As reported by Nikkei Asia on October 23rd, three inside sources have indicated that Vanguard International Semiconductor(VIS), a prominent semiconductor foundry, is gearing up to construct its first 12-inch wafer plant in Singapore, aiming to meet the surging demand for automotive chips.

It’s important to note that TSMC, the parent company of VIS, holds a significant 28.3% stake in the company. When approached for comments, VIS stated they remain open to various possibilities but are currently observing a quiet period preceding an earnings call, which restricts them to provide further details.

VIS’s Growth and Singapore Expansion

In 2019, VIS acquired a Singaporean 200mm wafer facility from GlobalFoundries for $236 million. Since then, they diversified into producing various sensors and gained a reputation in display driver ICs and power management chips. VIS operated only 200mm wafer plants in Taiwan and Singapore. Recent reports suggest their investment in a 12-inch wafer plant in Singapore is nearing approval, per Nikkei.

The new VIS plant in Tampines, Singapore, is strategically located, a 10-minute drive from their existing 200mm facility and near NXP and SSMC, TSMC’s joint venture. UMC is investing $5 billion in a nearby plant. Expansions by GlobalFoundries and Applied Materials in Singapore bolster the city-state’s semiconductor industry.

Chairman Leuh Fang cited increased demand from U.S., European, and Asian customers who aim to mitigate geopolitical risks tied to chips manufactured in China. His prior role as Deputy General Manager of SSMC in Singapore underscores the importance of this move.

Global Giants Expand Abroad to Meet Clients’ Demand

In line with its global expansion strategy, VIS is not the only player. TSMC is processing its global factory construction as well. Of particular note, the new facility in Arizona, US. The German plant is on schedule for production in 2027. In Japan, the Kumamoto plant is advancing rapidly, and production is anticipated to commence by the end of 2024. Besides, PSMC is planning to establish a 12-inch wafer plant in Japan, becomes the second Taiwanese semiconductor giant to set up shop in Japan after this move, expanding its global presence.

(Image: VIS)

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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)

According to the news from Money UDN, amid a tough semiconductor market, once-stable long-term contracts for silicon wafer makers have turned uncertain. A major Taiwanese foundry seeks price cuts in upcoming contracts from a Japanese supplier. Intense negotiations are ongoing, potentially affecting industry dynamics and pricing strategies due to the Japanese suppliers’ pivotal role in the supply chain.

Market insiders suggest silicon wafer makers may resist price reductions due to their vital role in foundries. Reports hint at foundries’ challenges and the ripple effects on critical materials suppliers.

Globally, Japan’s Shin-Etsu and SUMCO are top silicon wafer suppliers, trailed by Taiwan’s GlobalWafers, Germany’s Siltronic, and South Korea’s SK Siltron. And Taiwan SUMCO joint venture with Formosa Plastics Group as “Formosa Sumco Technology”, and other companies like Wafer Works. With over 30% market share, Shin-Etsu leads, closely followed by SUMCO, combining for around 55% to 60% global share.

Taiwan’s foundries include TSMC, UMC, VIS, and PSMC, among others. TSMC, with a global market share exceeding 50%, holds a leading position in the industry.

Silicon wafers are essential raw materials for semiconductor foundries, integrated device manufacturers (IDMs), and memory manufacturers. Presently, the standard duration for silicon wafer long-term contracts ranges from three to 8 years, specifying annual supply and demand quantities. In the previous semiconductor boom, these long-term contracts often featured escalating prices year by year.

Semiconductor market shifts led to reduced foundry capacity use, heightening tensions with silicon wafer makers’ clients. Delays emerged in the last quarter, leading to agreements between manufacturers and clients. This trend has persisted into the first half of this year. Silicon wafer industry insiders acknowledge slow end-market demand recovery and relatively high client inventories.

Amidst this situation of overflowing inventories, reports indicate that a major Taiwanese silicon wafer foundry is requesting Japanese silicon wafer suppliers to not only agree to further delays in this year’s contracted shipments but also to lower prices for next year. However, no formal agreement has been reached by the silicon wafer manufacturers at this stage.

A juridical person suggests that the negotiations are currently at a deadlock, and the situation might become clearer in the fourth quarter. If the silicon wafer manufacturers eventually concede, they are unlikely to publicly admit it, in order to prevent other clients from seeking similar adjustments and causing wider disruptions.

Market insiders also reveal that the Japanese silicon wafer manufacturers facing price reduction demands are currently operating relatively well and are adopting a firm stance. From the perspective of the foundries, they are hoping for support from their supply chain partners to alleviate the pressure. Normal silicon wafer inventories typically span two to three months, yet certain silicon wafer foundries are already grappling with high inventory levels, particularly for 8-inch wafers, which might persist throughout this year.

(Source: https://money.udn.com/money/story/5612/7366962)

Demand in the global foundry market remains strong in 1Q21, according to TrendForce’s latest investigations. As various end-products continue to generate high demand for chips, clients of foundries in turn stepped up their procurement activities, which subsequently led to a persistent shortage of production capacities across the foundry industry.

TrendForce therefore expects foundries to continue posting strong financial performances in 1Q21, with a 20% YoY growth in the combined revenues of the top 10 foundries, while TSMC, Samsung, and UMC rank as the top three in terms of market share. However, the future reallocation of foundry capacities still remains to be seen, since the industry-wide effort to accelerate the production of automotive chips may indirectly impair the production and lead times of chips for consumer electronics and industrial applications.

TSMC has been maintaining a steady volume of wafer inputs at its 5nm node, and these wafer inputs are projected to account for 20% of the company’s revenue. On the other hand, owing to chip orders from AMD, Nvidia, Qualcomm, and MediaTek, demand for TSMC’s 7nm node is likewise strong and likely to account for 30% of TSMC’s revenue, a slight increase from the previous quarter. On the whole, TSMC’s revenue is expected to undergo a 25% increase YoY in 1Q21 and set a new high on the back of surging demand for 5G, HPC, and automotive applications.

In response to increased client demand for 5G chips, CIS, driver ICs, and HPC chips, Samsung will continue to raise its semiconductor CAPEX this year, which is divided between its memory and foundry businesses and represents Samsung’s desire to catch up to TSMC. With regards to process technologies, the Korean company’s capacity utilization rates for the 5nm and 7nm nodes have been relatively high in 1Q21, during which Samsung is expected to increase its revenue by 11% YoY.

In addition to chip demand from the automotive sector, UMC has been keeping up with manufacturing driver ICs, PMICs, RF front-end, and IoT products. The company’s capacity thus remains fully loaded in 1Q21, and UMC is expected to undergo a 14% YoY increase in revenue. GlobalFoundries is similarly experiencing high capacity utilization rates due to the increase in automotive chip demand, as well as the military chips that it has been manufacturing for the U.S. Department of Defense. GlobalFoundries’ revenue is expected to increase by 8% YoY in 1Q21.

SMIC’s revenue for the 14nm and below nodes is expected to decline in 1Q21 as the company was added to the Entity List by the U.S. and subsequently faced constraints in the development of advanced processes. However, with the persistent demand in the foundry market for mature processes above (including) the 40nm node, SMIC’s revenue is projected to stay on a positive trajectory and reach a 17% YoY increase in 1Q21. TowerJazz will spend about US$150 million on a small-scale capacity expansion, but equipment move-in and calibrations will not be finalized until approximately 2H21, after which the expanded capacity will start measurably contributing to the company’s revenue. In 1Q21, TowerJazz’s revenue is expected to be on par with the previous quarter while reaching a 15% increase YoY.

PSMC is primarily focused on manufacturing memory products, DDICs, CIS, and PMICs. At the moment, high demand for 8-inch and 12-inch wafer capacities and for automotive chips has resulted in fully loaded capacity for PSMC. The company’s revenue is expected to increase by 20% YoY in 1Q21. Likewise, VIS’ capacity is fully loaded across all of its process technologies. Driven by increased spec requirements for PMICs and small-sized DDICs, VIS’ revenue is expected to increase by 26% YoY in 1Q21. Finally, Hua Hong is currently placing considerable emphasis on expanding the 12-inch capacity of HH Fab7 in Wuxi. Process technologies for 12-inch production lines, including NOR, BCD, Super Junction, and IGBT, have all passed qualifications, thereby injecting fresh momentum into Hua Hong’s development. Furthermore, given Hua Hong’s fully loaded 8-inch capacities and the fact that its performance in 1Q20 represents a relatively low base period for YoY comparison, Hua Hong’s revenue may likely reach a 42% YoY increase in 1Q21.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

Not only did automotive market take a downward turn starting in 2018, but the severe impact of the COVID-19 pandemic in 2020 also led to noticeably insufficient procurement activities from major automotive module suppliers, according to TrendForce’s latest investigations. However, as the automotive market is currently set to make a recovery, TrendForce expects yearly vehicle sales to increase from 77 million units in 2020 to 84 million units in 2021.

At the same time, the rising popularity of autonomous, connected, and electric vehicles is likely to lead to a massive consumption of various semiconductor components. Even so, since most manufacturers in the automotive supply chain currently possess a relatively low inventory, due to their sluggish procurement activities last year in light of weak demand, the discrepancies in the inventory levels of various automotive components, along with the resultant manufacturing bottleneck, have substantially impaired automakers’ capacity utilization rates and, subsequently, vehicle shipments.

The recent shortage situation in the IC supply chain has gradually extended from consumer electronics and ICT products to the industrial and automotive markets. In the past, manufacturers in the automotive semiconductor industry were primarily based on IDM or fab-lite business models, such as NXP, Infineon, STMicroelectronics, Renesas, ON Semiconductor, Broadcom, TI, etc. As automotive ICs generally operate in wide temperature and high voltage circumstances, have relatively long product lifecycle, and place a heavy demand on reliability as well as longevity support, it is more difficult for the industry to alternatively transition its production lines and supply chains elsewhere.

Automotive semiconductor remains in shortage as production capacities remain fully loaded across the global foundry industry

Nevertheless, given the current shortage of production capacities across the foundry industry, wafer capacities allocated to automotive semiconductor components have been noticeably crowded out by other products. Some of these examples include automotive MCU and CIS manufactured in 12-inch fabs, as well as MEMS, Discrete, PMIC, and DDI products manufactured in 8-inch fabs. TrendForce indicates that automotive semiconductor products manufactured at the 28nm, 45nm, and 65nm nodes in 12-inch fabs are suffering the most severe shortage at the moment, while production capacities at 0.18µm and above nodes in 8-inch fabs have also been in long queue by other products.

As in-house IDM fabrications have relatively high CAPEX, R&D expense, and operating overhead, automotive IC vendors have in recent years outsourced some of their products to TSMC, GlobalFoundries, UMC, Samsung, VIS, Win Semiconductor and so on. In particular, TSMC specifically indicated during its 4Q20 earnings conference that wafer starts for automotive semiconductors reached rock bottom in 3Q20, while additional orders began arriving in 4Q20. As such, the company is currently considering allocating some of its production capacities from logic ICs to specialty foundry, in order to meet sudden demand from its long-term customer relationship.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com