefits of diversification amid the U.S.-China trade war, Liu mentioned that it takes time for customers to redesign and transition orders. It can take at least six to nine months in the short term for the effects to be seen, and up to one to two years in the long term for orders to be successfully transitioned.

Currently, there are no significant effects from diversification in the short term. However, UMC’s production is diversified across regions including Singapore, Japan, China, and Taiwan, with collaborations with Intel in Arizona, USA. Thus, UMC can meet customer needs regardless of where they choose to manufacture, Liu explained.

Liu reiterated the stance from last month’s briefing, stating that the situation in the first half of the year has improved from the economic downturn, and second-quarter revenue is expected to see a slight increase compared to the previous quarter. He hopes for better performance in the second half of the year.

In terms of application markets, the short-term performance of the automotive and industrial sectors appears weak, but growth is expected in the medium to long term. On the other hand, prospects for the communication and consumer sectors in the second half of the year are expected to be better than the first half.

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(Photo credit: UMC)

According to Taiwan’s Economic Daily News, UMC has recently engaged in discussions with global giants such as Texas Instruments and Infineon about long-term cooperation plans. Additionally, Taiwan’s two leading IC design companies, MediaTek and Realtek, have seen their inventories of WiFi 6/6E chips depleted, prompting them to increase their orders with UMC.

TrendForce recently reported that the White House announced on May 14th the imposition of additional tariffs on semiconductor products manufactured in China. This move has accelerated a shift in supply chain orders, leading Taiwanese foundries to receive increased orders, boosting capacity utilization beyond expectations.

For the second half of this year, Vanguard’s capacity utilization is expected to rise above 75%, PSMC’s 12-inch capacity utilization will reach 85-90%, and UMC’s overall capacity utilization will settle between 70-75%.

UMC’s orders from overseas clients are largely driven by the U.S. tariffs on Chinese semiconductor imports, which are projected to double to 50% by 2025. This has spurred a wave of supply chain relocations, with UMC leveraging its diverse manufacturing footprint to attract long-term cooperation plans from companies like Texas Instruments, Infineon, and Microchip.

From the perspective of Taiwanese market, UMC has benefited from a recent recovery in the networking sector. Taiwan’s top two WiFi 6 chip suppliers, MediaTek and Realtek, responding to customer restocking demands, have begun to increase their orders for WiFi chips with UMC.

Recent revenue data from Realtek indicates a rebound in the networking market. In April, Realtek’s consolidated revenue reached NT$10.068 billion, a 11.4% increase month-over-month and a 21.9% increase year-over-year, marking the first time in 20 months that monthly revenue has surpassed NT$10 billion.

MediaTek’s consolidated revenue in April was NT$42.028 billion, a 16.74% decrease month-over-month, yet still the second highest on record for the period, with a 48.25% year-over-year increase. Foundry sources indicate that MediaTek has placed additional orders for the third quarter, suggesting that networking customers are set to upgrade specifications this year.

UMC’s consolidated revenue in April was NT$19.741 billion, up 8.67% month-over-month and 6.93% year-over-year, reaching a 16-month high. UMC previously projected that as inventories in the computer, consumer, and communication sectors return to healthier levels, overall wafer shipments would see a slight increase this quarter. However, in the automotive and industrial sectors, slower-than-expected inventory digestion has kept demand subdued.

(Photo credit: UMC)