foundry


2021-10-28

Annual Foundry Revenue Expected to Reach Historical High Once Again in 2022 with 13% YoY Increase with Chip Shortage Showing Sign of Easing, Says TrendForce

While the global electronics supply chain experienced a chip shortage, the corresponding shortage of foundry capacities also led various foundries to raise their quotes, resulting in an over 20% YoY increase in the total annual revenues of the top 10 foundries for both 2020 and 2021, according to TrendForce’s latest investigations. The top 10 foundries’ annual revenue for 2021 is now expected to surpass US$100 billion. As TSMC leads yet another round of price hikes across the industry, annual foundry revenue for 2022 will likely reach US$117.69 billion, a 13.3% YoY increase.

Foundries will gradually kick off production with newly added capacities in 2H22 in response to the ongoing chip shortage

TrendForce indicates that the combined CAPEX of the top 10 foundries surpassed US$50 billion in 2021, a 43% YoY increase. As new fab constructions and equipment move-ins gradually conclude next year, their combined CAPEX for 2022 is expected to undergo a 15% YoY increase and fall within the US$50-60 billion range. In addition, now that TSMC has officially announced the establishment of a new fab in Japan, total foundry CAPEX will likely increase further next year. TrendForce expects the foundry industry’s total 8-inch and 12-inch wafer capacities to increase by 6% YoY and 14% YoY next year, respectively.

Although the manufacturing costs of 8-inch and 12-inch wafer fabrication equipment are roughly equal, the ASP of 8-inch wafers falls short compared with 12-inch wafers, meaning it is generally less cost-effective for foundries to expand their 8-inch wafer capacities. That is why the increase in 8-inch capacity is also expected to fall short of the increase in 12-inch capacity next year. Regarding 12-inch wafer foundry services, the 1Xnm and more mature nodes, which currently represent the most severe shortage among all manufacturing process technologies, will account for more than 50% of the newly added wafer capacities next year. On the other hand, while Chinese foundries, such as Hua Hong Wuxi and Nexchip, account for most of the newly added 12-inch wafer capacities this year, TSMC and UMC will comprise the majority of 12-inch wafer capacity expansions in 2022. These two foundries will primarily focus on expanding the production capacities allocated to the 40nm and 28nm nodes, both of which are currently in extreme shortage. As a result, the ongoing chip shortage will likely be alleviated somewhat in 2022.

Chip shortages will show signs of easing, but component gaps will continue to impact the production of some end products

Application segments such as consumer electronics (such as notebook computers), automotive electronics, and most connected digital appliances are now being impacted by the shortages of peripheral components made with the 28nm and more mature nodes. The undersupply of the said components will probably begin to moderate somewhat in 2H22 if foundries proceed to activate their newly added production capacity. However, just as there will be signs indicating an easing of capacity crunch for the 40nm and 28nm nodes, the tightening of production capacity for 8-inch wafers and 1Xnm nodes is going to be an important development that warrants close attention in 2022.

Regarding 8-inch wafer foundry services, the overall production capacity growth has been limited while the demand related to PMICs has increased multiple folds. The growth of this particular application has to do with the increasing market penetration of 5G smartphones and electric vehicles. Under this circumstance, PMICs continue to take up the available production capacity of 8-inch wafers, and wafer production lines that deploy ≦0.18µm nodes are now expected to operate at fully-loaded capacity to the end of 2022. Hence, the capacity crunch for 8-inch wafers will not ease in the short term.

As for 1Xnm nodes, the number of foundries that are offering these more advanced process technologies is gradually shrinking. The reason is that following the migration to FinFET in the general development of semiconductor manufacturing, the costs associated with R&D and capacity expansions have risen higher and higher. TSMC, Samsung, and GlobalFoundries are now the only three foundries in the world that possess 1Xnm technologies. Also, GlobalFoundries is the only one among these three to undertake a marginal capacity expansion for its 1Xnm node next year. The other two currently have no plan to raise 1Xnm production capacity in 2022.

In the aspect of demand, the kinds of chips that are made with 1Xnm nodes include the following: 4G SoCs, 5G RF transceivers, and Wi-Fi SoCs equipped in smartphones, as well as TV SoCs, chips for Wi-Fi routers, and FPGAs/ASICs. Due to the increasing market penetration of 5G smartphones, 5G RF transceivers will take up a massive portion of the overall 1Xnm production capacity. This will, in turn, significantly limit the available wafer capacity allocated to other products. Furthermore, demand has been rising over the years for smartphones that are equipped with 1Xnm Wi-Fi SoCs and Wi-Fi routers that contain 1Xnm chips. The supply of these components is already very limited at this moment and will get tighter in 2022 because the overall 1Xnm production capacity will not be raised by a significant amount.

In sum, there are several takeaways from this focus on the potential developments in the foundry market next year. First, the major foundries have now announced capacity expansions with the emphasis on addressing the capacity crunch for the 40nm and 28nm nodes. Their newly added production capacity is expected to enter operation next year, following two consecutive years of chip shortages. This will bring some relief to the undersupply situation, which is already very severe at this moment. However, the actual chip output contribution from the newly added production capacity will mainly take place no earlier than 2H22, or during the middle of the traditional peak season. With stock-up activities across the supply chain expected to reach a higher level of intensity at that time because of preparations for holiday sales, the easing of the capacity crunch in the foundry market will not be especially noticeable.

Second, it is worth pointing out that even though supply will loosen slightly for some 40/28nm chips, the lack of production capacity for 0.1Xµm chips on 8-inch wafers and 1Xnm chips on 12-inch wafers will likely remain a serious bottleneck in the supply chain. Currently, production capacity is already quite insufficient for 0.1Xµm 8-inch wafers and 1Xnm 12-inch wafers. Next year, the related capacity growth is also expected to be fairly limited. In sum, TrendForce believes that the foundry market will continue to experience some tightness in production capacity during 2022. Although the undersupply situation will moderate for some components, the persistent issue of component gaps will also continue to adversely affect the production of certain end products.

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

2021-10-18

Why did TSMC choose to build a chip plant in Japan?

Having experienced in worldwide lockdown caused by COVID-19 and rising geopolitical worries in recent years, governments of various countries hope to have wafer manufacturing plants in their own territories to reduce the possible impact of supply chain disconnection; however, building and operating a semiconductor wafer manufacturing factory is not an easy task. In addition to the extremely high cost, high labor demand, and environmental conditions are also a threshold. Therefore, TSMC, the leader in foundries, has naturally become the target of active invitations by governments to set up factories. In addition to Japan,  after evaluating customer needs, cost, and environmental resources (including water, electricity, land) and other conditions, TSMC doesn’t rule out the possibility of setting up factories in other countries if it is cost-effective.

Japan, once the world’s largest semiconductor cluster, still occupies a very important position in some semiconductor equipment, raw materials and packaging materials, and technologies. TSMC has previously announced the establishment of a 3DIC material R&D center in Japan, and this time it announced the establishment of a wafer manufacturing plant. In addition to deepening the streamlined process of customer products from manufacturing to packaging, it can also cooperate closely with upstream equipment vendors, chemical raw materials factories, such as TEL, SCREEN, SUMCO, Shinetsu, etc.

(Image credit: TSMC

2021-08-31

Foundry Revenue for 2Q21 Reaches Historical High Once Again with 6% QoQ Growth Thanks to Increased ASP and Persistent Demand, Says TrendForce

The panic buying of chips persisted in 2Q21 owing to factors such as post-pandemic demand, industry-wide shift to 5G telecom technology, geopolitical tensions, and chronic chip shortages, according to TrendForce’s latest investigations. Chip demand from ODMs/OEMs remained high, as they were unable to meet shipment targets for various end-products due to the shortage of foundry capacities. In addition, wafers inputted in 1Q21 underwent a price hike and were subsequently outputted in 2Q21. Foundry revenue for the quarter reached US$24.407 billion, representing a 6.2% QoQ increase and yet another record high for the eighth consecutive quarter since 3Q19.

Revenue growths of TSMC and Samsung were slightly hindered by power outages at their respective fabs

For 2Q21, TSMC once again comfortably dwarfed other foundries with a revenue of US$13.3 billion, a 3.1% QoQ increase. TSMC’s relatively muted growth can be attributed to several factors, the most prominent of which was a power outage that occurred in TSMC’s Fab14 P7, located in the Southern Taiwan Science Park, in April. The power outage subsequently caused some wafers at the 40nm and 16nm nodes to be discarded. TSMC’s fab in the Southern Taiwan Science Park suffered yet another disruption when Taipower’s Kaohsiung-based Hsinta Power Plant temporarily went offline in May. Although the fab immediately resumed operations via its emergency power generators so that no wafers in the production lines were discarded, certain wafers still needed to be reworked. Finally, TSMC maintained its longstanding strategy of giving consistent price quotes for its foundry services. Hence, although the foundry’s revenue for 2Q21 exceeded the upper end of its prior financial guidance, its revenue for the quarter underwent a slightly lower QoQ growth compared to other foundries, and it also lost some market share to competitors.

Samsung’s revenue for 2Q21 reached US$4.33 billion, a 5.5% QoQ increase. After recovering from the winter storm that swept Texas in February, Samsung’s Austin-based Line S2 fab fully resumed its manufacturing operations in April. The fab is now operating at fully loaded capacities by manufacturing for additional client orders in order to compensate for the 1.5-month loss in wafer input from idling as a result of the winter storm. Although the sharp drop in wafer input in 1Q21 somewhat constrained Samsung’s output and revenue growth for 2Q21, the foundry still managed to post a 5.5% QoQ revenue growth thanks to strong client demand for CIS, 5G RF transceivers, and OLED driver ICs. Owing to persistently high demand for PMIC, TDDI, Wi-Fi, and OLED driver IC products, UMC, ranked third on the top 10 list, operated at a capacity utilization rate surpassing 100%, and its output severely lagged behind client demand. In response, UMC continued to raise its quotes. In addition, newly installed production capacities at the 28/22nm nodes, which have a relatively high ASP, gradually became available for wafer input in 2Q21, resulting in a 5% QoQ increase in UMC’s blended ASP for 2Q21. The foundry saw its market share remaining relatively unchanged from the previous quarter at 7.2% and posted a revenue of US$1.82 billion, an 8.5% QoQ increase.

Fourth-ranked GlobalFoundries posted a revenue of US$1.52 billion for 2Q21, a 17.0% QoQ increase. After selling its US-based Fab10 and Singapore-based Fab3E to ON Semi and VIS, respectively, in 2019, GlobalFoundries has been gradually consolidating its existing product lines and focusing on the development of 14/12nm FinFET, 22/12nm FD-SOI, and 55/40nm HV and BCD technology platforms. At the same time, GlobalFoundries has also announced that it will expand its current production capacities by building new US-based and Singapore-based fabs, which are expected to contribute to GlobalFoundries’ earnings starting in the 2H22-2023 period. On the other hand, although GlobalFoundries has already sold its Fab10 to ON Semi, the former continues to manufacture products for the latter at Fab10 across the 2020-2021 period. ON Semi will not independently operate the fab until the transfer of ownership is finalized in 2022. SMIC likewise grew its revenue for 2Q21 by a remarkable 21.8% to US$1.34 billion and raised its market share to 5.3%. SMIC’s growth took place due to strong client demand for various technologies including 0.15/0.18µm PMIC, 55/40nm MCU, RF, HV, and CIS, as well as a continued increase in its ASP. Owing to better-than-expected adoption of its 14nm technology by new clients, SMIC is operating at a fully loaded capacity of 15K wspm at the moment.

While VIS leapfrogged Tower on the top 10 list, HuaHong Group, inclusive of subsidiaries HHGrace and HLMC, took sixth place

HuaHong Group subsidiaries HHGrace and HLMC have been operating Fab1/2/3/7 and Fab5/6, respectively and sharing certain manufacturing resources. Hence, TrendForce will from now on combine the two subsidiaries’ revenues into a single item, listed as HuaHong Group. In particular, capacity expansion at HH Fab7, operated by Hua Hong Wuxi, proceeded ahead of expectations, with client demand for NOR Flash, CIS, RF, and IGBT products remaining strong. Not only is HH Fab7’s production capacity of 48K wspm currently fully loaded, but HuaHong Group’s 8-inch fabs have all been operating at a capacity utilization rate of more than 100%. Thanks to a 3-5% QoQ increase in HuaHong Group’s blended ASP for 8-inch wafers, HuaHong Group’s revenue for 2Q21 reached US$658 million, a 9.7% QoQ increase, placing the foundry squarely in the number six spot.

After leapfrogging Tower in the revenue rankings in 1Q21 for the first time ever, PSMC maintained its strong growth in 2Q21 partially owing to continued wafer starts for specialty DRAM, DDI, CIS, and PMIC in its P1/2/3 fabs. At the same time, there was a massive hike in demand for automotive chips, such as IGBT, manufactured at PSMC’s Fab 8A and Fab 8B. In view of quarterly increases in PSMC’s overall ASP, the foundry posted US$459 million in revenue for 2Q21, an 18.3% QoQ increase, and took the seventh spot in the rankings. VIS benefitted from a host of factors in 2Q21, including persistent demand for DDI, PMIC, and power discretes; newly installed capacities in the Singapore-based Fab3E ready for production; adjustments in the foundry’s product mix; and an overall ASP hike. VIS’ revenue for 2Q21 reached US$363 million, which represented not only an 11.1% QoQ increase, but also the first time VIS overtook Tower in terms of revenue.

Although ninth-ranked Tower benefitted from stable demand for RF-SOI products, industrial PMIC, and automotive PMIC, the foundry’s newly installed capacities were not entirely ready for mass production, and its revenue therefore underwent a modest 4.3% QoQ increase for 2Q21 to US$362 million. On the other hand, DBHiTek had been operating at fully loaded capacities for more than 18 months. While client demand for PMIC, MEMS, and CIS products manufactured with 8-inch wafers made consistent contributions to the foundry’s earnings, most of DBHiTek’s revenue growth for 2Q21 took place due to the rise in its ASP. DBHiTek’s revenue for 2Q21 reached US245 million, a 12.0% QoQ increase.

As of 3Q21, the shortage of foundry capacities that began in 2H19 has persisted and intensified for nearly two years. Although newly installed capacities from certain foundries have become gradually available for production, the increase in production capacity has been relatively limited, and these additional capacities have been fully booked by clients, as indicated by TrendForce’s investigation into orders placed by foundry clients. All major foundries currently operate at fully loaded capacities, though their production still lags behind market demand. Furthermore, wafer inputs for automotive chips have been skyrocketing since 2Q21 due to major pushes by governments worldwide, in turn constraining the available production capacities for other chips. As a result, foundries are continuing to raise their blended ASPs and adjusting their product mixes in order to further optimize profits. TrendForce therefore believes that the combined revenues of the top 10 foundries will reach a record high in 3Q21 by undergoing a wider QoQ growth compared to 2Q21.

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

2021-06-28

What Is the Global Significance of the Taiwanese Semiconductor Industry’s Advanced Processes?

As UMC and GlobalFoundries successively end their respective developments of advanced processes, the advanced process market has now become an oligopoly, with TSMC and Samsung as the only remaining suppliers (excluding SMIC, which is currently affected by geopolitical tensions between China and the US). According to TrendForce’s latest investigations, TSMC holds a 70% market share in advanced processes below – and including – the 1Xnm node, while Samsung’s market share is about 30%.

As electronic products demand faster data transmission speeds and better performance in response to IoT and 5G applications, the chips contained in these products also need to shrink in size and consume less power. Hence, process technologies need to evolve in order to enable the production of increasingly advanced chips. In this light, suppliers of such chips as smartphone AP, CPU, and GPU primarily rely on Taiwan for its semiconductor industry’s advanced process technologies.

Why is Taiwan able to hold key manufacturing competencies, market shares, and unsurpassed technologies in the global foundry industry?

After TSMC pioneered its pure-play foundry services more than 30 years ago, UMC also subsequently transitioned to a foundry business model. However, the build-out and maintenance of wafer fabs require enormous human resources, capital expenditures, and environmental support, all of which have been skyrocketing since the industry progressed below the 40nm node into the EUV era. Factors including governmental support, human resource development, utility services, and long-term amortization and depreciation are all indispensable for foundries to keep up their fab operations. TrendForce’s findings indicate that Taiwan possesses about 50% of the global foundry capacity, and this figure will likely continue growing due to the persistent demand for advanced processes.

Taiwanese foundries led by TSMC and UMC operate based on a pure-play foundry model, which means they do not compete with their clients outside of foundry operations. Foundries are able to maximize the profitability of the semiconductor ecosystem in Taiwan thanks to Taiwan’s comprehensive PC, ICT, and consumer electronics industries.

In addition, not only are they able to deliver PPA(performance, power, and area) advantages to their clients through technology scaling and node shrinking, they are also unsurpassed in their comprehensive silicon IP cores and longstanding product development services. Other competing foundries are unlikely to make breakthroughs in these fields and catch up to Taiwanese foundries in the short run.

On the whole, the Taiwanese foundry industry is able to maintain its leadership thanks to competencies in human capital, client strategies, process technologies, capital intensify, economies of scale, and superior production capacities.

Furthermore, not only do advancements in semiconductor fabrication technology require developmental efforts from foundries, but they also need support throughout the entire supply chain, including upstream wafer suppliers and downstream client feedbacks, both of which can serve to eliminate yield detractors and raise yield rates. Therefore, the Taiwanese semiconductor industry derives its advantage from foundries(TSMC, UMC, PSMC, and VIS), as well as from the cross-industrial support across silicon wafer suppliers(SAS and GlobalWafers), fabless IC design clients, and packaging and testing operators(ASE, etc.)

(Cover image source: TSMC

2021-06-25

An Overview of China’s Third-Generation Semiconductor Industry in a Global Context

Some of the advantages of third-generation semiconductors SiC and GaN include their ability to operate under high voltages, high temperatures (for SiC), and high frequencies(for GaN). Not only do these advantages allow manufacturers to significantly reduce the physical sizes of chips, but peripheral circuit designs can also be simplified as a result, thereby further reducing the sizes of modules, peripheral components, and cooling systems. That is why SiC and GaN have become important strategic focuses of the global semiconductor industry.

As part of its ongoing goal of semiconductor independence, China has been accelerating the development of third-generation semiconductors in recent years

From the perspective of substrate development, countries find it difficult to procure SiC substrates due to the lack of production capacities worldwide. Hence, the ability to control the supply of SiC substrates equals having more influence in the semiconductor industry. The current ranking of geographical regions that control the supply of SiC substrates is, in order, the US (Cree and II-VI), Japan (Rohm), and Europe (STM).

It should be pointed out that China’s overall standing in the third-generation semiconductor industry is hindered by its insufficient supply of substrates. Hence, Chinese companies are slightly lagging behind other global companies in this industry. At the moment, both TankeBlue and Shanxi Shuoke have successfully developed 8-inch SiC wafers, though their scale of mass production is yet to catch up to global leader Cree.

Despite the vast majority of GaN substrate suppliers being Japanese and European companies, Chinese companies have been making an aggressive push to enter this market. Regarding substrates, Nanowin, Sino Nitride, and Eta Research are all currently investing in R&D and mass production, though their current focuses are limited to 2-inch and 4-inch wafers. Regarding epitaxy, Enkris, GLC, and Genettice have been similarly making progress on R&D and mass production.

Furthermore, Chinese companies are farther ahead in the development and manufacturing strategies for GaN substrates compared to SiC substrates. For the GaN RF segment, Chinese companies span the entire supply chain, including IDM(CETC, Aofengyuan, Chengchang, Dynax, Innoscience, Bofang Jiaxin), foundries(HiWafer and San’an), and fabless IC design companies(GaXtrem).

(Cover image source: TSMC

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