UMC


2023-09-18

[News] Goldman Sachs Securities Downgrades TSMC’s Next Year Capex

According to a report by Taiwan’s Media TechNews, Taiwan’s leading semiconductor foundry, TSMC (Taiwan Semiconductor Manufacturing Company), experienced a significant 2.43% decline in its ADR (American Depositary Receipt) on the last trading day of the previous week in the U.S. stock market. This drop was attributed to media reports indicating that TSMC had requested its suppliers to delay equipment deliveries, subsequently affecting the stock prices of related semiconductor equipment companies. Furthermore, Goldman Sachs Securities has reduced its projections for TSMC’s capital expenditure over the next two years.

Goldman Sachs Securities noted that due to the slower-than-expected recovery in end-market demand, they have adjusted their revenue and capital expenditure estimates for TSMC and believe that both TSMC and UMC, another major semiconductor foundry, might delay their capacity expansion schedules. To enhance efficiency, these companies may also allocate equipment resources more effectively, reducing capital expenditures for 2024 and 2025.

Goldman Sachs Securities estimates that TSMC’s capital expenditure for 2023 will remain around $31.6 billion, with no adjustments made. However, due to the uncertainty surrounding demand recovery, TSMC is likely to reduce the pace of equipment procurement for advanced nodes. Instead, some of Taiwan’s equipment may be relocated to overseas production bases in Japan and the United States. Consequently, Goldman Sachs expects TSMC’s capital expenditure for 2024 to decrease from $28 billion to $25 billion, a 21% reduction compared to 2023. As for 2025, the capital expenditure projection has been adjusted from $36 billion to $35 billion.

Additionally, Goldman Sachs Securities has also lowered the utilization rates for TSMC’s 3nm process. Utilization rates for 2023 and 2024 have been adjusted from 40% and 71% to 36% and 65%, respectively, while the 2025 utilization rate is expected to remain unchanged at 78%. The production capacity for the 3nm process in 2024 and 2025 has also been revised from 80,000 and 90,000 wafers per month to 70,000 and 80,000 wafers per month.

(Photo credit: TSMC)

2023-09-11

[News] Recovery in Foundry Mature Node May Be Delayed Until Next Year

According to the news from ChinaTimes, the semiconductor market is experiencing a slowdown, with Taiwan’s three major mature process wafer foundries UMC, VIS, and PSMC all reporting reduced revenues in August. VIS and UMC both posted lower revenues compared to the previous month, while PSMC managed a slight 1.2% monthly increase in August. However, this increase still falls within this year’s relatively low range. Industry experts anticipate that the semiconductor industry will maintain a subdued market outlook in the latter half of this year, with a potential recovery likely delayed until the first half of the next year.

The semiconductor industry began its correction in the second half of last year. Initially, there was optimism for inventory adjustments to conclude within four quarters by the end of this year’s second quarter, anticipating a demand rebound in the latter half of the year. However, since the second quarter, semiconductor manufacturers have grown pessimistic due to slower downstream inventory depletion and weak end-user demand. This is reflected in third-quarter revenues for mature process wafer foundries, which are expected to remain flat or slightly decline based on August revenues. A robust recovery in the fourth quarter is unlikely, suggesting that industry-wide recovery is likely postponed until the first half of next year.

UMC saw consecutive monthly revenue growth from February to July. However, following five consecutive increases, the company experienced a slight decrease in revenue in August. TSMC previously stated in a conference that the current market recovery falls short of expectations, with an unclear outlook for wafer demand. It anticipates a 3~4% quarter-on-quarter decrease in wafer shipments in the third quarter, which aligns with the market’s expectations for a slight decline in August revenue.

UMC forecasts a 3~4% quarter-on-quarter decrease in wafer shipments in the third quarter, a 2% quarter-on-quarter increase in the average wafer price in USD, a low single-digit percentage decrease in the average gross margin, and an approximate 65% capacity utilization rate. Overall, industry insiders expect TSMC to face slight downward pressure on third-quarter revenue.

VIS reported July revenue reaching NT$3.596 billion, marking a new high for the first seven months of the year. However, its August revenue showed a decline, with a 2.23% month-on-month decrease to NT$3.516 billion. This is significantly different from the typical revenue growth momentum observed during the third-quarter peak season in previous years. Cumulative revenue for the first eight months of this year also decreased by 34.54% compared to the same period last year.

VIS anticipates a 4~6% quarter-on-quarter increase in wafer shipments in the third quarter, with a capacity utilization rate similar to that of the second quarter, around 60%. The average selling price (ASP) is expected to remain stable. However, due to increased production costs and depreciation expenses, the gross margin is estimated to decline to 25~27% in the third quarter, putting more pressure on profitability compared to revenue.

As for PSMC, although its August revenue saw a slight 1.2% month-on-month increase, the company has maintained around NTD 3.4 billion in monthly revenue from June to August, which is considered a low level compared to the second quarter when monthly revenue was approximately NTD 3.8 billion. The third quarter is expected to continue to exert downward pressure on revenue compared to the previous quarter. The company has also previously stated that it does not rule out the possibility of a quarterly loss in its core business during the third quarter.

(Source: https://www.chinatimes.com/newspapers/20230911000124-260202?chdtv)
2023-09-01

[News] Rumored AI Chip Demand Spurs Price Hikes at TSMC, UMC, ASE

TSMC’s CoWoS advanced packaging capacity shortage is causing limitations in NVIDIA’s AI chip output. Reports are emerging that NVIDIA is willing to pay a premium for alternative manufacturing capacity outside of TSMC, setting off a surge in massive overflow orders. UMC, the supplier of interposer materials for CoWoS, has reportedly raised prices for super hot runs and initiated plans to double its production capacity to meet client demand. ASE, an advanced packaging provider, is also seeing movement in its pricing.

In response to this, both UMC and ASE declined to comment on pricing and market rumors. In addressing the CoWoS advanced packaging capacity issue, NVIDIA previously confirmed during its financial report conference that it had certified other CoWoS packaging suppliers for capacity support and would collaborate with them to increase production, with industry speculation pointing towards ASE and other professional packaging factories.

TSMC’s CEO, C.C. Wei, openly stated that their advanced packaging capacity is at full utilization, and as the company actively expands its capacity, they will also outsource to professional packaging and testing factories.

It’s understood that the overflow effect from the inadequate CoWoS advanced packaging capacity at TSMC is gradually spreading. As the semiconductor industry as a whole adjusts its inventory, advanced packaging has become a market favorite.

Industry insiders point out that the interposer, acting as a communication medium within small chips, is a critical material in advanced packaging. With a broad uptick in demand for advanced packaging, the market for interposer materials is growing in parallel. Faced with high demand and limited supply, UMC has raised prices for super-hot-run interposer components.

UMC revealed that it has a comprehensive solution in the interposer field, including carriers, customed ASICs, and memory, with cooperation from multiple factories forming a substantial advantage. If other competitors are entering this space now, they might not have the quick responsiveness or abundant peripheral resources that UMC does.

UMC emphasized that compared to competitors, its competitive advantage in the interposer field lies in its open architecture. Currently, UMC’s interposer production primarily takes place in its Singapore plant, with a current capacity of about 3,000 units, with a target of doubling to six or seven thousand to meet customer demand.

Industry analysts attribute TSMC’s tight CoWoS advanced packaging capacity to a sudden surge in NVIDIA’s orders. TSMC’s CoWoS packaging had primarily catered to long-term partners, with production schedules already set, making it unable to provide NVIDIA with additional capacity. Moreover, even with tight capacity, TSMC won’t arbitrarily raise prices, as it would disrupt existing client production schedules. Therefore, NVIDIA’s move to secure additional capacity support through a premium likely involves temporary outsourced partners.

(Photo credit: NVIDIA)

2023-08-29

[News] CoWoS Demand Surges: TSMC Raises Urgent Orders by 20%, Non-TSMC Suppliers Benefit

According to a report from Taiwan’s TechNews, NVIDIA has delivered impressive results in its latest financial report, coupled with an optimistic outlook for its financial projections. This demonstrates that the demand for AI remains robust for the coming quarters. Currently, NVIDIA’s H100 and A100 chips both utilize TSMC’s CoWoS advanced packaging technology, making TSMC’s production capacity a crucial factor.

Examining the core GPU market, NVIDIA holds a dominant market share of 90%, while AMD accounts for about 10%. While other companies might adopt Google’s TPU or develop customized chips, they currently lack significant operational cost advantages.

In the short term, the shortage of CoWoS has led to tight chip supplies. However, according to a recent report by Morgan Stanley Securities, NVIDIA believes that TSMC’s CoWoS capacity won’t restrict shipments of the next quarter’s H100 GPUs. The company anticipates an increase in supply for each quarter next year. Simultaneously, TSMC is raising CoWoS prices by 20% for rush orders, indicating that the anticipated CoWoS bottleneck might alleviate.

According to industry sources, NVIDIA is actively diversifying its CoWoS supply chain away from TSMC. UMC, ASE, Amkor, and SPIL are significant players in this effort. Currently, UMC is expanding its interposer production capacity, aiming to double its capacity to relieve the tight CoWoS supply situation.

According to Morgan Stanley Securities, TSMC’s monthly CoWoS capacity this year is around 11,000 wafers, projected to reach 25,000 wafers by the end of next year. Non-TSMC CoWoS supply chain’s monthly capacity can reach 3,000 wafers, with a planned increase to 5,000 wafers by the end of next year.

(Photo credit: TSMC)

2023-08-25

[News] NVIDIA Establishes Non-TSMC CoWoS Supply Chain, UMC Doubles Interposer Capacity

According to a report from Taiwan’s Commercial Times, NVIDIA is aggressively establishing a non-TSMC CoWoS supply chain. Sources in the supply chain reveal that UMC is proactively expanding silicon interposer capacity, doubling it in advance, and now planning to further increase production by over two times. The monthly capacity for silicon interposers will surge from the current 3 kwpm (thousand wafers per month) to 10 kwpm, potentially aligning its capacity with TSMC’s next year, significantly alleviating the supply strain in the CoWoS process.

A prior report from Nomura Securities highlighted NVIDIA’s efforts since the end of Q2 this year to construct a non-TSMC supply chain. Key players include UMC for wafer fabrication, Amkor and SPIL for packaging and testing. NVIDIA aims to add suppliers to meet the surging demand for CoWoS solutions.

The pivotal challenge in expanding CoWoS production lies in insufficient silicon interposer supply. In the future, UMC will provide the silicon interposers for front-end CoW process, while Amkor and SPLI will take charge of the back-end WoS packaging. These collaborations will establish a non-TSMC CoWoS supply chain.

UMC states its current silicon interposer capacity stands at 3 kwpm. However, the company has decided to undertake a one-fold expansion at its Singaporean plant, targeting a capacity of around 6 kwpm. The additional capacity is anticipated to be progressively operational within 6 to 9 months, with the earliest projections for the first quarter of next year.

Yet, due to persistent robust market demand, it’s expected that even with UMC’s capacity expansion to 6 kwpm, it may not completely meet market needs. Consequently, industry sources suggest UMC has opted to further amplify silicon interposer capacity to 10 kwpm, aiming for a two-fold acceleration of production expansion. Addressing these expansion rumors, UMC affirms that growth in advanced packaging demand is an inherent trend and future focus, asserting their evaluation of capacity options and not ruling out the possibility of continuous enlargement of silicon interposer capabilities.

(Photo credit: Amkor)

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