Despite the U.S. sanction on the semiconductor industry in China, China is still positively looking for further development.

Following our discussion on the shifts of Chinese wafer fabs in the previous article (China’s Wafer Fabs Hits 44 with Future Expansion 32, Mainly Targeting on The Mature Process), this article focuses on the application of 8-inch and 12-inch wafers, as well as provides detailed account of Chinese foundries’ strategic positioning in the landscape.

From a cost perspective, producing a 12-inch wafer incurs approximately 50% more cost than an 8-inch wafer. However, the chip output from a 12-inch wafer is nearly triple that of an 8-inch wafer, leading to a cost reduction of roughly 30% per chip. As manufacturing processes improve and yields increase, the cost of 12-inch wafers is expected to further decline in the future.

In terms of applications, a clear distinction emerges between 12-inch and 8-inch wafers. The versatility of 12-inch wafers is evident, covering a broad range of practical applications. As depicted in the table below, 8-inch wafers are primarily utilized for mature and specialized processes, focusing on the 0.13-90nm range.

8-inch wafers’ downstream applications are concentrated in industrial, mobile, and automotive sectors, encompassing power devices, power management chips, non-volatile memory, MEMS, display driver ICs, and fingerprint recognition chips, among others. The surging demand for power devices in automotive electronics and industrial applications has been a key driver for recent production expansions.

Currently, the market demand for 8-inch wafers remains robust. However, there is a trend of decreasing 8-inch production lines in the market. This shift is primarily due to the industry’s mainstream adoption of 12-inch wafers. Given the significant capital required to establish 12-inch wafer fabs (often exceeding billions of US dollars), many foundries are reevaluating their 8-inch wafer production lines. These lines face challenges such as outdated equipment (mostly sourced from the second-hand market), upgrades difficulties, and lower returns compared to 12-inch wafers. Consequently, an increasing number of major companies are transitioning their focus from 8-inch to 12-inch wafers.

While the quantity of 8-inch wafer fabs is far less than that of 12-inch wafer fabs, their presence is significant. According to data from SEMI, China has maintained rapid development in 8-inch wafers. It is projected that by 2026, China’s market share in 8-inch wafers will increase to 22%, with a monthly production capacity reaching 1.7 million wafers, ranking first globally. By the end of 2025, companies including Huahong, Sien, Silan, Yangdong Microelectronic, GTA Semiconductor, SMEIIC, Zkjx, Hwdz, and Eaerkey are expected to establish a total of nine new 8-inch wafer fabs.

China’s Semiconductor Focus: 33% Mature Process Capacity by 2027

Based on product requirements, we can categorize semiconductor processes into specialty processes and logic processes. Logic processes further divide into mature processes (28nm and above) and advanced processes (nodes below 28nm, primarily 16/14nm and below).

Considering the current scenario, challenges in advanced process technology and high expenditures have confined major players in advanced processes to Intel, TSMC, and Samsung. This year, Samsung and TSMC announced the mass production of 3nm processes, marking the most advanced nodes currently available. Examining China’s situation, the semiconductor industry, having started relatively late, is currently focusing on mature and specialty processes due to factors like equipment and material limitations and changes in the international landscape.

It’s worth noting that, apart from Chinese wafer fabs intensively researching mature processes, many major companies have started to reverse their focus on mature processes in the past two years. Companies such as TSMC, Samsung, Intel, UMC, and GlobalFoundries are actively expanding their mature process capacities.

Among them, UMC’s bet on mature capacities is unprecedented. It became the world’s first wafer foundry to announce leaving research and development of advanced processes. Since 2018, UMC has strategically focused on improving the company’s return on investment, particularly targeting processes of 28nm and above.

According to TrendForce, the compound annual growth rate of global semiconductor foundry capacities from 2021 to 2024 is expected to reach 11%. 28nm capacity is expected to be 1.3 times that of 2022 by 2024, making it the most actively expanded node in mature processes. It is anticipated that more applications of specialty processes will transition to 28nm. Moreover, from 2021 to 2024, the global capacity of mature processes (28nm and above) is expected to maintain a stable share of over 75%. This indicates the potential and significance of positioning in the mature process and specialty process markets.

TrendForce predicts that, with the expansion of mature process capacities below 28nm, mature process capacities are expected to account for 70% of the top ten foundries’ capacities by 2027. China is expected to hold 33% of mature process capacities in 2027, with the possibility of continuous upward adjustments.

(Image: SMIC)

On August 7th, HuaHong Group officially went public on the Sci-Tech Innovation Board Market, Shanghai Stock Exchange (STAR Market, SSE). Combined with the return of SMIC to A-shares (China’s domestic shares) in the past two years and Nexchip’s listing in May, it brings together the three major players in China’s foundry sector on the STAR Market. Additionally, SMEC, closely linked to SMIC, also went public on the STAR Market without turning a profit. Overall, China’s foundry industry is steadily gaining strength.

As per TrendForce’s latest research, challenges in the economic outlook and ongoing inventory issues this year have led to a slowdown in demand. This is particularly noticeable in the automotive and industrial control, where inventory has been piling up after short-term fulfillment. Fabless and other IDM inventory digestion have faced severe restrictions. IDM foundries, launching new capacities, are consolidating outsourced orders and once again reducing orders to foundries. In 2024, given the expected unfavorable economic environment, the overall recovery of capacity utilization poses challenges.

While Chinese foundries have not been immune to these challenges, the losses have been mitigated thanks to the boost in China’s import substitution policies on semiconductors. According to TrendForce, the global ratio of mature (>28nm) to advanced (<16nm) processes is projected to hover around 7:3 from 2023 to 2027. Propelled by policies and incentives promoting local production and domestic IC development, China’s mature process capacity is anticipated to grow from 29% this year to 33% by 2027. Leading the charge are giants like SMIC, HuaHong Group, and Nexchip.

Exploring China’s Wafer Foundries Landscape

According to TrendForce, excluding 7 temporarily suspended fabs, China currently operates 44 fabs (25 fabs in 12-inch, 4 fabs in 6-inch wafers, and 15 in 8-inch fabs and production lines), additionally, 22 fabs are under construction (15 fabs in 12-inch, and 8 fabs in 8-inch). In the future, SMIC, Nexchip, CXMT, and Silan plan to construct 10 fabs (9 fabs in 12-inch, and 1 fab in 8-inch). Overall, by the end of 2024, China aims to establish 32 large fabs, and all of them are about to focus on mature processes.

Reviewing the distribution of wafer foundries across China, the Yangtze Delta region hosts nearly half of the total, with significant concentrations in provinces like Shanghai, Wuxi, Beijing, Hefei, Chengdu, and Shenzhen.

Nearly 4.14 million wafer capacity in 12-inch will be ongoing per month in China until 2026

In terms of capacity, the statistics showed that China currently operates 31 fabs in 12-inch, including those under construction with fixed capacity for 12-inch. The total monthly capacity is approximately 1.189 million wafer capacity. Compared to the planned monthly capacity of 2.17 million wafer capacity, the capacity utilization of these fabs is close to 54.48%, still a significant room for expansion.

Considering construction and future planning, it is anticipated that China will add 24 fabs in 12-inch in the next five years, with a planned monthly capacity of 2.223 million wafer capacity. Assuming all planned 12-inch wafer foundries achieve full production, by the end of 2026, the total monthly capacity of 12-inch in China will exceed 4.14 million wafer capacity, marking a 248.19% increase compared to the current capacity utilization rate.

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• TrendForce Foresees China’s Mature Wafer Processes to Expand to 33% by 2027, Japan Secures Advanced Processes

The research institution TrendForce held its AnnualForecast 2024 Seminar on November 3, where they delved into discussions about global wafer foundry trends, the applications of AI, the dynamics of AI servers, and the demand for High Bandwidth Memory (HBM).

Joanne Chiao, analyst from TrendForce, observed that while AI servers have experienced robust growth over the past two years, AI chips account for just 4% of wafer consumption, limiting their impact on the overall wafer industry. Nevertheless, both advanced and mature processes offer business opportunities. The former benefits from the desire of companies like CSPs to develop customized chips, leading them to seek the assistance of design service providers; while the latter can consider venturing into sector such as power management ICs and I/O solutions.

Persisting US export restrictions continue to affect China’s foundries, causing delays in their expansion plans. Furthermore, the regionalisation of wafer foundry services is exacerbating issues related to uneven resource distribution.

Due to lackluster end-market demand and fierce market competition, the capacity utilization rate of 8-inch wafer foundries continue to decline until the first quarter of the upcoming year. Inventory adjustments are underway in the fields of industrial control and automotive electronics. Chinese foundries are more willing to offer competitive prices, and outperforming their counterparts in Taiwan and Korea in terms of order performance.

In the realm of 12-inch wafer foundry services, success relies on technological leadership and exclusivity. Competition isn’t as intense as it is with 8-inch wafers. This resurgence is driven by inventory replenishment, the demand for iPhone 15, select Android smartphone brands, and the need for AI chips. A moderate recovery is expected in the latter part of this year.

TrendForce indicates that, with the expansion of processes beyond 28nm, mature process capacity is expected to occupy less than 70% of the capacity of the top ten foundries by 2027. Under the pressure to transition towards mature processes, China is anticipated to account for 33% of mature process capacity by 2027, with the possibility of further increases.

It’s noteworthy that Japan is actively promoting the revival of its semiconductor industry and, through incentives for foreign companies establishing fabs, may secure 3% of advanced process capacity.

TrendForce’s analyst, Frank Kung, predicts that the shipment of Nvidia’s high-end GPU processors will exceed 1.5 million units this year, with a YoY growth rate of over 70%, expected to reach 90% by 2024. Starting from the latter half of this year, Nvidia’s high-end GPU market will transition primarily to H100. As for AMD, its high-end AI solutions are mainly targeted at CSPs and supercomputers. The AI server market, equipped with MI300, is expected to experience significant expansion in the latter half of this year.

In the 2023-2024 period, major CSPs are poised to become the primary drivers of AI server demand, with Microsoft, Google, and AWS ranking among the top three. Additionally, the robust demand for cloud-based AI training is expected to propel the growth of advanced AI chips, which may, in turn, stimulate growth in power management or high-speed transmission-related ICs in the future.

Lastly, concerning HBM, TrendForce’s senior research vice president, Avril Wu, mentioned that as Nvidia’s H100 gradually gains momentum, HBM3 is set to become the industry standard in the latter half of this year. With the launch of B100 next year, HBM3e is poised to replace HBM3 as the mainstream memory in the latter half of the following year. Overall, HBM plays a pivotal role in DRAM revenue, with expectations of an increase from 9% in 2023 to 18% in 2024, potentially leading to higher DRAM prices in the coming year.
(Image: TechNews)

GlobalWafers has achieved a milestone by successfully advancing silicon carbide (SiC) crystal growth to 8-inch wafers, aligning with major international players in the industry. The company foresees the commencement of small-scale shipments of 8-inch SiC products in Q4 2024, with substantial growth expected in 2025, surpassing the proportion of 6-inch wafers by 2026.

Accourding to CTEE, Doris Hsu, Chairwoman of GlobalWafers, shared that the yield for 8-inch SiC crystal growth has been excellent, with ample room for further expansion, currently exceeding 50%.

The company emphasizes its readiness with 8-inch SiC crystal growth, cutting, grinding, and polishing capabilities, with sample deliveries set for the first half of next year.

Hsu highlighted customers’ eagerness for GlobalWafers to expedite the transition from 6-inch to 8-inch SiC production, aiming for an “8-inch dominant, 6-inch secondary” approach. The increasing demand for 8-inch SiC is primarily driven by automotive customers.

In terms of technology, SiC is moving from 6-inch to 8-inch wafers due to increased demand. TrendForce’s insights indicated, “Currently, the silicon carbide industry is mostly using 6-inch wafers, accounting for nearly 80% of the market share, while 8-inch wafers make up less than 1%. Expanding the wafer size to 8 inches is considered crucial for further reducing the cost of silicon carbide devices.”

From a cost perspective, 8-inch wafers indeed offer substantial advantages, but the challenge of yield has consistently plagued SiC. TrendForce’s earlier research suggests that, when it reaches maturity, an 8-inch wafer’s selling price is approximately 1.5 times that of a 6-inch wafer, and the number of die an 8-inch wafer can produce is about 1.8 times that of a 6-inch SiC wafer, significantly improving wafer utilization.

While GlobalWafers currently manufactures SiC substrates in Taiwan, the future SiC epitaxy will take place in the United States, with plans to expand with two additional substrate and two additional epitaxy facilities.

The production of SiC crystals involves high-temperature and closed-environment growth, which demands meticulous furnace design and crucible material selection, adding complexity to equipment and operations.

GlobalWafers has designed and developed specialized SiC crystal growth furnaces, enhancing material quality control and lowering crystal growth costs. SiC’s high hardness and brittleness make wafer processing challenging, but GlobalWafers employs higher process accuracy and more efficient wafer handling methods to achieve ultra-thin SiC wafer processing.

(Image: GlobalWafers)

Since February 14, UMC subsidiary Hejian Technology (HJTC), had entered phased shutdown and temporary suspension due to the pandemic, according to TrendForce‘s investigation. The plant is an 8-inch fab and its production capacity accounts for approximately 25% of UMC’s total 8-inch capacity and approximately 3% of global 8-inch capacity. Since this incident was not an unforeseen accident, utilization rate during the phased shutdown was maintained at roughly 25~30% and wafers on the production line did not need to be scrapped. The plant has gradually resumed operation today (2/24). Since it takes approximately five to seven days to recalibrate semiconductor equipment, full recovery of overall utilization rate is expected to fall in early March with an estimated wafer input loss of 14~20 days, affecting approximately 4~5% of the company’s 8-inch production capacity this quarter or approximately 0.4~0.5% of global 8-inch production capacity, a manageable situation overall.

UMC HJTC Fab 8N contains 0.5μm~0.11μm node production lines and is a full eight-inch fab. The actual proportion of customer products on the production line at the time of the incident is as follows: HJTC’s largest client Silergy accounted for 40% of the production line for PMICs, with most end applications being consumer and industrial products such as IP cams, air conditioners, and refrigerators. SinoWealth and Novatek each accounted for 13% of the production line with products such as MCUs and large size DDIs. Other PMIC clients include Mediatek and GMT who accounted for approximately 35% of the plant’s production capacity.

Since most customer products allocated to this fab are simultaneously produced at the UMC fab in Taiwan or at other fabs and end-user products including smartphones, TVs, and laptops are all currently in the off-season, restocking momentum is weak. TrendForce believes that although the shutdown was longer than expected, since no wafers were scrapped on the production line and the cycle time of some PMICs is short, wafer input losses have an opportunity to be mitigated through expedited order production and have limited impact on shipments. In terms of revenue, due to the relatively low selling price of 8-inch wafers, the impact of this incident on UMC’s annual revenue performance falls within a 0.3% range.