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.

Read more

• [News] TSMC Affiliate VIS and NXP to Invest USD 7.8 Billion for 12-Inch Fab in Singapore, Expected Mass Production by 2027
• Taiwanese Chipmakers Expand Overseas to Capitalize on Geopolitical Shifts and De-Sinicization Benefits, Says TrendForce

(Photo credit: VIS)

Wafer foundries’ mature process continues to suffer from oversupply, facing further price reduction pressure. According to a report from Economic Daily News, industry sources from IC design companies revealed that in this quarter, prices for certain mature processes have dropped by single-digit percentages (1% to 3%). Given the current situation, prices in the third quarter may drop by another 1% to 3%, leading to a continuous correction in overall price trends starting from the third quarter of 2022, marking the ninth consecutive quarterly decline.

Industry sources cited by the same report pointed out that this wave of price reductions in mature process was triggered by Chinese foundries two to three years ago, with Taiwanese manufacturers subsequently following suit. Major Taiwanese foundries involved in mature processes, include UMC, Vanguard International Semiconductor (VIS), and PSMC, have all been closely monitoring the latest market changes.

Regarding rumors of further price cuts in the market, UMC stated that the company would not make further comments. VIS, on the other hand, mentioned during a recent earnings call that the price pressure from Chinese foundries has affected its operations, but the company will not engage in these price-cutting competitions. It is expected that as market inventory adjustments approach completion, prices should gradually stabilize without significant fluctuations. PSMC indicated that they have not particularly felt any price pressure.

Local foundries stated that even though customers from specific applications, including driver ICs and other IC design houses, turn to Chinese foundries in order to enjoy cheaper manufacturing prices, they will not engage in price-cutting. After all, price wars may never see an end. Instead, Taiwanese foundries will continue to increase orders from other applications to gradually boost capacity utilization rates.

In the third quarter of 2022, as market conditions reversed, Chinese foundries initiated price cuts, prompting some Taiwanese manufacturers to make slight concessions in pricing. The pricing gap between Chinese and Taiwanese foundries generally remained at double-digit percentages.

To cope with a period of market inventory adjustment, some foundries are more flexible in negotiations, while others hope for customers to “exchange volume for price.”

Overall, foundry pricing has experienced eight consecutive declines up to this quarter. However, with no significant recovery in most end-demand sectors, IC design companies assess that foundry pricing in the third quarter may continue to trend downward.

Industry sources cited by the report believe that Chinese foundries receive official subsidies, allowing them to disregard profit considerations. Previously, IC design houses’ price negotiations with Chinese foundries were mostly successful, which results in single-digit percentage price reductions recently. However, after the third quarter, the room for further price reductions may diminish, indicating that the price seems to be soon hit the bottom.

However, fin order to cope with the current macroeconomic fluctuations, some IC design companies mentioned that after suffering from being “burned” by high inventory in the past, they now tend to wait for clear demand from customers before starting production. In recent years, the proportion of production sent to Chinese foundries has been increasing due to cost considerations. With the continuous expansion of mature process capacity in Chinese foundries, the pressure of oversupply may persist for a while longer.

According to TrendForce’s previous report on the fourth quarter of 2023, global semiconductor foundry revenue rankings showed that the top three semiconductor foundries globally were TSMC, Samsung, and GlobalFoundries, which are all less exposed to mature nodes.

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(Photo credit: TSMC)

Taiwan experienced a magnitude 7.2 earthquake on the 3rd, prompting round-the-clock repair efforts during the holiday by semiconductor fabs, aiming to restore equipment operations. According to reports from TechNews, the latest progress of various fabs and science parks across different locations is as follows.

TSMC

TSMC stated that the maximum intensity of the earthquake on the 3rd in science parks such as Hsinchu, Longtan, and Zhunan was magnitude 5, while in Central Taiwan and Southern Taiwan science parks, it was magnitude 4. The recovery rate of semiconductor fab equipment has exceeded 80%, with newly built fabs (such as Fab 18 responsible for producing 3 and 5 nanometers wafers) expected to fully recover by the evening of the 4th..

While some equipment in certain areas suffered damage, affecting production lines, major equipment including all EUV machines remained undamaged. In areas with higher seismic intensity, longer time is expected for adjusting and calibrating to restore automated production.

It is believed that this may refer to the advanced packaging stronghold in Longtan, where production process equipment needs reconfiguration due to earthquake evacuation, unstable or disrupted network signals requiring parameter reset, as well as seismic impacts on cleanroom spaces, damaged pipelines, and machinery relocation, all requiring extensive scheduling for repair.

UMC

A spokesperson for UMC indicated that the impact of the strong quake on 12-inch Fab in Southern Taiwan was relatively light, while 8-inch Fab in Hsinchu was more severely affected. The company’s machinery and pipelines remained undamaged, with only instances of machinery displacement, some quartz tube damage, sprinkler head damage, and partial office ceiling damage.

According to market sources cited in the same report, UMC is actively reallocating manpower to reposition machinery in 8-inch Fab, cleaning damaged wafers, and replacing quartz tubes, expecting a recovery time of two to three days, or even a week.

VIS

VIS stated that as of noon on the 4th, about 80% of affected machinery had returned to normal, and production operations would gradually resume. The company promptly informed affected customers upon the earthquake’s occurrence, maintaining close communication and providing detailed information individually.

Hsinchu Science Park Administration

Most major factories including semiconductor and panel manufacturing plants completed equipment recovery from the quake on the 3rd. Although there was some impact on production lines, effective measures were taken by factories such as seismic design for buildings and machinery, personnel evacuation, and preventive machinery shutdowns, resulting in minimal impact on factory operations.

Currently, factories are operating normally, with a few undergoing machine calibration for full recovery in the short term. Manufacturers’ machinery is gradually returning to operation, personnel have resumed their positions, and major wafer manufacturing plants have sufficient materials and are smoothly recovering operations.

Central Taiwan Science Park Administration

In parts of the Central Taiwan Science Park, which mainly focuses on optoelectronics, semiconductors, and precision machinery industries, manufacturers have gradually resumed operations after machinery shutdowns. Among them, over 90% of high-precision machinery in semiconductor fabs have resumed operation, with only some machines undergoing calibration, all expected to complete and operate normally by the end of the 4th.

Southern Taiwan Science Park Administration

As of noon on the 4th, major factories including TSMC, UMC, Innolux and Corning Taiwan in the area have all resumed normal operations. Continuous monitoring of aftershocks and manufacturer dynamics will be maintained, with necessary assistance provided as needed.

(Photo credit: TSMC)

Foundry is a crucial sector in the semiconductor industry and a focal point of attention for many professionals in the industry. Recently, three foundries have released their outlook for the first half of 2024, all indicating a cautious outlook for the first quarter.

According to Taiwanese News outlet Commercial Times, United Microelectronics Corporation (UMC), Powerchip Semiconductor Manufacturing Corporation (PSMC), and Vanguard International Semiconductor Corporation (VIS) anticipate a subdued first quarter due to factors such as off-season effects and holidays.

With conservative estimates on wafer shipments, average selling prices (ASP), and gross margins for the first quarter, there remains a high likelihood of a continued decline in performance compared to the previous quarter.

• VIS: Visibility of the Market Conditions Limited to about Only 2 to 3 Months

VIS stated in a recent conference that semiconductor demand entered the traditional off-season at the beginning of the year.

It is expected that the supply chain will continue inventory adjustments and maintain a cautious approach to orders. Assuming an average exchange rate of NTD 30.9, shipments are expected to decrease by 6-8% quarterly, with average selling prices roughly remaining flat and gross margins falling between 21-23%.

VIS believes that the industry is still undergoing inventory adjustments, and the overall economic situation remains sluggish. Currently, the visibility of the market is limited to only two to three months. In the first quarter, due to continuous inventory adjustments in the supply chain and a cautious approach to ordering, capacity utilization will decrease to 50%.

In addition, regarding the investment in 12-inch fabs, VIS Chairman Leuh Fang stated that due to the significant investment required for 12-inch fabs, there must be definite demand and leading technological sources before deciding to proceed with construction.

Currently, the decision is still in the cautious evaluation stage, and no plants will be built hastily until the technology sources are confirmed.

• PSMC: A Conservative Outlook

PSMC’s General Manager, Brian Shieh, stated during a mid-January earnings call that the company expects a seasonal decline of approximately 5-6% in revenue for the first quarter due to fewer working days.

Regarding inventory, PSMC noted that client inventory levels are currently at normal, with the semiconductor manufacturing segment performing relatively well. It is anticipated that capacity utilization rates for the first quarter of 2024 could rebound to 70% to 75%, offering promising prospects for operations in the latter half of the year.

Overall, PSMC aims for a capacity utilization rate of over 90% for the full year, with the goal of continuously filling the new capacity at the Tongluo plant in the second half of the year. The company estimates that the Tongluo plant can be fully operational in the latter half of the year, primarily focusing on 55nm and 40nm logic products.

• UMC: Visibility of the Market Conditions for 2024 is Relatively Limited

UMC forecasts a modest increase of 2-3% in wafer shipments for the first quarter of 2024, with ASP quoted in USD expected to decrease by 5%, leading to a slight decline in gross margin to around 30%. This is primarily attributed to adjustments in pricing and changes in product mix. Capacity utilization is anticipated to remain at low 60%.

In terms of production lines, stable demand is projected for communication and consumer sectors, maintaining flat revenue trends, while automotive and industrial segments are expected to undergo inventory adjustments, resulting in a seasonal decline in revenue for the first quarter of 2024.

UMC estimates that the revenue contribution from special processes will reach 30% in the first quarter of this year, with sales from a predominant single customer making a significant contribution.

Regarding the medium to long-term outlook for the full year, UMC stated that the semiconductor market is expected to grow at a mid-single-digit rate annually, while the foundry industry is forecasted to grow at a high single-digit rate, approaching 10%.

UMC’s revenue is expected to align closely with the growth rate of the wafer foundry industry. UMC holds a cautiously optimistic outlook for demand in 2024, as smartphone and PC inventory levels returned to relatively normal levels in the fourth quarter of 2023.

Additionally, on January 25th of this year, Intel and UMC announced a collaboration to develop 12nm technology. Both parties will share the expenses, with Intel taking charge of operating the facility.

UMC stated that the capacity expansion will significantly impact the company’s operational performance once production starts. The technology is expected to enter the Process Design Kit (PDK) stage in 2025, begin trial production in 2026, and commence supply in 2027. The 12nm technology represents a potential market worth billions, and the collaboration does not include IP licensing.

Regarding this matter, TrendForce believes that this partnership, which leverages UMC’s diversified technological services and Intel’s existing factory facilities for joint operation, not only aids Intel in transitioning from an IDM to a foundry business model but also brings a wealth of operational experience and enhances manufacturing flexibility.

For UMC, this collaboration is a game-changer as it allows the company to agilely leverage FinFET capacity without the pressure of heavy capital investments.

This move positions UMC to carve out a unique niche in the fiercely competitive mature process market. Furthermore, by co-managing Intel’s US facility, UMC can expand its global footprint, smartly diversifying geopolitical risks. This partnership is shaping up to be a win-win for both.

Overall, TrendForce views this alliance as a significant step. UMC brings its plentiful experience in mature processes, while Intel contributes its advanced technological prowess.

This partnership is not just about mutual benefits at the 10nm process level; it’s a watchpoint for potentially deeper and more extensive collaboration in their respective fields of expertise. In the dynamic world of semiconductor manufacturing, this Intel-UMC alliance is a fascinating development to keep an eye on.

Read more

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• [News] Intel Teams Up with UMC to Pursue 12-Nanometer Technology, Production Expected by 2027

(Photo credit: UMC)

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.

Read more

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

(Photo credit: UMC)