According to a previous report from Bloomberg, Chinese 3D NAND Flash giant YMTC recently filed a lawsuit against American memory giant Micron in California, accusing Micron of infringing on 11 of its patents related to 3D NAND Flash and DRAM products. YMTC is requesting the court to order Micron to stop selling the infringing memory products in the United States and to pay patent royalties.

Established at the end of 2016 in Wuhan, YMTC is a major Chinese manufacturer of memory (DRAM) and flash memory (NAND Flash), supported by significant investments from the “Big Fund.” It has become a representative enterprise in China’s effort to build a local chip supply chain. However, in October 2022, the U.S. Department of Commerce added YMTC to the Entity List, preventing it from obtaining advanced equipment from U.S. companies to manufacture 3D NAND chips with 128 layers or more.

Before facing U.S. export controls, YMTC’s 128-layer 3D NAND chip products had already entered Apple’s supply chain and received technical and quality certification from Apple. At that time, Apple reportedly hoped to use YMTC’s chips not only for cost considerations but also to prevent flash memory from being overly concentrated in the hands of Samsung, SK Hynix, and Micron.

The report from Tom’s hardware states that YMTC’s current allegations assert that Micron’s 96-layer (B27A), 128-layer (B37R), 176-layer (B47R), and 232-layer (B58R) 3D NAND Flash products, as well as some DDR5 SDRAM products (Y2BM series), infringe on 11 of YMTC’s patents or patent applications filed in the United States.

Notably, last November, YMTC also filed a lawsuit against Micron and its subsidiaries in the U.S. District Court for the Northern District of California, accusing them of infringing on eight U.S. patents related to 3D NAND Flash. Additionally, per a report from South China Morning Post on June 7th of this year, YMTC filed a lawsuit in California, accusing the Denmark-based consulting firm Strand Consult, funded by Micron, of spreading false information that damaged YMTC’s market reputation and business relationships.

Industry sources cited by the Commercial Times also note that in recent years, China’s technological capabilities have significantly improved, and companies have been actively applying for patents domestically and internationally. With the support of the Chinese government, they have also started to frequently engage in patent litigation. Last year, Chinese courts received 5,062 technical intellectual property and monopoly cases.

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(Photo credit: YMTC)

As geopolitical tensions rise, a significant increase in orders from China for TSMC was seen last quarter. According to a report from Economic Daily News, as the U.S. presidential election countdown continues, both party candidates agree on expanding semiconductor export controls to China. Consequently, Chinese companies are stockpiling chips, causing a surge in rush orders for TSMC.

Regarding concerns that Chinese customers seem to be increasing their orders in response to potential future export controls or tax issues, TSMC did not elaborate much during its previous earnings call. They only mentioned that the increase in orders from Chinese customers was mainly due to high-performance computing (HPC) applications.

Concerning U.S. export control issues, TSMC’s management reiterated throughout 2023 earnings calls that the company will comply with all rules and regulations while serving all customers.

Recently, the proportion of TSMC’s orders from China has risen rapidly. The company’s latest financial report shows that in Q2, North America remained the largest market by customer headquarters location, accounting for 65%. The Chinese market, however, surged to 16%, up from 9% in the first quarter and 12% in the same period last year, replacing the Asia-Pacific region as the second-largest regional market. The Asia-Pacific region’s share fell to 9%, Japan remained at 6%, and the remaining share came from the EMEA region.

The sources cited by the report further indicate that as semiconductor export controls to China tighten, many Chinese companies not yet blacklisted under these controls are proactively placing orders and stockpiling goods, especially for advanced processes below 5 nanometers, which are highly valuable.

The sources noted that the current market atmosphere is quite similar to when Huawei’s HiSilicon excessively stocked up before export controls were imposed. This reflects the active development of Chinese companies in the AI field, not only renting computing power from major U.S. companies but also stockpiling chips and equipment on a large scale.

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According to a report from Economic Daily News, amid U.S. presidential candidate Donald Trump’s remarks claiming that Taiwan is taking away chip business and should pay the U.S. for defense, geopolitical risks have become another focal point at TSMC’s July 18 earnings call.

TSMC stated that whether the tariffs may increase is a hypothetical issue; if new tariff issues do arise, TSMC will discuss with customers and share the corresponding costs. However, it is still too early to discuss this in detail. Thus, TSMC Chairman C.C. Wei emphasized that TSMC’s overseas expansion strategy remains unchanged, including ongoing fab construction in Arizona, USA, and Kumamoto, Japan, with plans for future facilities in Europe as well.

Sources cited by the report indicate that TSMC’s statement of sharing corresponding costs with customers may imply that if additional tariffs are imposed, TSMC will seek customer assistance in bearing these costs, effectively raising prices.

TSMC pointed out that in a fragmented globalization environment, the costs for everyone—including TSMC, customers, competitors, and the entire semiconductor industry—will be higher.

TSMC plans to manage and minimize cost disparities through three methods: implementing strategic pricing to reflect the value of regional flexibility; closely cooperating with local administrations to ensure their support; and leveraging fundamental advantages such as leading manufacturing technologies and large-scale production capabilities that competitors cannot match.

Regarding TSMC’s progress on overseas expansion, the Arizona plant in the USA is scheduled to begin mass production of the 4nm process in the first half of 2025 as planned. The second plant in Arizona, following recent announcements, will offer both 3nm and 2nm processes and is expected to start mass production in 2028. The third plant in Arizona is expected to provide 2nm or more advanced process technologies.

Regarding the Kumamoto plant in Japan, the target is to commence mass production in the fourth quarter of this year. Previously, TSMC and its joint venture partners announced plans to establish a second wafer plant in Japan specializing in 40nm, 12/16nm, and 6/7nm process technologies. This plant aims to support strategic customers in consumer, automotive, industrial, and high-performance computing (HPC) applications. Construction of the second wafer plant in Japan is planned to start in the second half of 2024, with production expected to begin by the end of 2027.

As for its European plant, TSMC plans to begin construction on the Dresden, Germany, facility in the fourth quarter of 2024. TSMC emphasizes that its overseas expansion depends on customer demand and government support, aiming to maximize shareholder value and ensure that its long-term gross margin target remains above 53%.

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(Photo credit: TSMC)

On July 17th, silicon wafer giant GlobalWafers announced that it is setting up a research and development center in Sherman, Texas, and constructing a 12-inch silicon wafer production line in St. Peters, Missouri. This move is expected to strengthen its US semiconductor supply chain. It is worth noting that the company has signed a preliminary memorandum of understanding with the US Department of Commerce and will receive a USD 400 million subsidy under the CHIPS Act.

US Secretary of Commerce Gina Raimondo noted that the US government is revitalizing the leadership position of the US semiconductor supply chain, encompassing materials, manufacturing, and R&D. GlobalWafers’ investment will enhance the US’s role in the semiconductor supply chain, provide locally sourced silicon wafers needed for advanced processes, and bolster the security of the supply chain.

GlobalWafers stated that its subsidiaries, GlobalWafers America (GWA) and MEMC, have signed a non-binding preliminary memorandum of understanding with the US Department of Commerce. Under the US CHIPS and Science Act, they will receive a USD 400 million subsidy, which is expected to be used for the construction costs of the Texas and St. Peters plants.

Upon completion, its production base in Sherman, Texas, will be the first advanced silicon wafer plant in the US with an integrated process in over 20 years.

At the Sherman, Texas production base, the initial phase of construction will create 1,200 jobs. Additionally, there will be 750 high-paying positions for production operators, technicians, and engineers in the future, with mass production expected to begin in 2026.

Once the St. Peters, Missouri plant is completed, it will be the only advanced 12-inch SOI  wafer production base in the US. It is expected to create 500 construction jobs and 130 high-paying positions.

Among the top 5 companies globally controlling over 80% of the 12-inch silicon wafer market, including GlobalWafers, 90% of these wafers are currently produced in East Asia. As per the plan, GlobalWafers’ plant in Sherman, Texas, will manufacture wafers for advanced, mature, and memory chips, while the St. Peters, Missouri plant will focus on wafers for defense and aerospace applications.

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(Photo credit: GlobalWafers)

According to a report from TechNews citing industry sources, the US is considering expanding sanctions, with the next focus on China’s mature semiconductor processes. In addition to imposing tariffs, the determination of the chip’s origin will be strictly enforced. The standard, which previously considered the final packaging point, will now trace back to the front-end manufacturing and photomask origin.

Reportedly, it is believed that the US will significantly escalate the trade war after the presidential election, intensifying export restrictions on China. Currently, new tariffs of over 10% are being imposed on products from countries other than the US, and there are plans to impose tariffs of 60% or higher on Chinese goods.

It is noteworthy that the US government previously announced the imposition or increase of tariffs on Chinese electric vehicles, semiconductors, lithium batteries, and other products, with the semiconductor tariff rate set to rise from 25% to 50% by 2025.

The sources cited by the report believe that tariffs do indeed reduce imports and encourage the production of industries such as semiconductors, computer equipment, and steel in US factories. However, the cost is very high, potentially offsetting any overall benefits. Research indicates that tariffs lead to higher prices for US consumers and factories that rely on foreign inputs, and reduce exports of certain US goods that face retaliatory measures.

Meanwhile, for the future direction of the US, it can be inferred that chips manufactured in Taiwan and South Korea may also face tariffs.

Due to the intensification of the US-China tech war, the US is considering expanding export restrictions, targeting the mature processes that China is starting to shift towards. There have been continuous reports of China expanding its mature processes, raising global concerns about overcapacity in mature processes. The US government may in the future use tariff barriers to prevent products containing chips made with Chinese mature processes from being sold overseas at low prices.

The sources cited by TechNews further report that the determination standard will change from the final packaging location to whether the origin of the chip and photomask is manufactured in China.

In addition, Bloomberg also reports that the US administration is considering using the “Foreign Direct Product Rule” (FDPR). Under this rule, if a product uses any US technology, the US can implement controls. The US government has also notified companies such as Tokyo Electron and ASML that if they continue to supply advanced chip technology to China, the US will consider imposing the strictest trade control measures.

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