US export controls affect SMICs expansion of production and TSMCs output in mainland China

 US export controls affect SMICs expansion of production and TSMCs output in mainland China

Screenshot of Taiwan Economic Daily

In recent years, most of the worlds major wafer foundry factories are mainly based on incremental advanced processes. However, the demand for home office and online education brought about by the new crown epidemic has led to a sharp increase in orders for power management chips and display panel drive chips with mature processes, which also makes the production capacity in this area continue to tighten.

To make matters worse, the United States suddenly strengthened export controls, which frustrated SMICs 14 / 28nm production expansion, further aggravating the global capacity tension.

Liang Mengsong, the companys co CEO, said that it was actively communicating with American suppliers about the licensing of some American equipment and raw materials.

In this case, manufacturers such as Qualcomm are said to want to transfer orders from SMIC to avoid risks, but the price increase also failed to find the latters alternative capacity.

Due to the shortage of production capacity and huge market, TSMC, liandian and Samsung have started to expand production and raise prices.

According to the statistics of the design branch of China Semiconductor Industry Association, the total sales value of Chinas IC design industry will exceed 300 billion yuan in 2019. By the end of November of that year, there were 1780 design enterprises in China, an increase of 4.8% over the same period last year.

The Nanjing plant of TSMC in this expansion is the companys only 12 inch wafer plant outside Taiwan Island.

TSMC Nanjing plant is its only 12 inch Fab outside Taiwan Island photo source: TSMC official website

In 2015, in the year of mass production of TSMCs 16nm FinFET powerful version process, the company announced its decision to build a factory in Nanjing, which took only 14 months from the ground breaking to the machine entering, which was known as the factory with the fastest construction, the fastest online operation and the most beautiful environment.

It is generally believed by the industry that TSMCs goal in Nanjing is to compete with SMICs 14nm production line.

According to TSMCs financial report in 2019, the Nanjing plant has a revenue of about 4.2 billion yuan and a net profit of about 300 million yuan.

In comparison, SMICs revenue in 2019 is 20.47 billion yuan, and its net profit is 1.54 billion yuan.

It is worth mentioning that while TSMCs Nanjing plant is expanding its production, the company is also promoting the construction of a plant in the United States.

On May 15, this year, on the day when the US government announced a new round of sanctions against Huawei, TSMC announced its intention to build a 12 inch advanced wafer factory in Arizona, USA, and use the companys 5nm process technology to produce semiconductor chips, with a planned monthly production capacity of 20000 wafers.

The subsidy from the federal government and the government of Arizona is the key to TSMCs plant establishment in the United States.

Screenshots of Taiwan media reports

On November 18, local time, the City Council of Phoenix, Arizona, approved the TSMC development agreement.

According to the terms of the agreement, Phoenix will be funded by the city government of $205 million to improve infrastructure such as roads and water, but no information has been disclosed on the amount of subsidies from the key U.S. federal government and Arizona government.

Some equipment manufacturers expect that TSMCs 5nm wafer plant will not only produce special application chips (ASIC) for U.S. government agencies, but also produce wafers for major U.S. customers such as apple, Intel, AMD, Qualcomm and NVIDIA.

According to TSMCs financial report, in the third quarter of 2020, the companys revenue from North America accounted for 59%, and the revenue from the Chinese market continued to rise to 22%.

In June, Liu Deyin, chairman of TSMC, said at the shareholders meeting that the recent tense trade relations among major international powers have brought many business challenges to the company. What they can do is to keep looking for solutions to cope with the new international situation. Source: editor in charge: Yang Bin_ NF4368