Profit from Samsung's chip business plunged more than 90 percent last quarter, but its rival's wafer manufacturing business posted record revenue last quarter and for all of last year. Profit also rose last year, reflecting expanded capacity for advanced processes and a more fragmented customer base and applications.
However, Samsung admitted that this quarter will not escape the pressure of industrial inventory adjustment, will make the foundry business capacity utilization began to fall, industry concerns that Samsung may launch a price cut to take orders, disadvantageous Taiwan Semiconductor, United Semiconductor and other Taiwan manufacturers.
According to industry analysis, recently, the capacity utilization rate of wafer foundries has generally declined, and the capacity utilization rate of United Electric has dropped to about 70% from the previous full load, and it is reported that the capacity utilization rate of some manufacturers' production lines is only 50%. However, Taiwan Semiconductor and United Electric have stuck to the price, with Taiwan Semiconductor increasing its price by 6% this year, and United Electric expects the average product price (ASP) to be flat this quarter.
At a time when "end demand is weak and the price of the wafer duo is stiff," a cut-price bid by Samsung would be attractive to IC designers and integrated component (IDM) plants, which are facing high inventory pressure and are reluctant to pay more manufacturing costs. It would not only help Samsung fill capacity gaps, but also help it increase market share.
Samsung did not provide the relevant data and quotation dynamics of its wafer foundry capacity utilization rate, only disclosed that the industrial inventory adjustment has led to a decline in the wafer foundry capacity utilization rate. However, it still expects that in the second half of the year, the demand for automotive and high-speed computing will bring recovery, and it will win new customers with the product competitiveness of the second-generation 3-nanometer process. And has set up an advanced packaging team to support the wafer foundry business needs.
Samsung also updated its most advanced chip process information, saying that the yield of the 3-nanometer process is "stable," and that the second-generation 3-nanometer process is "making rapid progress." It is also developing a 4-nanometer process for automotive applications, and will focus on developing a 2-nanometer process this year.
Korean media: The United States, Japan and Taiwan cooperation to help Taiwan Semiconductor Manufacturing to grow
According to South Korean media reports, Taiwan Semiconductor Manufacturing recently announced investment in the United States and Japan to compete with China on safety and widen the global market share gap with Samsung Electronics Co.
According to BusinessKorea, citing experts, South Korea has not been active in restructuring its semiconductor supply chain despite the U.S. pushing for a so-called Chip 4 alliance with South Korea, Taiwan and Japan.
Taiwan announced in 2021 that it would cooperate with the U.S. and Japan in the semiconductor sector, the report said. The U.S. and Japan also formed a semiconductor technology alliance last year. And Taiwan Semiconductor Manufacturing is trying to strengthen alliances with the United States and Japan.
Experts say that TSMC, caught between the US and China, is taking advantage of the geopolitical crisis by building factories in the US and Japan to ease and disperse the risk of Chinese attacks, while securing future factories and human resources with the support of the US and Japan.
Foundry, down 4 percent in 2023
In the first quarter of 2023, the demand for various processes from mature to advanced wafer foundry continues to be revised down, and the wafer cutting of all major IC design plants will spread from the first quarter to the second quarter. TrendForce observed that the capacity utilization performance of all wafer founderships from the first quarter to the second quarter is not ideal, and some processes in the second quarter are even lower than the first quarter. There is still no significant sign of a return of orders. Looking ahead to the second half of the year, even for some products whose inventory correction cycle started earlier, there may be order filling for the year-end festival, but the global political and economic trend is still the biggest variable, and the capacity utilization rate may not recover as fast as expected. Therefore, TrendForce estimates that the output value of wafer foundry will decline by about 4 percent annually in 2023. The recession was even deeper in 2019.
It is worth mentioning that geopolitical risks have prompted the supply chain to continue to shift, and IC factories are preparing to reduce the proportion of production in China. The transfer effect will gradually ferment in the second half of 2023 and become more obvious after 2024. The supply and demand of wafer foundry will gradually trend to regional development, leading to the divergence in the capacity utilization rate of wafer founderships in the second half of the year. In addition to the factors of customer inventory level and traditional peak season, the distribution effect of supply chain is also worth paying attention to.
The 8-inch order transfer is more obvious, and the 12-inch mature process is more stable than the advanced process
8-inch, smart phones, laptops, TVS and other consumer terminal demand into the sales season, slow inventory reduction further affect the orders of consumer PMIC, MOSFET and other products, resulting in the main 8-inch wafer foundry capacity utilization in the first quarter of 2023 continued to decline. The recent 8-inch fab order filling will occur piecemically in the second quarter, mainly from demand for specialized industrial computers and the percentage of production between a few customers switching founfounts. The contribution to overall 8-inch capacity utilization remains limited. Capacity utilization is similar to the first quarter and there is no clear sign of recovery.
For the 12-inch advanced process, the capacity utilization rate of Taiwan Semiconductor Manufacturing (TSMC) in the first half of the year was still not ideal, and the improvement of the 7-nanometer capacity utilization rate in the second half of the year was still limited. 5 nano is expected to rely on new products in the peak season stock driven, back to a healthy level. On the other hand, Samsung's capacity utilization rate for advanced manufacturing processes below 8 nm was at a low level throughout the year, mainly due to transfer orders from major customers Qualcomm and NVIDIA.
For the 12-inch mature process, Taiwan Semiconductor Manufacturing, United Electric (UMC), GlobalFoundries and other foundries actively arranged stable demand for automotive, industrial and medical applications. In the first half of the year, the capacity utilization rate remained 75%~85% higher, and the capacity utilization rate of 28 nm was better than that of the mature process such as 55/40 nm. Foundries with a high proportion of consumer products fell more, to about 65 to 75 percent.
8 ⁄ 12 inch capacity utilization rebounded in the third quarter
Geopolitical risks are expected to continue in the second half of 2023, with end-customers taking the lead in supplier inventory and continuing to shift supply chains in response to the U.S. government's bid. At the same time, IC design factories have gradually transferred part of their orders to non-Chinese wafer factories for production, most of which are 8-inch products. The transfer measure has gradually increased since the second half of the year. It is expected that the recovery performance of 8-inch capacity utilization rate in non-Chinese wafer founfounts such as United Power and Vanguard will be slightly better than average in the second half of the year.
Overall, after a year-long inventory correction period, some end-consumer products are expected to regain inventory restocking momentum for the year-end holiday season. TrendForce said inventory momentum will be driven by a few specialty products and rush orders from the second quarter, and the 8/12 and 12-inch capacity utilization rates will increase significantly from the third quarter. However, considering the overall economic situation is not clear, the overall rise is limited, I am afraid, a short time to return to full prosperity.
More than 20 new plants around the world are being completed each year
In the medium and long term, the supply and demand of wafer foundry will gradually favor the multi-capacity layout of each region. TrendForce statistics show that in recent years, there are more than 20 new fabs planned in the world, including 5 in Taiwan, 5 in the United States, 6 in mainland China, 4 in Europe, Japan and South Korea and 4 in Singapore. Geopolitics has promoted the awareness of local production in various countries and regions, and semiconductor resources have gradually become strategic materials of various countries. In addition to considering the business and cost structure, wafer foundries should also consider the government subsidy policies of various countries and regions, meet customers' localized production needs, and maintain the balance of supply and demand. The diversification of future products and pricing strategy are the key to the operation of wafer foundries.