China, Taiwan, and South Korea’s foundry price war continues to heat up. Rumors of price reductions are circulating in the foundry industry, Chinese foundries allegedly lowering their tape out prices, attracting Taiwanese IC design companies to switch their orders.

Companies including Samsung, GlobalFoundries, UMC, and PSMC have reportedly seen customers cancel orders in favor of these Chinese foundries.

According to reports from IJIWEI, China’s SMIC, Huahong Group, and Nexchip began lowering their foundry service prices to Taiwanese IC design companies last year to secure new orders. Many Taiwanese IC design companies have been enticed by these lower prices, prompting them to shift their orders to Chinese foundries. As a result, companies like Samsung, GlobalFoundries, UMC, and PSMC have witnessed customers canceling orders in favor of Chinese manufacturers.

Due to the mature manufacturing processes in China, unaffected by US export restrictions, the lowered wafer fabrication costs have become attractive to Taiwanese IC design companies seeking to enhance their cost competitiveness.

Reports also indicate that this competitive pressure has forced Taiwan’s foundries, UMC and PSMC, to follow suit by reducing their prices. UMC has lowered its 12-inch wafer foundry services by an average of 10-15%, while its 8-inch wafer services have seen an average price reduction of 20%. These price adjustments took effect in the fourth quarter of 2023.

Earlier reports from TechNews had already highlighted that, due to the sluggish semiconductor market conditions in 2023, both China and South Korea aggressively reduced prices to secure orders, with price reductions of up to 20-30% observed in 8-inch and 12-inch mature processes. Taiwanese foundries also made concessions in terms of pricing.

Taiwan’s leading foundry, TSMC, had already initiated pricing concessions in 2023, mainly related to mask costs rather than wafer fabrication. It was reported that these concessions primarily applied to the 7nm process and were dependent on order volumes.

Samsung Foundry, which had previously remained inactive, also adopted a price reduction strategy in the first quarter of this year, offering discounts ranging from 5-15% and indicating a willingness to negotiate.

Looking at the global semiconductor foundry landscape, data released by TrendForce in 2023 showed that Taiwan accounted for approximately 46% of the world’s wafer fabrication capacity, followed by China at 26%, South Korea at 12%, the United States at 6%, and Japan at 2%. However, due to active efforts by China, the United States, and other countries to increase their local capacity shares, by 2027, Taiwan and South Korea’s capacity shares are expected to converge to approximately 41% and 10%, respectively.

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• [News] Competing with TSMC? Samsung Foundry Follows Price Cuts, Offering Discounts Up to 15%

Recent reports have suggested that UMC’s new facility in Singapore is set to be completed by mid-2024, with initial production expected to commence in early 2025.

UMC has announced that, in response to the demand for capacity expansion, the board of directors has approved a capital expenditure execution plan of USD 39.8 million. The first phase of the new facility is planned to have a monthly production capacity of 30,000 wafers, offering 22/28nm processes, with a total investment of USD 5 billion.

Semiconductor Companies Target Singapore

Influenced by complex international situations and other factors, the global semiconductor supply chain is undergoing a shift, with high expectations placed on the Southeast Asian region, particularly Singapore.

In the wafer manufacturing sector, IDM companies like Micron, Infineon, NXP Semiconductors, STMicroelectronics, and others, along with foundry enterprises like GlobalFoundries, UMC, and Vanguard International Semiconductor(VIS) are investing in building facilities in Singapore.

In 2010, GlobalFoundries acquired Singapore’s Chartered Semiconductor Manufacturing Company and took over its fab. In September 2023, GlobalFoundries announced the official launch of its USD 4 billion investment in expanding the manufacturing plant in Singapore, further expanding its global production capacity.

The expanded fab is projected to produce an additional 450,000 300mm wafers annually, raising GlobalFoundries’ total production capacity in Singapore to approximately 1.5 million 300mm wafers per year.

UMC has been operating its 12-inch fab in Singapore for over 20 years. In February 2022, UMC announced that its board of directors approved plans to expand a new advanced fab in the Fab12i campus in Singapore.

At that time, UMC anticipated that the new facility would commence production at the end of 2024. The latest updates indicate that the new facility is expected to begin production in early 2025.

VIS currently operates an 8-inch fab in Singapore. In October 2023, media reports indicated that VIS plans to establish its first 12-inch fab in Singapore. This facility is primarily intended to meet the demand for automotive chips. The investment for this project is estimated to be at least USD 2 billion, and it is anticipated to produce 28nm chips.

Continuous Expansion in Foundry Capacity

Despite the sluggish demand in the consumer electronics market, the pace of expansion for foundries remains unaffected.

Covering 2022 to 2024, the World Fab Forecast report has shown that the global semiconductor industry plans to begin operation of 82 new volume fabs, including 11 projects in 2023 and 42 projects in 2024 spanning wafer sizes ranging from 300mm to 100mm.

Among the newly added capacity, China is expected to experience rapid growth, securing the top position, followed by Taiwan, maintaining the second position. Subsequently, the rankings include South Korea, Japan, the Americas, Europe, and Southeast Asia.

According to TrendForce‘s statistics, the number of foundries in China has reached 44 and is expected to increase by 32 in the future, mainly focusing on mature nodes.

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• [News] UMC, VIS, PSMC Cut Prices for Mature Process Wafers to Boost Production

(Photo credit: UMC)

On January 8th, leading U.S. microcontroller (MCU) and analog IC manufacturer Microchip raised concerns, stating that the revenue for the last quarter would experience a more significant decline than previously estimated, falling short of overall expectations.

The market perceives Microchip’s financial report as an alarm, revealing the continued sluggishness in sectors such as automotive and consumer electronics. These areas heavily rely on mature process production for related products, impacting mature process-focused foundries like UMC (United Microelectronics Corporation) and Vanguard International Semiconductor (VIS).

Industry sources analyze that Microchip’s warning of poor financial results indicates that, amid the unstable overall economic situation, further observation might be necessary for evaluating this year’s semiconductor market conditions.

Microchip is the global leader in the 8-bit microcontroller market, with a wide range of chip applications that virtually span across all industries. Its customer base exceeds 125,000 in industrial, automotive, consumer, defense, communication, and computer markets. Due to its diverse coverage and extensive customer base, Microchip is regarded as a crucial indicator for observing the semiconductor market.

Market expectations were initially optimistic that, after last year’s industry inventory adjustments, the overall semiconductor market conditions would gradually recover this year. Additionally, the anticipation of new trends such as AI smartphones and AI PCs was expected to drive mid-to-long-term demand in the industry.

However, Microchip’s concern seems to introduce more uncertainty into the market. According to Microchip’s latest projections, the revenue for the third quarter of the fiscal year ending in December is expected to decrease by approximately 22%, surpassing the earlier estimated range of 15% to 20% and significantly exceeding Wall Street’s forecast of 17%.

Microchip’s CEO, Ganesh Moorthy, mentioned in a press release: “The weakening economic environment that our customers and distributors faced during the December 2023 quarter resulted in many of them wanting to receive a lower level of shipments as they took actions to further de-risk their inventory positions.”

Moorthy pointed out that many customers, in their ongoing management of operational activities at the end of the last quarter, extended the closure time of facilities.

He stated, ” The impact of these and related factors was that certain backlog that we had planned to ship when we provided our guidance on November 2, 2023 did not ship to customers before the end of the December quarter. ”

Microchip will release its complete financial report for the last quarter on February 1st.

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• [News] Resolution of Labor Dispute Paves the Way for Accelerated Equipment Installation at TSMC’s US Fab

(Photo credit: Microchip)

According to TechNews’ report, after a prolonged period of price suppression in the mobile panel market, there has been an upswing in demand since the end of the second quarter, as customer inventories have reached a turning point.

The report further quoted industry sources, stating that the increased demand is notably driven by Huawei’s new models, and other customers initiating stockpiling for new models. This gradual increase in demand is raising AMOLED panel utilization rates, subsequently leading to a price uptick, which is also influencing LTPS LCD panel prices.

Previously reported by IJIWEI, the robust demand for Huawei’s Mate 60 series smartphones is expected to contribute to a total annual smartphone shipment of 40 to 50 million units. This surpasses the previous year’s shipments of 30 million units by 30 to 70%.

Industry insiders cited by South Korean media indicate that Huawei’s shipping target for the next year is 100 million units, surpassing market research company predictions by over 40%, which estimated around 70 million units.

The demand for Huawei’s new smartphone models is on the rise, especially as its high-end products extensively adopt LTPO backplane technology, occupying a portion of panel manufacturers’ capacity. Additionally, other customers initiating preparations for new models have contributed to the surge in demand, bringing China’s AMOLED panel capacity back to 80-90%.

Looking ahead to next year, the demand for AMOLED panels will still need to be monitored, particularly around the Lunar New Year. If demand continues to grow steadily, it will likely support panel prices.

As for the crucial component, OLED DDI (Display Driver IC), the process is gradually shifting from 40nm to 28nm. Currently, only UMC (United Microelectronics Corporation) globally can mass-produce the 28nm HV (High Voltage) process required for OLED DDI, while SMIC (Semiconductor Manufacturing International Corporation) employs the 40nm HV process.

With TSMC (Taiwan Semiconductor Manufacturing Company) set to join the 28nm HV process in 2025, there is no imminent shortage of supply. Therefore, the price increase in AMOLED panels may have limited impact on OLED DDI prices, and the fourth quarter and the first quarter of next year are likely to maintain a stable trend.

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• [News] Industry Insiders Report Huawei’s Target of Shipping 100 Million Smartphones Next Year

(Photo credit: Huawei)

With 32 mature process wafer fabs set to be completed in China by the end of next year, Taiwanese wafer foundries are gearing up early in response to the “red alert.”

Faced with the pricing war, semiconductor insiders reveal that mature process foundries in Taiwan are anticipating a roughly 10% reduction in prices in the first quarter. The aim is to seize orders ahead of the competition and maintain high capacity utilization rates.

In contrast to traditional sales discounts, major semiconductor foundries like TSMC, UMC, and PSMC have recently introduced a “diversified” pricing strategy for IC design, including:

1. Volume Discounts: Significant price reductions are offered for orders exceeding ten thousand units, with pricing flexibility increasing as the order quantity grows.
2. Volume Tied Pricing: Maintaining a certain order volume, pricing has a degree of flexibility based on market conditions.
3. Deferred Wafer Delivery: Allowing the extension of the original wafer delivery timeline by one year or even longer, providing IC design firms with flexibility and reduced pressure when placing orders.
4. Dynamic Pricing: Rapid negotiations for urgent orders, reducing the risk of volume pressure for IC designers, albeit with relatively limited price flexibility.
5. Wafer Bank: Transforming wafers into semi-finished products stored in foundries, facilitating on-demand packaging and delivery when needed.

These initiatives are strategically positioned to capitalize on the anticipated recovery in consumer electronics demand next year.

Insiders reveal that due to the sluggish market conditions in the first quarter and the impact of an upcoming extended holiday, demand for the next quarter may not just be “cool” but could freeze.

Industry experts characterize this downturn as an “L-shaped bottom,” and if orders are taken by Chinese foundries before the recovery, Taiwanese foundries will lose out on the subsequent rebound. Consequently, the three major mature process wafer foundries in Taiwan are compelled to lower prices in advance, with an estimated price reduction of around 10% for the next quarter. However, the foundries refrain from commenting on pricing.

Historically, major domestic mature process fabs maintained stable prices but offered discounts by shipping more wafers than ordered. In an effort to boost high capacity utilization and secure orders early, these fabs will no longer stick to stable pricing in the first quarter of next year.

Instead, they have adopted a direct price reduction of 10% for orders exceeding 10,000 wafers. IC design companies estimate that as benchmark fabs initiate price reductions, other industry players will inevitably follow suit.

While the extent of price reduction varies depending on products and processes, an average price reduction of 10-20% for wafer foundry services in the first quarter of next year is anticipated.

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• TrendForce Foresees China’s Mature Wafer Processes to Expand to 33% by 2027, Japan Secures Advanced Processes

(Photo credit: TSMC)