CHIPS Act Again, PSMC Captured Orders rerouted from HuaHong Foundry Business

Over the past few years, the US Department of Commerce has imposed export restrictions and the CHIPS Act, causing political tensions to rise between China and the US. To mitigate geopolitical risks, customers are beginning to diversify the proportion of Chinese and non-Chinese suppliers, with Taiwanese foundries expected to benefit.

Industry sources claim that one of the world’s top three CMOS image sensor manufacturers, which previously produced CIS chips for laptops at Hua Hong, has reportedly shifted its orders to PSMC at the request of its customers. Another major power discrete manufacturer is also reportedly considering discussions with PSMC for related cooperation due to geopolitical concerns.

The subsidy regulations of the CHIPS Act prohibit subsidy recipients from transferring funds to related foreign entities, expanding semiconductor manufacturing capacity in “related countries” within 10 years, or engaging in any form of joint research or technology licensing with foreign entities involved in sensitive technology or products.

China’s advanced process capacity will only account for 1% in 2025

TrendForce predicts that the CHIPS Act may further reduce the willingness of multinational semiconductor companies to invest in China. Japan and the Netherlands have also joined the sanctions, which may hinder the expansion plans of both Chinese and multinational foundries in China. Chinese foundries are more active in expanding mature process capacity, with a projected growth of 27% from 2022~2025, but the advanced process has only 1% in 2025. However, the US is expected to have the highest growth rate in advanced processes (7nm and below), reaching 12% by 2025.

China’s memory production capacity will decline annually

SK hynix is the only one of the top three DRAM manufacturers with a production facility in China’s Wuxi. Due to factors such as oversupply and geopolitics, Wuxi’s DRAM production has decreased from 48% to 44%. The company’s new plant is expected to be located in Korea. Meanwhile, Samsung and Micron have no DRAM production in China, and their expansion plans will focus on Korea and the United States respectively. According to TrendForce, as DRAM production in Korea continues to rise, China’s global share of DRAM production capacity will gradually decline from 14% to 12% between 2023 and 2025.

Samsung and SK Hynix are reportedly unlikely to expand their legacy-process production lines for NAND flash memory as they approach manufacturing of 200-layer and higher products, making sub-128-layer processes uncompetitive. Instead, they are planning to establish new production facilities in South Korea or other regions. This move could restrict China’s NAND flash production capacity expansion and process upgrades, causing its global market share to drop from an estimated 31% to 18% between 2023 and 2025.

(Image credit: SMIC)


Memory Spot Prices were volatile this week, with Q2’s Average Price Decline worsening

TrendForce’s latest research indicates that, as production cuts to DRAM and NAND Flash have not kept pace with weakening demand, the ASP of some products is expected to decline further in 2Q23. DRAM prices are projected to fall 13~18%; NAND Flash is expected to fall between 8~13%.

On the other hand, based on the weekly updates on the DRAM and NAND flash spot markets by TrendForce, the spot markets for DRAM and NAND flash continued to decline this week. Details are as follows.

DRAM Spot Market

Spot prices of DDR4 products have been dropping incrementally for several consecutive days, and buyers in the spot market are mostly waiting for further developments. However, there are more quote inquiries for DDR5 products because the supply gap hasn’t been bridged. As a result, there is now an uptick in spot prices of DDR5 products, and the divergence between DDR4 and DDR5 products in terms of price trajectory is expected to continue for several weeks. Nevertheless, spot prices of DDR4 products are showing no sign of rebounding in the near future. The average spot price of mainstream chips (i.e., DDR4 1Gx8 2666MT/s) fell by 0.74% from US$ 1.618 last week to US$ 1.606 this week.

NAND Flash Spot Market

European and American spot markets have yet to recover in purchase sentiment, while some Asian markets, due to the recuperation of the Chinese market, have slightly risen in purchase willingness. Overall spots have not experienced any apparent fluctuations from South Korean suppliers’ announcement of production cuts, despite sellers aggressively adjusting their prices and pursuing orders, which led to a restricted level of overall transactions and a small drop in prices. 512Gb TLC wafer has dropped by 0.35% in spot prices this week, arriving at US$1.431.


DRAM and NAND Flash Spot Market Dynamics Update


DRAM Spot Market:

SpecTek, a subsidiary of Micron, has slightly increased the prices of its products in the spot market. Additionally, sellers have indicated that they will not slash prices further for low-priced chips. As a result, the momentum of trading activities has stagnated. Like buyers in the contract market, buyers in the spot market are adopting a wait-and-see approach. Facing significant losses, DRAM suppliers need to enlarge the scale of their production cuts in order to stabilize prices. DDR4 products are also experiencing a serious inventory glut, and their prices could keep going down due to the weak overall demand. Conversely, DDR5 products are experiencing a tighter supply due to the PMIC incompatibility issue, thereby leading to an increase in their prices. The average spot price of mainstream chips (i.e., DDR4 1Gx8 2666MT/s) fell by 0.06% from US$3.235 the previous week to US$3.233 this week.

NAND Flash Spot Market: 

Inquiries for some packaged dies were once prosperous with market anticipation gradually turning to focusing on the rebound of prices under suppliers’ production cuts, however, the level of demand is seen primarily from short-term and urgent orders at an insignificant expansion of transactions, where overall prices are still dropping at a decelerated pace. 512Gb TLC wafer has dropped by 0.76% in spot prices this week, arriving at US$1.436.


Micron Targets Low-Priced Products to Halt Memory Price Decline: TrendForce

Amid a prolonged market downturn and persistent weakness in end demand, the world’s top three memory chipmakers – Samsung, SK Hynix, and Micron – have implemented production cuts in an effort to control the continuing decline in memory prices through supply management. Recently, news emerged in the memory channel market that Micron had notified its customers that starting in May, it will not accept inquiries for DRAM and NAND Flash below current market prices.

According to TrendForce, the situation is not widespread at the moment, but is limited to low-priced memory chips. As for other product categories with high inventory levels, they still cannot avoid the situation of falling prices.

Contract market:

Although DRAM suppliers have actively reduced production, the output bit volume has not yet reached an effective convergence in 2Q23, so the quarterly contract price decline will be greater than originally expected, with an expected drop of more than 15%. TrendForce has observed that there is a strong wait-and-see atmosphere on the OEM side. While the willingness to purchase DRAM has increased, the premise of the deal is that low-priced quotes are attractive enough to OEMs. Due to poor demand prospects, the purchasing behavior of buyers still appears to be passive.

Spot market:

TrendForce pointed out that Micron’s subsidiary brand, Spectek, has slightly raised prices for its products this week, especially in the low-priced chip segment, indicating a reluctance to further reduce prices. Therefore, trading in the spot market appears stagnant, similar to the strong wait-and-see attitude mentioned in the contract market.

As suppliers have already entered a stage of significant losses, it is necessary to continue to expand production cuts to avoid prices from collapsing again. Among them, DDR4 still has a price decline due to high inventory levels and weak demand, while the supply of DDR5 is limited by the PMIC compatibility issue, resulting in an upward trend in spot prices.


4Q22 DRAM contract price drop expanded to 18~23%, also spot market has no luck to escape from the recession

According to TrendForce, prices for 4Q22 contracts were mostly finalized in October in contract market. The QoQ decline in the overall DRAM ASP has now reached 18~23%. This discrepancy is due to the fact that Samsung maintains a rather aggressive approach for pricing. Regarding 1Q23, TrendForce has revised the QoQ decline in the overall ASP from 5~10% to 15~20% provided that Samsung continues to be this competitive. TrendForce is also not ruling out the possibility that prices could drop by more than 20% for some types of DRAM products.

As for spot market, October saw spot transactions at their lowest level so far for this year. Moving into November, the ongoing decline in DRAM spot prices will unlikely ease anytime soon as China maintains its strict zero-COVID policy and enforces lockdown for local outbreaks. Furthermore, the major DRAM suppliers have made substantial price concessions in their contract negotiations, thereby creating downward pressure on spot prices as well. TrendForce has observed that the average spot price of the mainstream 1Gb DDR4 chips has been falling rapidly since October 24 with the daily decline exceeding 1%.

Until November 9, the sequential drop in the average spot price of 1Gb DDR4 chips has reached 8.36%. At the same time, spot prices of server DRAM modules have now fallen below the lowest point in the previous cyclical downturn and arrived around US$70. This indicates that there is a considerable room for a further drop in contract prices in 1Q23. Regarding weekly change in the spot price trend of the mainstream chips (i.e., DDR4 1Gx8 2666MT/s), the average spot price slid by 2.30% from US$ 2.222 last week to US$2.171 this week.

(Image credit: Unsplash)

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