Taiwan semiconductor


2022-04-21

Opportunity and Risk for Taiwan’s Supply Chains

(AmCham Taiwan|Associate Editor: Julia Bergström) As more countries look to diversify their supply chains, Taiwan has a chance to strengthen its position in the global economy. But is its infrastructure robust enough to support expanded business?

Over the past few years, the U.S. and Taiwan have intensified their efforts to reduce reliance on China in their supply chains as a way to increase resilience. First came the U.S.-China trade dispute, in which American companies were encouraged to leave or decrease operations in China, followed by the Tsai Ing-wen administration’s reshoring initiative to bring investment from China back to Taiwan.

At the onset of the global pandemic, the flow of critical products halted, global supply chains were disrupted, and supply chain resilience became a priority for all industries. Then, just as commerce began to bounce back, Russia launched an attack on Ukraine, giving rise to new worries of geopolitically induced shortages and inflationary effects.

Meanwhile, China is pushing to indigenize its supply chains, most notably with its Made in China 2025 plan, which aims to upgrade Chinese industries’ manufacturing capabilities into more technology-intensive powerhouses and achieve independence from foreign suppliers.

Although the U.S. and Taiwan are not decoupling from China, they have significantly changed the flow of goods and investments, says Rupert Hammond-Chambers, managing director of BowerGroupAsia, a consultancy.

“Instead of 10 dollars flowing into China, you’re seeing five going to China and the other five to the Southeast Asia region, or even Taiwan,” he says. However, there is no certainty that Taiwan will gain some of China’s lost business. Rather, achieving that goal will require significant policy changes and government efforts.

For Taiwan, strengthening its role in global supply chains is more than an effort to ensure economic stability – it also has political and security implications. Hammond-Chambers sees Taiwan’s role in the semiconductor industry in particular as a “geostrategic lever that focuses other countries on the importance of Taiwan and peace and security in the Taiwan Strait.”

Taiwan accounts for over 60% of the global chip foundry market, and the island plays a pivotal role in many high-tech industries, a trend expected to continue despite pushes from the U.S. and EU to revitalize their semiconductor industries.

In fact, says Joanne Chiao, senior analyst at Taiwanese market research firm TrendForce, her organization “expects Taiwan’s market share [in the chip foundry sector] will further increase to 66% in 2022,” as some of the newly added capacity will enter mass production by the end of 2022.

Although Taiwan leads in semiconductors, domestic expansion has its limits. During a discussion on Taiwan’s role in global supply chains organized by Washington, D.C.-based public policy organization The Brookings Institution, Taiwan Semiconductor Manufacturing Co. (TSMC) Vice President of Global Government Affairs Peter Cleveland noted that the company operates “at such a massive scale that it’s mind-blowing to people. [Production] takes over 4 million gallons of water per day, the power requirements are enormous, and STEM talent is critical.”

Cleveland said he sees geographic dispersion as an advantage for the company, and the expansion of Taiwan semiconductor operations in the U.S. as a way to strengthen supply chains while alleviating chip manufacturing’s strain on Taiwan’s resources. TSMC is constructing a US$12 billion fab in Phoenix, Arizona, which is scheduled to start producing chips in 2024. It is also building a plant in Japan and is in early discussions regarding a possible fab in Germany.


Apart from expanding manufacturing abroad, Taiwan also needs to implement policies that strengthen its infrastructure, according to BowerGroupAsia’s Hammond-Chambers. Of what has been termed the island’s “five shortages” (land, power, water, labor, and talent), he refers to labor, talent, and electricity as the most critical areas for government scrutiny of existing policies.

“The energy policy of Taiwan is just not working at the moment,” he says, adding that “there’s no time to waste” when it comes to improving the power grid. “It’s a strategic issue, military issue, social issue, and economic issue – it ticks every single major box.”

Jason Hsu, a former Taiwan legislator and currently senior research fellow at the Harvard Kennedy School, stressed at the Brookings seminar that the shortage of semiconductor talent is already noticeable in both the U.S. and Taiwan. The island’s recent establishment of a Semiconductor Research Institute is a step in the right direction, but not enough to fill the gap, he said.

“There needs to be a comprehensive program that links U.S. and Taiwan talent development and ensures that Taiwan can continue to develop its manufacturing capability and talent,” with innovation shared between the U.S. and Taiwan, Hsu noted.

Taiwan has relaxed immigration laws to attract foreign talent, particularly from Southeast Asia, and developed work and study programs for university students, said Minister Without Portfolio John Deng during the Brookings event.

But considering that the island is on track to become a super-aged society, Taiwan could and should implement a much more robust and open immigration policy that attracts more people to make up for the shrinking labor pool. The island’s decreasing population could pose an existential threat to Taiwan if not managed, says Hammond-Chambers.

Meanwhile, Taiwan could take advantage of what some scholars have dubbed “brain circulation” to strengthen economic ties with the U.S., according to Michael Nelson, senior fellow in the Carnegie Endowment For International Peace’s Technology and International Affairs Program.

“A lot of people from Taiwan have studied overseas, and some of them bring that knowledge back to Taiwan and start companies or teach the next generation,” he says, citing the founders of TSMC and the Industrial Technology Research Institute (ITRI) as two examples. “But a lot of them are still working overseas, and they’re part of this diaspora that forms a built-in advantage for Taiwan.”

Cloud opportunities

As the world undergoes the Fourth Industrial Revolution, digital supply chain technologies such as artificial intelligence (AI), algorithms, and machine learning can be used to analyze and learn from big data, which powers intelligent automation and provides supply chain managers with real-time insights that can assist quick responses to disruptions.

“When we think about how to boost our competitiveness, it doesn’t all have to be about manufacturing,” said Meriya Solis, Director of the Center for East Asia Policy Studies at Brookings. “We need to be mindful of the fact that we’re moving toward a digital economy.”

But while smart tools will mitigate human error, they pose a supply chain risk if they are not backed up by robust cybersecurity systems. Carnegie’s Nelson says that improving cybersecurity and investing in the Cloud of Things – integrated Internet of Things and Cloud Computing technology – would not only benefit biotech and other high-tech industries, but also create more robust supply chains for traditional industries. “It could help us do a better job of tracking fishing ports, ensuring the quality of food, and making sure cold chains are not broken,” he says.

The current global software infrastructure, notes Nelson, is built on a precarious system. Commercial software products tend to rely on complex open-source software repositories, and vulnerability in a single aspect of these repositories could compromise every commercial product that uses it.

Following an increase in cyberattacks, Taiwan’s government declared cybersecurity to be a national security issue in 2018 and proceeded to implement its Cyber Security Management Act in January 2019. The law stipulates obligations for providers of critical infrastructure, including water, energy, ICT production, and financial and healthcare services. The U.S. and Taiwan held their first joint Cyber Offensive and Defense Exercise (CODE), hosted by the American Institute in Taiwan (AIT) and the Executive Yuan’s Department of Cyber Security, in 2019.

In the past, Chinese tech seemed like it was on a steady path to market domination. But due to a high incidence of poorly written Chinese software and concerns that state actors could impel companies to embed security backdoors into their products, trust in its software is now generally low among global users. Nelson sees a lucrative opportunity for Taiwan to increase its involvement in data supply chains by establishing itself as a trusted source for more secure and better-tested software.

“Through the hardware sector and the semiconductor industry, you have all these links to all the major players,” he says. “By leveraging those links and showing that Taiwan can ensure that the software running on the chips they built is doing the job it’s advertised to do, Taiwan can help integrate different pieces of software from different companies and gain a reputation for being a trusted integrator.”

But to establish such a competitive advantage, Taiwan’s government will need to implement mechanisms that encourage local IT companies to uncover security vulnerabilities and adopt quality verification tools.

“Nobody thinks Taiwan is going to become the only source of systems software, but it can be a hub that works with different players and shows emerging markets in particular how technologies can be better designed,” says Nelson. “And it’s not just in healthcare, the high-tech sector, banking, and e-government applications – it’s also in agriculture, food production, and retail.”

Nelson says that rather than providing a long list of detailed requirements, the government should form a cybersecurity framework that focuses on goals and milestones without stipulating how they should be achieved. “You want to focus on the results, not the mechanism.”

China threat misconception

Supply chain cooperation between the U.S. and Taiwan is vital for the economic security of both, and collaboration has only strengthened with the increased attention to the importance of ICT products and semiconductor chips. The commitment of both sides to cooperate on related issues was reasserted in late 2021 when Taiwan and the U.S. established the Technology Trade and Investment Collaboration (TTIC), a new bilateral cooperation framework meant to develop commercial programs and strengthen critical technology supply chains.

TTIC is the latest addition to the two parties’ already established communication channels on economic issues, which also consist of the Trade and Investment Framework Agreement (TIFA) and the U.S.-Taiwan Economic Prosperity Partnership Dialogue. It is seen as a way for the U.S. to strengthen its role in the semiconductor industry and reiterate the importance of the bilateral U.S.-Taiwan commercial and investment relationship.

Such collaborative activity might not be enough, however. Convincing more American companies to include Taiwan in their supply chains will require creating greater confidence in Taiwan’s production stability and its government’s capability in data management and protection, says Nelson. Companies will also need assurance that they will not be affected by geopolitical maneuvering.

“If companies worry that their supply chain is going to be disrupted for geopolitical reasons, then they’re less inclined to work with companies in those countries.”

Recognizing these concerns, Minister Deng emphasized Taiwan’s trustworthiness and reliability during his opening statement at the U.S.-Taiwan supply chain seminar. Deng declared to the audience that Taiwan is a safe and reliable partner, and that it “actively maintains supply chain security” and has “never coerced any other countries with economic means.”

But to assure businesses that Taiwan will remain a stable partner, the island will need to assuage fears of potential military conflict. Hammond-Chambers notes that although many experts agree that China is unlikely to launch a military attack on Taiwan in the near future, media and think tank preoccupation with possible future scenarios could trickle into boardrooms and influence business decisions.

“They see what’s happening in Ukraine, and it’s easy for people to jump to conclusions about Taiwan,” he says. “Future global supply chains are likely to evolve into a red [Chinese] supply chain and alternate supply chains that include Southeast Asia on a grander scale. Whether companies’ attempts to ‘China-proof’ their businesses will result in an exclusion of Taiwan remains to be seen.”

(Source: https://topics.amcham.com.tw/2022/04/opportunity-and-risk-for-taiwans-supply-chains/

2022-03-30

Top 10 Taiwanese IC Design Company Revenue Top NT$900B in 2021 with MediaTek Contributing Lion’s Share

According to TrendForce research, in general, revenue of Taiwanese IC design companies grew significantly in 2021 with many hitting record highs due to active procurement of various terminal applications and the effect of product price inflation. These companies also performed well in terms of gross profit margin and profitability. The top 10 Taiwanese IC design companies generated revenue of NT$906.16 billion, or 54.3% YoY. In recent years, MediaTek has contributed more than half of the output value of Taiwan’s top ten IC design companies and has become a primary factor in the growth of Taiwan’s IC design industry.

Looking at Taiwan’s top three IC design companies, MediaTek, Novatek, and Realtek, in 1Q22, MediaTek benefited from the increase in 5G penetration and successive shipments of Dimensity 9000. A mobile phone release in March 2022 produced revenue growth which can offset lower demand for certain consumer products due to seasonal factors while the proportion of high-margin products in each revenue category will increase. Thus, annual revenue growth is expected to exceed 20% this year.

As for Novatek, although DDI and TDDI stocking has entered the off-season for traditional industries and demand for consumer electronics has weakened, overall market demand is still greater than supply and Commercial Notebook and Automotive demand remain strong. New products such as OLED FoD, OLED TDDI, FTDDI, and Mini LED will drive continued revenue stability. This year, Novatek will integrate TCON, PMIC, etc. for package sales, so that there is a relative price support, but the company must still dynamically adjust its product mix according to market changes.

In terms of Realtek, positive demand in the enterprise, industrial, and automotive sectors in 2H21 will continue to 1H22. With the pandemic slowing down, purchasing of commercial laptops and equipment has ramped up, wired and wireless network infrastructure is being upgraded, the automotive market continues to grow, and relevant products such as Wi-Fi 6, Wi-Fi 6E, 5G Ethernet, and the new LE Audio Bluetooth IC are being launched successively, which will continue to improve Realtek’s performance. On the consumer market side, demand in the PC and consumer electronics markets will return to normal in 2022 and the TWS Bluetooth headset market will face a price war, which will lead to a suppression of Realtek’s shipments in relevant sectors. Regarding foundry price hikes, some customers have reported that they cannot afford further price inflation and are still in the process of negotiating terms of cooperation. In addition, Realtek has been destocking in 1Q22 due to the customer yearend inventory audits and component mismatching.

Taking a comprehensive look at 2022, TrendForce believes that the benefits of price inflation will gradually fade and demand for consumer electronics will moderate but not weaken significantly, while sustained strong demand for industrial, automotive, and high-speed computing will test the product portfolio optimization and cost pass-through ability of IC design companies.

(Image credit: iStock)

2022-03-14

Top 10 Foundries Post Record 4Q21 Performance for 10th Consecutive Quarter at US$29.55B, Says TrendForce

The output value of the world’s top 10 foundries in 4Q21 reached US$29.55 billion, or 8.3% growth QoQ, according to TrendForce’s research. This is due to the interaction of two major factors. One is limited growth in overall production capacity. At present, the shortage of certain components for TVs and laptops has eased but there are other peripheral materials derived from mature process such as PMIC, Wi-Fi, and MCU that are still in short supply, precipitating continued fully loaded foundry capacity. Second is rising average selling price (ASP). In the fourth quarter, more expensive wafers were produced in succession led by TSMC and foundries continued to adjust their product mix to increase ASP. In terms of changes in this quarter’s top 10 ranking, Nexchip overtook incumbent DB Hitek to clinch 10th place.

TrendForce believes that the output value of the world’s top ten foundries will maintain a growth trend in 1Q22 but appreciation in ASP will still be the primary driver of said growth. However, since there are fewer first quarter working days in the Greater China Area due to the Lunar New Year holiday and this is the time when some foundries schedule an annual maintenance period, 1Q22 growth rate will be down slightly compared to 4Q21.

Top 5 foundries account for nearly 90% of global market share, Samsung recovers share with advanced processes

Looking at the top five industry players, TSMC’s 4Q21 revenue reached US$15.75 billion, a QoQ increase of 5.8%. Although 5nm revenue spiked thanks to the new iPhone, 7/6nm revenue dropped due to a weak Chinese smartphone market, becoming the only TSMC node in decline in 4Q21, and inducing a contraction in TSMC revenue growth in 4Q21, though TSMC still accounts for more than 50% of global market share. As one of TSMC’s few competitors in advanced processes below 7nm, Samsung strengthened 4Q21 revenue to US$5.54 billion, a quarterly increase of 15.3% owing to the gradual completion of new advanced 5/4nm process capacity and the mass production of new flagship products from major client Qualcomm. Although Samsung’s foundry business has posted record revenue, the slower ramp-up of advanced process capacity continues to erode overall profitability. Therefore, TrendForce believes that improving advanced process capacity and yield in 1Q22 is one of Samsung’s top priorities.

Constrained by limited growth in new production capacity and the fact that the new wave of wafers contracted at the latest pricing has yet to be produced, UMC’s revenue stalled slightly in 4Q21, to US$2.12 billion, up 5.8% QoQ. GlobalFoundries benefited from the release of new production capacity, product mix optimization, and new long-term agreement (LTA) pricing, pushing up ASP performance. Revenue in 4Q22 hit US$1.85 billion, up 8.6% QoQ. SMIC posted 4Q21 revenue of US$1.58 billion, 11.6% QoQ, due to mounting demand for products such as HV, MCU, Ultra Low Power Logic, and Specialty Memory as well as factors such as product mix adjustment and appreciating ASP.

Surpassing DB Hitek, Nexchip officially breaks into the top 10 in 4Q21

The foundries ranked 6th to 9th are HuaHong Group, PSMC, Vanguard International Semiconductor (VIS), and Tower Semiconductor (Tower), respectively. Each has benefiting from factors such as a utilization rate uniformly at full capacity, release of new production capacity, and adjustment of ASP and product mix, sustaining the growth of revenue performance. It is worth mentioning, the acquisition of Tower by Intel netted Intel mature process technologies and a customer base and expanded the diversity and production capacity of its foundry business. However, before this transaction is officially completed, Tower is still considered an independent entity in terms of the accounting process. TrendForce states, after Intel’s foundry business is properly integrated with Tower, Intel will officially enter the ranking of top ten foundries.

Coming in 10th on the top 10 foundry ranking is Nexchip with revenue of US$352 million and a quarterly growth rate of 44.2%, the fastest growth rate among the top ten, and officially surpassed DB Hitek. According to TrendForce investigations, the primary reason Nexchip was able to break into the top 10 in 4Q21 was the company’s diligent production expansion. Nexchip also plans to develop more advanced processes such as the 55/40/28nm nodes and multiple product lines including TDDI, CIS, and MCU, to compensate for its current single product line and limited customer base. Since Nexchip is currently ramping-up operations quickly, its growth performance in 2022 should not be underestimated.

2022-03-10

8-inch Substrate Mass Production in 2H22, 3rd Gen Power Semiconductor CAGR to Reach 48% by 2025, Says TrendForce

At present, the materials with the most development potential are Wide Band Gap (WBG) semiconductors with high power and high frequency characteristics, including silicon carbide (SiC) and gallium nitride (GaN), which are mainly used in electric vehicles (EV) and the fast charging battery market. TrendForce research estimates, the output value of third generation power semiconductors will grow from US$980 million in 2021 to US$4.71 billion in 2025, with a CAGR of 48%.

SiC is suitable for high-power applications, such as energy storage, wind power, solar energy, EVs, new energy vehicles (NEV) and other industries that utilize highly demanding battery systems. Among these industries, EVs have attracted a great deal of attention from the market. However, most of the power semiconductors used in EVs currently on the market are Si base materials, such as Si IGBT and Si MOSFET. However, as EV battery power systems gradually develop to voltage levels greater than 800V, compared with Si, SiC will produce better performance in high-voltage systems. SiC is expected to gradually replace part of the Si base design, greatly improve vehicle performance, and optimize vehicle architecture. The SiC power semiconductor market is estimated to reach US$3.39 billion by 2025.

GaN is suitable for high-frequency applications, including communication devices and fast charging for mobile phones, tablets, and laptops. Compared with traditional fast charging, GaN fast charging has higher power density, so charging speed is faster within a smaller package that is easier to carry. These advantages have proven attractive to many OEMs and ODMs and several have started rapidly developing this material. The GaN power semiconductor market is estimated to reach US$1.32 billion by 2025.

TrendForce emphasizes that third generation power semiconductor substrates are more difficult to manufacture and more expensive compared to traditional Si bases. Taking advantage of the current development of major substrate suppliers, companies including Wolfspeed, II-VI, and Qromis successively expanded their production capacity and will mass-produce 8-inch substrates in the 2H22. Output value of third generation power semiconductors is estimated to have room for continued growth in the next few years.

2022-02-08

8-inch Wafer Capacity Remains Tight, Shortages Expected to Ease in 2H23, Says TrendForce

From 2020 to 2025, the compound annual growth rate (CAGR) of 12-inch equivalent wafer capacity at the world’s top ten foundries will be approximately 10% with the majority of these companies focusing on 12-inch capacity expansion, which will see a CAGR of approximately 13.2%, according to TrendForce’s research. In terms of 8-inch wafers, due to factors such as difficult to obtain equipment and whether capacity expansion is cost-effective, most fabs can only expand production slightly by means of capacity optimization, equating to a CAGR of only 3.3%. In terms of demand, the products primarily derived from 8-inch wafers, PMIC and Power Discrete, are driven by demand for electric vehicles, 5G smartphones, and servers. Stocking momentum has not fallen off, resulting in a serious shortage of 8-inch wafer production capacity that has festered since 2H19. Therefore, in order to mitigate competition for 8-inch capacity, a trend of shifting certain products to 12-inch production has gradually emerged. However, if shortages in overall 8-inch capacity is to be effectively alleviated, it is still necessary to wait for a large number of mainstream products to migrate to 12-inch production. The timeframe for this migration is estimated to be close to 2H23 into 2024.

PMIC and Audio Codec gradually transferred to 12-inch production, alleviating shortage of 8-inch production capacity

At present, mainstream products produced using 8-inch wafers include large-sized panel Driver IC, CIS, MCU, PMIC, Power Discrete (including MOSFET, IGBT), Fingerprint, Touch IC, and Audio Codec. Among them, there are plans to gradually migrate Audio Codec and some more severely backordered PMICs to the 12-inch process.

In terms of PMICs, other than certain PMICs used in Apple iPhones already manufactured at 12-inch 55nm, most mainstream PMIC processes are still at 8-inch 0.18-0.11μm. Burdened with the long-term supply shortage, IC design companies including Mediatek, Qualcomm, and Richtek have successively planned to transfer some PMICs to 12-inch 90/55nm production. However, since product process conversion requires time-consuming development and verification and total current production capacity of the 90/55nm BCD process is limited, short term relief to 8-inch production capacity remains small. Effective relief is expected in 2024 when large swathes of mainstream products migrate to 12-inch production.

In terms of Audio Codec, Audio Codecs for laptops are primarily manufactured on 8-inch wafers, and Realtek is the main supplier. In the 1H21, the squeeze on capacity delayed lead times which affected notebook computers shipments. Although the stocking efforts of certain tier1 customers proceeded smoothly in the second half of the year, these products remained difficult to obtain for some small and medium-sized customers. At present, Realtek has partnered with Semiconductor Manufacturing International Corporation (SMIC) to transfer the process development of laptop Audio Codecs from 8-inch to 12-inch 55nm. Mass production is forecast for mid-2022 and is expected to improve Audio Codec supply.

In addition to PMIC/Power Discrete, another mainstream product derived from 8-inch manufacturers is the large-sized panel Driver IC. Although most fabs still manufacture 8-inch wafers, Nexchip provides a 12-inch 0.11-0.15μm process technology used to produce large-sized Driver ICs. As production capacity at Nexchip grows rapidly, the supply of this product has been quite smooth. However, TrendForce believes that this is a special case. Mainstream large-sized Driver ICs are still manufactured on 8-inch wafers and there is no trend to switch to 12-inch wafers.

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

  • Page 1
  • 4 page(s)
  • 18 result(s)