Leading foundries have been making significant moves, reshaping the semiconductor industry landscape. Vanguard International Semiconductor Corporationrecently announced its entry into the 12-inch wafer foundry business, marking the beginning of a new phase in its strategic transformation for the next 30 years, with silicon carbide (SiC) also included in its development plan.

Meanwhile, India’s first 12-inch wafer plant has begun operations, with the Indian government approving five semiconductor plant construction projects valued at approximately USD18 billion. Additionally, TSMC’s world-first 2nm wafer plant is set for completion by the end of this month. Industry sources indicate that AI-related demand is expected to surge, further boosting TSMC’s profitability.

Vanguard International Semiconductor Corporation Enters 12-Inch Wafer Foundry Market, Aiming for TWD 100 Billion in Annual Revenue in Five Years

On November 2, Vanguard Chairman Mr. Leuh Fang announced that the company officially entered the 12-inch wafer foundry sector and is building a new plant. Both the company and stakeholders have high hopes for the plan, aiming for annual revenue to grow from TWD 50 billion to TWD 100 billion in five years once the new plant reaches full capacity. Fang emphasized that Vanguard announced a USD 7.8 billion investment in collaboration with NXP Semiconductor to build a 12-inch wafer fab, with TSMC providing all necessary critical technology and resources.

On June 5, Vanguard and NXP jointly announced plans to construct a 12-inch wafer fab in Singapore with a total investment of USD 7.8 billion. The fab will employ 130nm to 40nm technology and produce mixed-signal, power management, and analog products for automotive, industrial, consumer electronics, and mobile device markets.

India’s First 12-Inch Wafer Plant Begins Operations

On November 1, Powerchip Semiconductor Manufacturing Corporation (PSMC) announced the official launch of its joint project with Tata Electronics to construct India’s first 12-inch wafer fab. PSMC has received the first payment for Fab IP from Tata, and the construction project will proceed actively. Meanwhile, high-capacity interposer chips, validated by customers, will also begin mass production and delivery.

This 12-inch fab, with a total investment of USD 11 billion, will focus on power management ICs, panel driver chips, microcontrollers, and high-speed computing logic chips. It is projected to have a monthly capacity of 50,000 wafers, primarily serving automotive, computing, data storage, wireless communication, and AI applications. The plant is scheduled for completion and mass production by 2026.

World’s First 2nm Wafer Plant Nears Completion by End of Month

According to recent supply chain news, TSMC’s Kaohsiung P1 site for its first 2nm wafer fab is nearing completion, with a ceremony planned for November 26 and equipment installation set to begin on December 1.

TSMC’s 2nm production will take place at its Hsinchu Science Park (HSP) Baoshan F20 fab and Kaohsiung Nanzi F22 fab. The Baoshan fab is expected to complete a mini production line by the end of the year, targeting volume production by Q4 2025 with a monthly capacity of around 30,000 wafers. Commercial production at the Kaohsiung F22 fab will commence in Q1 2026, also with a monthly capacity of 30,000 wafers.

TSMC’s Chairman and CEO C.C. Wei have highlighted unprecedented demand for the 2nm process. Current planned capacity for the 2nm process has already surpassed that of the previous 3nm generation, underscoring the strong market demand for advanced process technology. Reportedly, TSMC has validated its 2nm product roadmap with customers, with process quotes exceeding USD 30,000 per wafer.

(Photo credit: Vanguard)

Vanguard International Semiconductor (VIS), an affiliate of TSMC, announced today a joint venture with NXP to build a 12-inch fab in Singapore. According to its press release, the construction is set to begin in the second half of 2024, with mass production expected by 2027. The initial investment for the fab is approximately USD 7.8 billion.

VIS stated in the official press release that it will establish a joint venture company, VisionPower Semiconductor Manufacturing Company (VSMC), with NXP in Singapore to build a 12-inch fab. The joint-venture fab will support 130nm to 40nm mixed-signal, power management and analog products, targeting the automotive, industrial, consumer and mobile end markets, of which its underlying process technologies are planned to be licensed and transferred to the joint venture from TSMC.

The company further stated that the joint venture will begin construction of the initial phase of the wafer fab in the second half of 2024, pending receipt of all required regulatory approvals, with initial production available to customers during 2027.

The joint venture will operate as an independent, commercial foundry supplier, providing assured proportional capacity to both equity partners, with an expected output of 55,000 300mm wafers per month in 2029. The joint venture will create approximately 1,500 jobs in Singapore. Upon the successful ramp of the initial phase, a second phase will be considered and developed pending commitments by both equity partners.

The total cost of the initial build out is anticipated to be USD 7.8 billion. VIS will inject USD 2.4 billion representing a 60 percent equity position in the joint venture and NXP will inject $1.6 billion for the remaining 40 percent equity position. VIS and NXP have agreed to contribute an additional USD 1.9 billion which will be utilized to support the long-term capacity infrastructure. The remaining funding including loans will be provided by third parties to the joint venture. The fab will be operated by VIS.

“VIS is pleased to work with leading global semiconductor company NXP to build our first 300mm fab. This project aligns with our long-term development strategies, demonstrating VIS’ commitment to meeting customer demands, and diversifying our manufacturing capabilities,” said VIS Chairman Leuh Fang.

“NXP continues to take proactive actions to ensure it has a manufacturing base which provides competitive cost, supply control, and geographic resilience to support our long-term growth objectives,” said Kurt Sievers, NXP President and CEO. “We believe VIS is well suited and fully understands the complexities involved in building and operating together with NXP a 300mm analog mixed signal fab. The joint venture partnership we intend to create with VIS perfectly aligns within NXP’s hybrid manufacturing strategy.”

Regarding this move, TrendForce posits that it reflects the trend of global supply chains shifting “Out of China, Out of Taiwan”(OOC/OOT), with Taiwanese companies accelerating their overseas expansion to improve regional capacity flexibility and competitiveness.

TrendForce noted that the semiconductor supply chain has been diversifying over the past two years to mitigate geopolitical and pandemic-related risks, forming two major segments: China’s domestic supply chain and a non-China supply chain. Recent US tariff increases have accelerated this shift, leading to increased orders from American customers.

Consequently, Vanguard’s capacity utilization rate is expected to rise to approximately 75% in the second half of this year, exceeding initial expectations. Additionally, inquiries for capacity at Vanguard’s existing Singapore Fab 3E plant have significantly increased, indicating potential support for the new plant’s capacity from customer demand and order transfers, according to Trendforce.

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(Photo credit: VIS)

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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(Photo credit: Microchip)

Mature process foundries are locked in a battle to uphold a 60% capacity utilization rate. Reports indicate that major players, including UMC, Vanguard International Semiconductor (VIS), and PSMC, are slashing prices significantly for the first quarter of the coming year to salvage their capacity utilization rates. This reduction, reaching double-digit percentages and up to 15% to 20% for project customers, stands out as the most extensive post-pandemic price cut, according to UDN News.

Post-Pandemic Price Challenges in Mature Process Foundries    

This pricing adjustment is pushing the prices of mature process foundries to a new low post-pandemic, affecting the profit margins and profitability trends of related companies. Industry sources disclose that only TSMC’s prices remain robust, with almost no exception for other foundries.

To rescue capacity utilization rates, companies are aggressively tweaking their quotes. A source from an IC design company privately reveals that foundries have notified them of slow-moving business in mature processes, resulting in a direct drop in capacity utilization rates. To ensure capacity utilization rates and market share, maintaining a certain level of production scale becomes imperative, prompting a substantial reduction in quotes.

Industry sources emphasize that despite recent indications of recovery in the PC and smartphone markets, clients remain cautious due to external factors such as inflation, especially given almost a year of inventory clearance. Companies, still on edge, fear slipping back into the challenges of inventory clearance and thus maintain a conservative approach to order placement.

Currently, the recovery in order placement strength is only about 30% to 40% of pre-pandemic levels, compelling wafer foundries to intensify their price cuts to prevent orders from being lost to competitors willing to lower prices, resulting in even lower capacity utilization.

It is evident that consumer IC demand for foundry services is low, and whom focusing on 8-inch mature process are the most affected. It is mainly due to excessive duplicate orders from integrated device manufacturers (IDMs) and IC design companies in the past, leading to inventory clearance for chips such as power management ICs, driver ICs, and microcontrollers (MCUs). Some products have even shifted to 12-inch wafers, keeping the capacity utilization rates of 8-inch foundries at a low level.

Navigate Semiconductor Shifts in TSMC, UMC, VIS, and PSMC

Industry sources note that TSMC is bolstered by advanced processes, enabling them to bundle them with mature processes for sale. Moreover, TSMC’s pricing strategy for mature processes has not surged as dramatically as that of other related companies, making it more acceptable to customers.

As for UMC, the company anticipates a drop in capacity utilization rates from 67% in the last quarter to 60% to 63% in this quarter, reaching a single-season low in recent years. Due to the continuous adjustment of capacity utilization rates, the gross profit margin will drop from 35.9% last quarter to 31% to 33%, reverting to levels seen at the beginning of the pandemic in 2021.

In response to pricing issues, UMC stated that, as mentioned in a recent earnings call, there will indeed be a significant decrease in the 8-inch, but there will be no adjustments for the 12-inch. Supply chain sources reveal that UMC has reportedly offered a 5% concession, aiming to consolidate order momentum with major clients this quarter. Considering the anticipated weak demand in the first quarter of next year and to attract more order placements, UMC plans to expand the price reduction to double-digit percentages.

According to the supply chain, VIS is expected to see a price reduction of up to 5% in the second half of the year. Large-volume clients may even secure a 10% discount, with a further decrease expected in the first quarter of next year, ranging from single to double-digit percentages. The company’s management previously mentioned at a conference call that, in response to intense price competition, short-term flexible adjustments are anticipated.

Similarly impacted by conservative customer order placements, PSMC reported losses in the third quarter, with capacity utilization rates hovering around 60%. It is reported that PSMC is also gearing up to implement price reduction measures to enhance capacity utilization rates.

(Image: VIS)

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According to Economic Daily News, industry insiders said that Vanguard International Semiconductor (VIS) is in talks to acquire land and facilities from AUO’s Singapore plant for its first 12-inch fab. The estimated investment for this project is a substantial US$2 billion. VIS is making a strategic move to specialize in producing advanced chips for the automotive industry.

AUO is scheduled to hold a conference on October 31st, and VIS will follow suit on November 7th. Both companies are currently in a pre-conference quite period and haven’t made any official comments on the recent rumors.

Per reports, AUO has been gradually relocating its equipment from its Singapore plant back to Taiwan. Following a model where AUO sold its L3B fab and related facilities in Hsinchu Science Park, Taiwan, they plan to sell this Singapore plant to VIS. Notably, this Singapore plant is conveniently located just an eight-minute drive away from TSMC’s Singapore plant (SSMC), and the transaction is estimated to be worth over a billion dollars.

The Singapore plant in question was acquired by AUO in 2010, and it specializes in the production of 4.5th generation low-temperature polycrystalline silicon (LTPS) display panels and also has some capacity for AMOLED displays. However, the land use contract for this plant expired during the pandemic. AUO then redirected the plant’s focus towards supporting display production. However, with a decrease in post-pandemic notebook demand, AUO’s strategy in Singapore shifted from manufacturing to establishing itself as a regional service center.

Recent developments show that AUO has begun a significant production line adjustment.  They’re transforming the Longtan Aspire Park in Northern Taiwan into a hub for mass-producing Micro LED technology and integrated automotive display modules. Insiders suggest that AUO’s LTPS production line in the Singapore plant has already started moving to Longtan Aspire Park, where they’re gearing up for Micro LED technology development and eventual mass production.

Regarding AUO’s Singapore plant, the company recently stated that they are conducting a thorough evaluation of the operational efficiency of their various plants worldwide. The production schedule for the Singapore plant extends until early 2024, and they’ll subsequently assess the equipment and assets. The company is in the process of discussing and evaluating the related strategies, and they haven’t made any final decisions yet. AUO’s Singapore plant employs approximately 500 people, and they are committed to following local regulations to safeguard their employees’ rights.

In an earning calls last year, Chairman of VIS, Leuh Fang, revealed that the company already operates five 8-inch fabs. Fab 5 still has the potential for increased wafer production, but due to the challenges of acquiring new 8-inch equipment, establishing a brand-new 12-inch fab in Singapore makes more sense if customer demand necessitates capacity expansion.

This development isn’t entirely surprising, as there’s a precedent for fab transactions between AUO and VIS. In late April 2021, AUO sold its L3B plant in the Hsinchu Science Park, along with its related equipment, to VIS for NT$905 million (pre-tax).
(Image: AUO)