Sourcenginebreadcrumb separatorResource Articlesbreadcrumb separatorIndustry Newsbreadcrumb separator
Semiconductor Industry News - February 2024 Update

Semiconductor Industry News - February 2024 Update

A picture of chips on a wafer

Significant Investments Planned Across Semiconductor Supply Chain - February 23, 2024

Investments within the semiconductor industry are on the rise. Organizations and governments are financing every part of the electronic components supply chain, from research and development to artificial intelligence manufacturing. The U.S. government continues to fund semiconductor-related research and development under the CHIPS Act, as OpenAI’s Sam Altman embarks on his most ambitious plan yet.  

The U.S. Continues its Investment in Semiconductors

To support domestic semiconductor manufacturing, the U.S. passed the CHIPS and Science Act, a great start to revitalizing this neglected industry. Since its creation, the U.S. has seen over $200 billion in investments for U.S. semiconductor manufacturing. Under the law, the allocated $52.7 billion was split into several areas, with $39 billion in subsidies for semiconductor production and $11 billion in research and development.  

At the center of this new push for research and development is the National Semiconductor Technology Center (NSTC). The NSTC, in U.S. Commerce Secretary Gina Raimondo words, is “a public-private partnership for the government, industry customers, suppliers, academics, entrepreneurs, and venture capitalists to come together to innovate, connect, network, solve problems and allow Americans to compete and outcompete the world.”

The NSTC will establish an investment fund to help “emerging semiconductor companies advance technologies toward commercialization.” The center will also conduct research and prototyping of advanced semiconductor technology.  

Raimondo spoke about the plan with Reuters, discussing the upcoming announcement to award funding to several chip manufacturers. “These are highly complex, first-of-their-kind facilities…These are new-generation investments–size, scale complexity that’s never been done before in the country.”  

More recently, the National Center for the Advancement of Semiconductor Technology, a nonprofit created to operate the NSTC, appointed Deirdre Hanford as its CEO. Hanford said the first step will be to “build a community whose members will help define the strategy and investments core to the semiconductor R&D ecosystem.”  

Hanford said this represents a “once-in-a-generation opportunity” to create a new institution that will give the U.S. semiconductor industry a boost that Washington hopes for.  

Alongside the NSTC, there are three other programs to improve research and development within the U.S. These new programs under the CHIPS Act are the National Advanced Packing Manufacturing Program, the CHIPS Metrology Program, and a CHIPS Manufacturing USA Institute.  

"With strategic investments in R&D complementing targeted industry incentives, CHIPS for America will not only bring semiconductor manufacturing back to the US – it will keep it here for good," said Raimondo.  

Semiconductor research and development will help fuel economic growth, secure national security, and improve technological competitiveness. The NSTC will play a significant part in that. According to the Semiconductor Industry Association (SIA) and Boston Consulting Group (BCG), five key areas that the CHIPS Act R&D’s funding should strengthen are:

  1. Transitioning and Scaling Pathfinding Research
  1. Research Infrastructure  
  1. Development Infrastructure
  1. Collaborative Development  
  1. Workforce

These projects should create over 400,000 jobs within the semiconductor ecosystem and support thousands more throughout the economy.  

OpenAI’s Sam Altman Seeks Trillions to Reshape the Semiconductor Industry

The capabilities of large language models (LLMs) and generative artificial intelligence have taken the world by storm, thanks in part to OpenAI’s ever-popular ChatGPT. The chatbot, released in late 2022, quickly captured the interest of companies and countries alike. Over the last year, everyone from tech giants to small businesses has developed their own version of OpenAI’s successful LLM.

There were some stumbling blocks, mainly regarding Microsoft and Google’s accidental missteps with Bing and Bard, which have since been rebranded and corrected but are not enough to trip up AI’s rise to the top. Over the last year, OpenAI has been working alongside Microsoft to enhance the latter’s AI application, Copilot, and petitioning other technology giants to establish AI regulations and universities to educate students.  

Now, OpenAI’s CEO, Sam Altman, is exploring a new area, and it could be one of the company's most significant undertakings yet.  

Sam Altman is currently in talks with investors and others, including the United Arab Emirates government, to raise funds for “a wildly ambitious tech initiative that would boost the world’s chip-building capacity, expand its power-to-power AI, and other projects.” Such a zealous action plan could cost as much as $5 to $7 trillion—quite the expense.  

AI’s expansion has been limited in comparison to its possible potential due to the scarcity and expensive nature of AI chips. This problem has placed constraints on OpenAI and other AI companies’ growth. As Altman explained, these chips are necessary to train large language models effectively but are far too limited. The number of GPUs needed to help push for greater AI use would need to be significantly expanded, hence the reason for this massive fundraising initiative.

However, an investment of this size is bigger than the current worth of the global semiconductor industry, which reached $527 billion in 2023, down 8.2% from poor sales and economic decline. The semiconductor industry isn’t forecast to even reach $1 trillion in size until 2030 at its current growth rate. This investment is even more significant than the national debt of some countries, like the U.S., with its corporate debt reaching $1.44 trillion. The combined market capitalization of Microsoft and Apple, the two highest-valued businesses in the U.S., is $6 trillion.

However, this plan might be necessary for OpenAI’s continued growth toward reaching human-level artificial intelligence. The support needed for such an extreme level of AI would require a solid and secure global-spanning network of funders, industry partners, and governments to provide funding and energy–of which AI facilities require oceans.

In the last few weeks, Sam Altman has met with U.S. Secretary of Commerce Gina Raimondo, U.A.E.’s Sheikh Tahnoun bin Zayed al Nahyan, a top security official and brother of U.A.E.’s President Mohamed bin Zayed al Nahyan, and the chair of numerous vehicles of Abu Dhabi’s sovereign wealth. Sam Altman has also discussed this initiative with Masayoshi Son, Softbank's CEO, and TSMC's representatives.  

The U.A.E. and its growing financial portfolio would be significant players in the venture but is dependent on allowance from the U.S. government. Altman plans on raising money in the Middle East to build new chip-fabrication facilities and have TSMC build and run them. Microsoft supports Altman’s goal in this venture. Whether it will prove to be successful is another question.

A new supply chain that helps support the growing AI sector will be necessary, considering how limited GPU supply is already causing bottlenecks. Whether this challenge will be solved through Altman’s venture, or another initiative is left to time.

A picture of a massive hurricane from above

Chips are Down, but Not Out. Experts Look Into 2024 - February 16, 2024

The semiconductor industry will see many changes this year. Research shows that 2023 saw continual declines in late Q3 and Q4 despite inklings of oncoming recovery. Memory giant SK Hynix stated in October 2023 that initial signs of chip recovery were beginning to appear. A month later, SK Hynix and Samsung Electronics indicated that signal demand weakness bottoming out was a good sign of recovery in 1Q24.

SK Hynix and Samsung Electronics have cited the rising popularity of artificial intelligence (AI) applications boosted chip demand, preventing the market downturn from growing worse. Despite the recovery outlook, SK Hynix and other memory manufacturers are still planning production cuts to keep supply-demand tight in 1H24. Market research predicts that there will be a rebound, like SK Hynix and Samsung Electronics expected in late 2023, but it could take longer than the original hope of 1Q24.  

Market Demand to Rebound Coming Late in the Year After Declines

A recent Semiconductor Industry Association (SIA) report revealed that the semiconductor industry’s revenue was down 8.2% in late 2023 compared to the same time frame in 2022. Despite the downturn, sales peaked during the second half of 2023, reaching $526.8 billion worldwide.

“Global semiconductor sales were sluggish early in 2023 but rebounded strongly during the second half of the year, and double-digit market growth is projected for 2024,” said John Neuffer, SIA President and CEO. “With chips playing a larger and more important role in countless products the world depends on, the long-term outlook for the semiconductor market is extremely strong. Advancing government policies that invest in R&D, strengthen the semiconductor workforce, and reduce trade barriers will help the industry continue to grow and innovate for many years to come.”

Counterpoint Technology Market Research reported similar findings, with global semiconductor industry revenue declining by 8.8% in 2023. This was due to a slowdown in enterprise and consumer spending. Counterpoint Research reported that 2023 was “a year for semiconductor companies to fine-tune their strategies/outlook and manage inventory adjustments to prepare for the impending AI boom.”

William Li, Senior Analyst at Counterpoint Research, said, “In general, we believe artificial intelligence (AI server, AI PC, AI smartphone, etc.) will continue to be a major organic growth driver in the semiconductor industry in 2024, followed by the memory sector’s rebound due to normalizing oversupply situation and demand recovery. The automotive sector could be another driver for the market due to content growth, which was already a key revenue driver for Infineon and STMicroelectronics in 2023.”

Nvidia will continue to lead the charge in market industry regrowth thanks to its high market share of general-purpose GPUs utilized in AI/high-performance computing.

The industry is at the end of its inventory correction cycle, and the current support from consumer demand is solid. Supply constraints may continue to be a challenge this year from outside factors, so it will be important for companies to be cautious despite the positive market forecast.

Challenges That Might Impact the Global Supply Chain in 2024

Stability is still far from reach after months of shortages, excess inventory, long lead times, and sharp price changes. Most research firms believe 2024 will be a year of growth for the semiconductor industry. The expectation of how much growth will come depends on the research firm's optimism. Edgewater Research has expressed a more tepid outlook, viewing 2024 as a transitional year.

In contrast, the International Data Corporation (IDC) and World Semiconductor Trade Statistics (WSTS) are far more optimistic about the market outlook. Most research points to AI and memory components being the main drivers of growth in 2024, with a significant rebound occurring in 2H24.  

The semiconductor industry isn’t out of the woods just yet. Sourceability’s Senior Vice President of Sales, Josh Pucci, discussed six of the biggest challenges poised to cause significant supply chain disruptions if left unchecked.  

There is a silver lining: opportunities for new avenues for business development and growth for every problem. The six issues EPS News listed in its recent article, “6 Trends Shaping the 2024 Supply Chain,” are:

  1. Geopolitics: Geopolitical volatility has risen in the last several years. Currently, the world is grappling with strife as the Russia-Ukraine war and Israel-Hamas conflict continue. Houthi rebel attacks on vessels in the Red Sea have delayed logistics as companies reroute around Cape Good Hope, and the ongoing trade war between the U.S. and China has contributed to restrictions on manufacturing equipment and raw materials.
  1. Climate Change: Billion-dollar weather events are on the rise, leading to costly droughts, fires, floods, and storms that disrupt nearly the entire length of the global semiconductor supply chain. In Panama, shipping companies have been delayed by a historic drought that has led to heavy restrictions on passage through the much-needed Panama Canal.  
  1. Environmental, Social, and Governance (ESG): Sustainability in the semiconductor industry is becoming a major priority as companies work to reduce their overall carbon footprint. Semiconductor manufacturing is known for its, unfortunately, toxic past with dangerous chemicals leeching into groundwater. Intel has been working alongside cleanup agencies in the U.S. to help detoxify its previous facilities.
  1. Cyber Attacks: It’s said that the next war will be fought on the frontlines of cyberspace and sophisticated malicious malware attacks are ramping up. Semiconductor facilities can present an attractive target to foreign hacking groups as successful breaches can have widespread effects. These attacks can delay shipments, leak intellectual property, and cause production downtime. Worse, these attacks can lead to infected products hurting a company’s brand.  
  1. Excess Inventory: The bullwhip from shortage to months of excess electronic component inventory has contributed to rising concerns about obsolescence risks. Electronic components have expiration dates, and improper storage can make components deteriorate faster. Long lead times, like those seen during the shortage, can pose a risk for holding inventory, as by the time the market rebounds, the stock could be useless.  
  1. Labor Shortages: From a lack of a sufficient talent pool to labor strikes, the semiconductor industry is grappling with an increased demand for higher production capacity but insufficient staff to accomplish this goal. Most countries working to improve domestic semiconductor manufacturing resiliency are also grappling with labor shortages, with an additional one million workers needed by 2030.

These challenges can cause massive disruptions in the fragile, global supply chain. Each delay can result in far-reaching ripple effects that vary in severity, especially with how interconnected the semiconductor supply chain is.  

It’s not all bad news. These challenges are the perfect catalyst for continued digitalization and the use of artificial intelligence applications within the semiconductor industry. Automation can help compensate for the lack of skilled labor on production lines while reducing human error and optimizing workflows to lessen a facility’s carbon footprint.  

Better inventory management through market intelligence can prevent dramatic inventory overhang and help organizations avoid the possibility of obsolescence. Greater visibility can highlight risks related to geopolitical volatility, and diversification can fortify supply chains against disruptions.  

Increased attention to digital tools and digitalization can improve an organization’s cyber security, preventing successful breaches by ransomware. Lastly, continued collaboration between semiconductor suppliers and environmental agencies can help find new alternatives for the toxic chemicals needed in manufacturing.

A picture of the United States Flag next to the Capitol Hill building

Resiliency Prioritization Continues and New Partnerships Promise Exciting Developments - February 9, 2024

Countries continue to work toward semiconductor manufacturing resiliency. Since the global semiconductor shortage, new programs and plants have made headlines over the last year. In the coming months, subsidies to support semiconductor manufacturing will be awarded to selected chipmakers.  

According to reports, the Biden Administration will soon announce which chipmakers will be receiving funding under the CHIPS Act. Since its creation and passage, the CHIPS Act has garnered the U.S. over $200 billion in private investments toward semiconductor manufacturing. Financial aid from both federal and state governments has continued to captivate interest among industry competitors.  

A side effect of new tax breaks and other monetary benefits has contributed to a rise in collaborative partnerships among semiconductor manufacturers. The benefits of these strategic partnerships are invaluable. They could prove essential in overcoming one of the biggest challenges for the electronic components industry in the coming decade: the labor shortage.  

Reports Indicate Semiconductor Projects Could Receive Billions in Subsidies

The Biden Administration will soon award billions in subsidies to top semiconductor manufacturing companies. The Wall Street Journal reports that executives expect this announcement to occur during President Biden’s State of the Union Address on March 7th. The likely recipients of these subsidies include Intel and TSMC, which will help these companies complete their latest U.S. semiconductor facilities.

Intel has projects underway in Arizona, Ohio, New Mexico, and Oregon that will cost more than $43.5 billion. TSMC has two plants in Arizona with a total investment of $40 billion, announced last year. Samsung Electronics, which could also be among the recipients, has a $17.3 billion project in Texas. The Wall Street Journal also expects Micron Technology, Texas Instruments, and GlobalFoundries to be among the top contenders for the subsidies.  

It’s predicted that the announcements will kick-start the manufacturing of advanced semiconductors for smartphones, artificial intelligence (AI) applications, and weapons systems. This comes after remarks from U.S. Commerce Secretary Gina Raimondo in December, stating that she would make around a dozen funding awards for semiconductor chips within the following year. This will reshape U.S. chip production.

The first award was also made public in December, with over $35 million in funding to a BAE Systems facility in New Hampshire. The facility is said to produce chips utilized in fighter planes and is part of the $39 billion “Chips for America” subsidy program.  

While these economic initiatives are an added boon to the United States, lingering concerns remain due to the ongoing labor shortage. Despite investments, some experts worry that semiconductor manufacturing production will take years to meet goals because of the need for more skilled labor.  

Universities and semiconductor companies are working together to create educational pipelines, but it could take years, not months, to properly establish. There is hope that these new subsidies will help propel educational efforts to grow the talent pool faster. If not, AI’s growing improvements can help bridge the gap left by the labor shortage.

Intel and UMC Collaborate for High-Growth Markets

Intel and the United Microelectronics Corporation (UMC) recently announced their collaboration to develop a 12nm semiconductor process platform. The new process will address high-growth markets like mobile, networking, and communication infrastructure. This long-term agreement will leverage Intel’s at-scale U.S. manufacturing capacity and experience alongside UMC’s extensive foundry capabilities on mature nodes to enable an expanded portfolio.

To begin, the partnership will focus on Intel’s U.S.-based high-volume manufacturing capacity and experience with FinFET transistor design. This design offers a potent combination of performance and power efficiency, giving Intel and UMC an excellent springboard for creating a product that satisfies customer demand. Intel and UMC will cooperate on design enablement to support the 12nm process through electronic design automation and intellectual property solutions from other ecosystem partners.

The project is forecasted to begin operations in 2027, with the 12nm process being developed and manufactured in Fabs 12, 22, and 32 at Intel’s Ocotillo Technology Fabrication site in Arizona. Intel and UMC will significantly reduce the investment needed to create this new process by using existing equipment.  

Since the announcement, Intel and Taiwan have shared positive statements regarding each other’s strengths.  

“Taiwan has been a critical part of the Asian and global semiconductor and broader technology ecosystem for decades, and Intel is committed to collaborating with innovative companies in Taiwan, such as UMC, to help better serve global customers,” said Stuart Pann, Intel Senior Vice President and General Manager of Intel Foundry Services. “Intel’s strategic collaboration with UMC further demonstrates our commitment to delivering technology and manufacturing innovation across the global semiconductor supply chain and is another important step toward our goal of becoming the world’s second-largest foundry by 2030.”

Jason Wang, UMC Co-President, said, “Our collaboration with Intel on a U.S.-manufactured 12 nm process with FinFET capabilities is a step forward in advancing our strategy of pursuing cost-efficient capacity expansion and technology node advancement in continuing our commitment to customers. This effort will enable our customers to smoothly migrate to this critical new node, and also benefit from the resiliency of an added Western footprint. We are excited for this strategic collaboration with Intel, which broadens our addressable market and significantly accelerates our development roadmap, leveraging the complementary strengths of both companies.”

The landmark collaboration is a win-win for both companies as UMC can agilely leverage the FinFET capacity without the added pressure of costly capital investments. For Intel, this collaboration is expected to aid the company in its goal of shifting from an integrated device manufacturer (IDM) to a foundry business model. Both companies, especially UMC, will be able to solidify their standing among fierce competition in their respective markets.  

Trendforce notes that if the partnership succeeds, Intel may consider “co-managing additional 1Xnm FinFET facilities with UMC, potentially expanding to sites like Ireland’s Fab24 and Oregon’s D1B/D1C.” However, it goes without mentioning that the journey to its tentative production start in 2027 is not without challenges. Intel continues to face hurdles as it attempts to break into the foundry industry, and UMC’s 14nm process has been in development since 2017.

Hopefully, Intel and UMC can strengthen each other's weak points with their individual experience and expertise. It will be interesting to see what develops in this new alliance in the coming years.  

An image of a distant city within China at dusk

Memory Market Sees Price Growth and China Races Toward Self-Resiliency - February 2, 2024

Ongoing coverage over the recent price hikes to DRAM contract prices is now shifting to NAND Flash. Prices are going up and up after a low year for the memory market, marked by significant capital losses for manufacturers and strategic production cuts.

New data by TrendForce reveals aggressive price hikes by suppliers for several reasons ranging from market outlook uncertainty to manufacturers offsetting losses. The semiconductor industry will likely see many different production strategies among various suppliers for 2024. Expectations are still optimistic for a market rebound in the latter half of the year.  

Meanwhile, countries continue to push for domestic semiconductor manufacturing resiliency in the new year. With recent government funding aid in the United States and facility construction commencing in Europe, Chinese companies are working overtime to boost domestic capabilities. Over the last few weeks, China’s production capacity is expected to boom over the next few years as its imports of semiconductor equipment reach billions.  

NAND Contract Prices See Growth Echoing DRAM in 1Q24

In true cyclical fashion, the NAND Flash sector is following behind DRAM. Earlier this year, TrendForce reported that DRAM contract prices were forecasted to rise 13-18% in 1Q24. In 4Q23, there were already expectations that prices across DRAM and NAND would see hikes after a year of drops.  

Due to uncertainty about DRAM's market outlook, memory manufacturers are increasing prices as buyers make bold purchasing decisions. Unfilled DDR5 orders are fueling this uncertainty with suppliers continuing production cuts to keep the supply-demand tight. Buyers are stockpiling DRAM components in some industry sectors, such as graphics and consumer.

TrendForce's most recent report reveals that even though the market faces a traditional low-demand season, buyers are increasing their purchases to establish safe inventory levels. The NAND Flash market will see an estimated 15-20% increase during 1Q24.  

According to TrendForce, “With demand struggling to keep pace with these rapid increases, future price escalations hinge on the resurgence of enterprise SSD procurement. The first quarter of 2024 will see varied production strategies among suppliers, with some ramping up output early. This could lead to added pressure if anticipated demand growth falls short, moderating price hikes in 2H24.”

So far, enterprise SSD has not seen any demand spikes in the North American market. Lately, Chinese CSPs and server brands have filled the gap NA CSPs left behind. This keeps the market buoyant and encourages buyers to beef up their orders, helping push SSD contract prices to a high of 18-23% during 1Q24.  

Meanwhile, eMMC and UFS products are witnessing bold price hikes in both sectors as suppliers' persistent production cuts have greatly limited production capacity. Because of the limited capacity, buyers must accept the price increases to prevent shortages. This is especially true for the UFS market, where critically low smartphone client inventories lead to UFS 4.0 being highly coveted.  

Stabilizing smartphone and Chromebook demand is the primary driver of buyers' stockpiling and suppliers' bold pricing strategy. Some UFS series products are even witnessing price jumps of over 30%, with a forecast of a high of 18-23% rise. NAND Flash will see a moderate increase in 1Q24 at 8-13% from diminished buyer enthusiasm.  

Uncertainty plagues DRAM and NAND Flash markets, with buyers and suppliers making ambitious moves while observing how the market plays out. Keeping a watch on pricing over the year's first half as excess inventory mitigation continues will be pertinent for buyers and suppliers to prepare for the forecasted market rebound in 2H24.

China Continues Pushing Toward Self Resiliency

Analysts at Barclays have indicated in a recent report that China’s semiconductor manufacturing capacity is expected to double in the next 5 to 7 years. This analysis of 48 chip manufacturers with production facilities in China surpasses previous market expectations significantly. Research suggests that 60% of the expected additional capacity to meet these goals will be able to come online within the next three years.  

Currently, 22 wafer fabs are under construction in China. Ten more are planned to be constructed by companies like SMIC, Nexchip, CXMT, and Silan in the coming months. All of them are expected to come online by the end of 2024.  

Chinese firms have also accelerated the procurement of crucial chip manufacturing equipment to ensure the timely completion of these facilities. The import value of lithography equipment from the Netherlands, essential in producing advanced semiconductors, has surged by 1050%. It has reached nearly $40 billion, according to Bloomberg. The most recent surge came in December as firms rushed to buy ahead before Dutch restrictions on lithography equipment started.  

To circumvent challenges by export controls, many firms are investing in the development of China-made semiconductor manufacturing equipment. Last year, sales revenue for China-based semiconductor manufacturing equipment surged significantly after restrictions passed.

Barclays analysts expect most of China’s production capacity will be held by mature semiconductors (28nm and above) over advanced semiconductors. Research suggests that China will likely lag in advanced semiconductor production for at least another decade. Most mature semiconductors are still used in household appliances and automotive systems, meaning these facilities will be a welcomed addition.

There is concern that the larger production capacity and focus on mature nodes could lead to a market oversupply, but Barclays research suggests it would take several years to reach that point. It would also depend on new trade restrictions, if any arise, and on component quality.  

However, TrendForce notes that China’s mature process capacity, rising from 29% to 33% and driven by local production policies, could cause a flood of mature processes to enter the global market and trigger a price war. Such a move would take place around 2027. As China’s mature process capacities emerge in the coming years, prepare for this.

An image of a container ship traveling on the water

A Year of Growth for the Semiconductor Industry - January 26, 2024

This year, the semiconductor, interconnect, and passive industries are poised for growth. Most analysts forecast a rebound to come fully in 2H24, with excess electronic component inventory remaining a challenge for the year's first half. Mitigation of excess inventory has been making progress, noticeable in 3Q23 and 4Q23, despite low sales. Artificial intelligence (AI) made its mark on the industry in 2023 and will continue to do so in 2024.

A surprise contender for one of the main drivers of market recovery in 2024 will come from the memory sector. Last year, memory giants experienced the steepest declines from the drop-off in consumer demand. DRAM contract prices are rising in 1Q24, fueled by production capacity uncertainty for unfulfilled orders of specific components.  

As memory manufacturers strategize for the year, logistics companies face another few months, if not the year, of challenges from disruptions to the two most well-known waterways worldwide.  

Expansion in Memory to Account for Undelivered DDR5 and HBM Stock

A recent report from TrendForce made one thing clear about the coming quarter: DRAM contract prices were rising. After months of price drops throughout 2023, there were clues of an upcoming price increase in 4Q23, according to Sourcengine’s Lead Time Report. There is likely an average increase of between 13%-18% across DRAM market segments.  

Uncertainty in the market outlook is fueling the current price trend, with buyers in consumer and graphics DRAM making more aggressive purchase decisions to stockpile components.

Unfulfilled DDR5 orders generate market unpredictability, feeding into the recent DRAM surge. Similarly, the industry is pivoting toward DDR5 over DDR4 and is poised to surpass DDR4 in the ongoing pricing rally.  

December is the starting point of the memory rebound, with recovery evident in revenue growth among Taiwanese companies such as Macronix, Nanya Technology, and Transcend. Despite the growth, some memory manufacturers plan to continue with production cuts to maintain the supply-demand balance throughout the year. SK Hynix is one such company that plans on continuing production cuts but reducing the scale in 1Q24. The company plans to make similar adjustments to NAND Flash production in 2Q24 and 3Q24.

Over the next few weeks, SK Hynix’s expansion will focus primarily on DDR5 and high-bandwidth memory (HBM) products. Manufacturers believe that over 2024, manufacturers will expand penetration of HBM and DDR5 through each quarter. According to TrendForce, low-margin DDR4 capacity “will be crowded out.”

HBM products are vital in using cloud servers and artificial intelligence applications, such as generative AI and large language models (LLMs). SK Hynix, Samsung Electronics, and Micron Technology have been working toward new-generation HBM components for cloud services.

Logistics Complications Continue in Two Important Canals

Over the last year, disruptions from geopolitical volatility and the energy crisis have led to challenges in logistics. In the early days of the global semiconductor shortage and the Covid-19 pandemic, a peculiar problem arose when a container ship called the Ever Given ran aground in the Suez Canal. The obstruction lasted six days, holding up nearly $60 billion in trade and causing an estimated 60-day shipping delay on an already overtaxed global supply chain.  

Now, the world is grappling with challenges impacting two of the world’s most important trade routes, the Panama and Suez Canal. These challenges have already caused a litany of headaches for shipping companies worldwide.

Panama is experiencing one of the worst droughts on record. To combat the ongoing drought, the Panama Canal Authority has placed restrictions on vessels passing through the Panama Canal due to the reduced water levels. Usually, the Panama Canal sees 36 ships pass through the route per day. This has been lowered to 22.  

However, since the drought began in December 2023, the situation is improving. The El Niño oscillation in the Pacific Ocean brings a fair amount of warmer ocean temperatures, contributing to more storms and wetter weather. Panama might see a decent amount of rainfall this year, remedying the drought.  

“Rainfall and lake levels have been higher than expected,” Air Cargo News reported on the situation in Panama. “Restrictions were set to become stricter with ships to be limited to 18 by February next year,” but due to higher water levels, the Panama Canal Authority will increase the transit number to 24 ships in January.  

Conversely, the Suez Canal is grappling with the ongoing Red Sea Crisis. Due to the devastating Israel-Hamas conflict, tensions in the Red Sea from rebel attacks on passing ships have surged. The additional security risks to Suez Canal-bound transport ships have raised the insurance cost.

Reuters says navigation through the Suez Canal is flowing normally, with the canal authority watching the tension and analyzing the impact on shipping. The Suez Canal is used by roughly one-third of all global container ship cargo, and the redirecting of ships costs around $1 million extra in fuel.  

The Panama Canal and Suez Canal lack an abundance of alternate routes. Those who avoid either waterway must go around Cape Horn in Chile or Cape Good Hope in South Africa. The increased fuel costs by taking alternate routes could translate to higher prices on some shipped components, similar to what the market experienced during the initial days of the war in Ukraine when Russia cut off natural gas to the European Union.  

The effect might not be as dramatic as the energy crisis, but it will be imperative for companies to keep an eye on it in the coming weeks if these matters aren’t resolved. The semiconductor industry is poised for a rebound in the latter half of 2H24, but market demand may be muted and not enough to offset even small price increases. If the market recovery follows a more positive outlook, lead times could grow following shipping delays.

An image of a quantum computer

New Scientific Breakthroughs and Old Challenges Haunt the Industry - January 19, 2024

From a global perspective, the difference between new and old is a thin lens. In the chip world, the days of silicon’s dominance are coming to an end. Researchers believe a new form of graphene, merged with silicon carbide, could be the future of chipmaking and quantum computing. They recently unveiled the world’s first graphene semiconductor.

Meanwhile, the international supply chain is applying lessons learned from past disruptions to manage a new wave of uncertainty. As war rages in the Middle East and Ukraine and demand for goods fluctuates wildly, the supply chain is embracing diversity and risk mitigation to bolster confidence.  

The World’s First Graphene Semiconductor Could Power Future Quantum Computers

The limits of using silicon to create semiconductors are rapidly approaching—perhaps sooner than many would like to admit. With this in mind, researchers are searching for the next material to carry the industry forward. Graphene is promising thanks to its superior conduction properties. However, its lack of a band gap has limited its ability to be used in chipmaking.  

According to a new study published in the journal Nature, this problem might be solved. The solution comes from a source with which many in the industry are already familiar: silicon carbide (SiC).  

The research team bonded a single-atom layer of graphene with a silicon carbide layer using their specialized heating and cooling process. Their result? An epitaxial graphene-based semiconductor that could revolutionize chipmaking in the coming years.  

In this system, the SiC atoms “donate” electrons to the graphene molecules, which creates a functional band gap. This refers to the minimum amount of energy electrons need to move within a material to allow transistors to switch between “on” and “off” phases in a computer chip. Using SiC allowed the researchers to bypass the limitations of graphene and create the world’s first functional graphene semiconductor.  

Since graphene moves electrons much faster than silicon, the chip can operate at terahertz frequencies. Such speeds are a massive leap compared to today’s silicon chips and promises big things for the industry.  

Notably, the researchers believe their approach can be easily integrated into existing wafer manufacturing processes. Indeed, many chipmakers are already experimenting with SiC wafers given their increasing importance for clean energy and electric vehicles. With this in mind, it’s realistic to see how the industry could shift towards this new epitaxial graphene as a medium for advanced semiconductors without a revolutionary upgrade to existing processes.  

Perhaps even more exciting is the material’s relevance for quantum computing. Today’s leaders in this segment are using a variety of methods to achieve their goals. There is plenty of disagreement on which technology will yield the greatest quantum results. Intel, for example, believes in a silicon-based solution that houses spin qubits inside. Meanwhile, Google, IBM, and Rigetti Computing are focused on a more mainstream superconducting model that requires extremely low temperatures but is tremendously powerful.  

In an interview, lead researcher from the graphene chip study, Walt de Heer of the Georgia Institute of Technology, said, “Like light, electrons in graphene have quantum mechanical wave-like properties that can be accessed in devices, particularly at very low temperatures.”  

The research team hopes to explore the quantum applications of their discovery in future studies. Though it remains speculative, de Heer says graphene-based chips could outperform superconducting technology. If true, this would be a massive breakthrough in the quantum computing world and could reshape how the industry evolves in the years ahead.  

For now, graphene-based semiconductors are an exciting area to explore. More research and significantly more testing are required before mass production can be considered. However, the need for more advanced chipmaking materials is dire, and epitaxial graphene is a promising solution.  

Diversity, Risk Mitigation Key for Combating Global Supply Chain Uncertainty Amid Turmoil

Globally, the supply chain is still working to recover from the effects of the COVID-19 pandemic. More recently, though, new factors have introduced further disruption. The conflicts between Russia and Ukraine, as well as Israel and Hamas, have a ripple effect on the supply chain. Ongoing fluctuations in demand also make it nearly impossible for logistics managers to predict future needs. As a result, there is an undeniable element of uncertainty right now as manufacturers, logistics operators, and consumers grapple with the influx of changes.  

Fortunately, global risk diversification efforts are beginning to pay dividends. Following the onset of escalating tensions between the U.S. and China in 2018, chipmakers and players across numerous other industries have engaged in strategic realignments to protect their operations from uncertainty. Indeed, this trend of global diversification has been one of the biggest headlines in recent years as companies expand their operations in new locations and avoid regions ripe with conflict—economic or otherwise. This diversity has dampened the impact of military conflicts and gives all parties more flexibility for moving goods around the world on schedule.  

With the chip industry at the center of rising global demand for components to power the AI revolution, Taiwan is handling a surge in business. The island’s Taiwan International Ports Corporation saw record-breaking highs in 2023 with even more volume projected for 2024. This comes partially thanks to the opening of its newest terminal, which can berth four container ships at a time.  

In Taiwan’s port and others worldwide, lessons learned during the pandemic are improving efficiency and preventing congestion. This includes the increased use of automation and better global planning and operating rules from leading logistics corporations.  

Of course, waning demand for goods also plays a role. According to data from several international institutions cited by DigiTimes Asia, global trade volume growth currently lags behind maritime capacity expansion. Today, the supply chain is better equipped to keep up than in years past.  

Alongside this, the latest PMI for the U.S. manufacturing and services sectors points to sustained activity moving forward with no more declines on the horizon. While the same isn’t true for the EU, consumer confidence is rising in the region.  

The global supply chain will need much more time to forget about the massive disruptions that shook the industry to its core in 2020. In reality, it’s best not to forget those trials or the lessons learned as a result. Even so, the uncertainty will linger as a barrage of political and economic tensions continues to put pressure on manufacturing and logistics.  

Fortunately, the global supply chain is now more diverse and robust than ever. There’s no sign that the efforts behind this trend will slow down in the coming years. As companies worldwide emphasize operational security, global collaboration will be increasingly essential, and the broader supply chain will benefit.

An image of the Japanese flag with a crack through it

Earthquakes and Slow Demand Kick Off the Year - January 12, 2024

Japan’s semiconductor industry appears to have dodged a significant blow following a deadly 7.6 magnitude earthquake as early reports reveal minimal damage to key facilities in the affected region. Experts believe the current temporary shutdowns for inspections will be resolved quickly and operations will resume shortly.  

Meanwhile, the memory market has finally turned the page on a tumultuous 2023 and is preparing for a more positive year. While spot prices for DRAM and NAND Flash components remained flat to close the year, analysts have high expectations for prices in the first quarter of 2024.  

Japan Earthquake Temporarily Halts Production at Key Chip Plants, Damage Appears Minimal

Following a devastating 7.6 magnitude earthquake that rocked Japan on the first day of the new year, experts are still assessing the impact on the country’s chip industry. At least 94 people have been confirmed dead following the quake that centered in the Noto region of Japan’s Ishikawa Prefecture.  

While there is no making up for the tragic loss of life, there is a glimmer of hope for a fast economic recovery. According to a report from TrendForce, the recent earthquake does not appear to have significantly damaged any of the several key chip-related facilities in the affected region.  

Ishikawa is home to several important fabs and raw wafer production plants. While these sites are shut down temporarily for authorities to thoroughly investigate each of them for damage, preliminary reports appear positive.  

Most of the factories weren’t located near the quake's epicenter and only experienced seismic forces of levels 4 to 5—well within the tolerance of the affected structures. Fortunately, early inspections reveal no damage to essential chip machinery, which should prompt a speedy return to operation.  

Shin-Etsu and GlobalWafers both operate plants in the area, which are currently shuttered for inspection. Due to the crystal growth needed for wafer production, seismic activity impacts these facilities more drastically. Fortunately for Shin-Etsu, most of its crystal growth operations are located in Fukushima, so the impact is limited, according to TrendForce.  

Meanwhile, Toshiba’s facility in Kaga is also halted for inspection alongside TPSCo’s trifecta of factories in Uozu, Tonami, and Arai. The latter is a co-venture between Tower Semiconductor and Nuvoton. Taiyo Yuden, Murata, and TDK, key MLCC manufacturers in the region, also reported no significant damage.  

While the humanitarian impact of Japan’s recent earthquake is still devastating, the country’s disciplined approach to earthquake preparedness prevented the disaster from being much worse. Ever since the brutal 1995 earthquake, Japan has invested heavily in infrastructure designed to be more resilient against strong seismic forces.

Interestingly, the country has also invested in drones to help aid in disaster relief. These robotic fliers can access hard-to-reach or dangerous areas much faster than human workers. Drones often assist in search-and-rescue operations to find people buried underneath the rubble and perform preliminary inspections of certain structures to ensure they are safe for human experts to enter.  

As Japan continues its recovery, expect the local chip industry to be back on its feet sooner rather than later. Thanks to the country’s preparation and quick work from disaster recovery teams, the earthquake's economic impact should be minimal, and chipmakers in the area shouldn’t be significantly affected.  

‍DRAM, NAND Flash Spot Prices Hover Due to Sluggish Year-End, But Increases Are on the Horizon

The memory chip market was up and down throughout 2023 and ended the year on a relatively flat note. Per new data from TrendForce‍, spot prices for both DRAM and NAND Flash components remained unremarkable thanks to the year-end and sluggish demand.  

The report outlines that some DRAM suppliers are releasing more stock into the spot market to lower their inventories. This trend has put downward pressure on spot prices. However, buyers have been slow to increase their procurement quantities, keeping prices for the DRAM market in flux.  

Meanwhile, NAND Flash spot prices have also remained flat thanks to the lack of driving forces to boost demand. TrendForce reports that purchasing stagnated at the end of the year. However, the NAND Flash market is in the midst of a substantial price correction thanks to restricted supply. Top memory chip makers, including Samsung, SK Hynix, and Micron, have all sustained sharp production cuts over the latter half of 2023 and into the new year to boost prices.  

Despite the stagnation in memory spot prices, industry analysts have a sunny outlook on the memory market’s future for 2024. TrendForce data suggests DRAM prices will increase by 13-18% in the first quarter. This jump will largely come thanks to demand generated by AI applications. The market is also currently flooded with unfulfilled DDR5 orders as OEMs race to manufacture devices with the fastest memory chips available today.  

Moreover, AI is also expected to spike demand for high-bandwidth memory (HBM) chips. These components play a crucial role in smartphones and other devices featuring on-device AI capabilities. As a result, mobile DRAM is expected to be the strongest category in Q1, with an expected price hike of 18-23%.  

Chipmakers will likely need to start churning out more memory modules in 2024. Analyst Roko Kim told Financial Times, “DRAM chipmakers’ inventories are likely to fall short of appropriate levels by the end of the first quarter. Then, they will need to think about increasing output and plant operating ratios.”  

Meanwhile, NAND Flash is poised for a surge of its own. TrendForce data projects a price increase of 13-18%. However, unlike the DRAM market, much of this increase is due to price hikes from manufacturers rather than organic demand.  

Ultimately, the memory market is sure to have a better year in 2024 than it did in 2023. Between growth driven by AI and price increases as manufacturers seek to offset their recent losses, buyers shouldn’t expect to procure memory chips on the cheap this year—even if current spot prices are stagnant.  

Semiconductor Industry Developments Go Full Steam Ahead in 2024 - January 5, 2024

Chipmakers are pushing the limits of what’s possible with cutting-edge silicon. However, as buyers continue to demand more and more from the latest chips, creative design and manufacturing solutions are more critical than ever. For some, this means turning to collaboration and joint projects. Samsung and ASML’s recent partnership to build a new $760 million EUV facility in Seoul is a testament to this trend.

Meanwhile, a push for geographic diversification is sparking interest in chips and equipment from places outside traditional hubs. Japan aims to recapture a spot at the top of the industry amid this shift. The country’s hopes center on its darling startup Rapidus, which believes it can close a 20-year gap with the world’s leading chipmakers thanks to its ambitious roadmap and strategy.    

Samsung, ASML Partner to Build New $760M EUV Facility in South Korea

Collaboration has recently been the name of the game in the chip industry as players look for new ways to gain an edge. ASML and Samsung recently unveiled plans to jointly build a $760 million advanced chip plant in the latter’s home of South Korea. The Seoul facility will utilize ASML’s next-gen extreme ultraviolet (EUV) equipment to produce high-end advanced semiconductors.  

The partnership is part of a broader diplomatic effort between the two sides as they seek to strengthen their collaboration in the chip sector. It comes after South Korean President Yoon Suk-yeol recently visited the Netherlands on a four-day trip, including a tour of ASML’s headquarters alongside Dutch King Willem-Alexander. Yoon said during the visit that his government is committed to working alongside the Netherlands and will provide all necessary support for the project.  

ASML has been working to expand its presence in South Korea beyond the four sites it already operates. Given the ongoing trade tensions between the U.S. and China, ASML is investing in geographic diversity with its latest expansion facilities.

Along with the new EUV plant in Seoul, ASML and Samsung are also working together to establish the Korea-Netherlands Advanced Semiconductor Academy. Aimed at addressing Dutch-based ASML’s severe labor shortage at home, the program will give South Korean students and chip workers opportunities for education and employment in the Netherlands.  

In a statement, Yoon Suk-yeol’s office said, “The technological innovation led by ASML is becoming a powerful driving force of the Fourth Industrial Revolution around the world, and Dutch semiconductor companies such as ASML and ASM are building new facilities for production, R&D, and talent training in Korea.”  

“This will mark a crucial turning point for the Korea-Netherlands semiconductor alliance,” the statement adds.  

ASML’s EUV machines are critical for Samsung and other chipmakers wanting to stay at the leading edge of chip production. As the South Korean firm maintains its status as a global leader in memory chip production, EUV advancements will remain vital. With demand for high-performance DRAM chips being driven by applications such as AI and electric vehicles, the need will be even greater in the years to come.  

However, Samsung isn’t the only South Korean firm joining hands with ASML. SK Hynix, the second-largest memory chip manufacturer, is working with ASML on hydrogen recycling technology for EUV equipment. The goal is to boost efficiency by reducing power usage and operating costs for EUV machinery.  

According to DigiTimes Asia, successful commercialization of the technology could yield annual cost savings of nearly $13 million per EUV machine. That’s an exciting proposition for the chip sector given EUV’s ubiquity for advanced chip production.  

The blossoming partnership between ASML and South Korea’s leading chip firms is an intriguing development to monitor. Close collaboration could yield results that significantly impact the wider industry and have widespread ramifications for chip production.  

Rapidus is Confident Japan Can Close 20-Year Gap with Global Chip Leaders

Japan’s most exciting chip startup, Rapidus, has taken the industry by storm since it was first announced. With the lofty goal of churning out 2nm chips by 2027 and already planning for 1nm production, Rapidus has set expectations sky-high. However, there’s no denying that its rivals have a two-decade head start and much more experience behind them.  

Even so, Rapidus believes it can quickly close this gap and catch up with the likes of TSMC and Intel. At the same time, the startup hopes to reinvigorate Japan’s semiconductor industry and return it to a place of prominence on the global stage.  

During the recent Semicon Japan conference, Rapidus Chairman Tetsuro Higashi noted that his firm’s forthcoming plant in Hokkaido will “surely succeed.” Higashi points to several fast-paced shifts in the chip industry as the driving factors.  

For one, the arrival of gate-all-around architecture is changing the way advanced semiconductors are designed and manufactured. Experts believe it will begin to replace traditional designs before this decade is over. Higashi notes this shift will unlock new chipmaking advancements which Rapidus intends to capitalize on with its 2nm production.  

“Around 2027 or 2028, there will be a point in time where the pendulum for the trend of the technology will start to swing in a different way,” he says, referencing this change.  

Higashi adds, “The chip market is moving more toward focusing on products with specific capabilities, instead of general use chips.”  

The latter is another critical shift Rapidus is targeting as part of its plan to catch up with industry leaders and boost Japan’s domestic industry. Companies across sectors, but particularly those in tech, are aggressively pursuing in-house development projects. While the likes of Apple and Meta have stolen the spotlight, countless others have shifted their focus to chips tailor-made for their applications. This is a significant trend to monitor in the coming years as traditional chipmakers will need to adapt to meet the changing demands of buyers.  

For Rapidus, this transition period over the next ten years or so presents an opportunity. The startup hopes it will be an ideal time to enter the market alongside more established players.  

One way Rapidus aims to break in is by harnessing the full support of Japan’s chemical and fab machine suppliers. Though the country’s overall chip sector lags behind other industry hubs, these firms are already key suppliers for the world’s largest manufacturers, including TSMC and Samsung. This will make Japan’s return to global semiconductor relevance a bit easier.  

However, the path forward isn’t without challenges. Japan’s chip industry has fallen far behind hubs like Taiwan, South Korea, and the U.S. in recent years. While Rapidus offers a breath of fresh air, it can’t revitalize the industry alone.  

Higashi says, “Japan must at all costs create a platform where cutting-edge technology can be born.”  

As Rapidus aims to close the gap between itself and global chip leaders, domestic support is essential. Fortunately, the Japanese government has fully bought into the project and has already pledged significant support for the startup. This includes hundreds of billions of yen for its Hokkaido headquarters and future chip research and expansion projects.  

Over the coming years, Rapidus will be one of the hottest chip firms to watch as it seeks to achieve a seemingly impossible feat. Whether or not it will draw level with TSMC and Intel anytime soon remains to be seen. However, it seems inevitable that Rapidus will shake up the industry with its ambitious roadmap and play a major role in returning Japan to a place of prominence in the global chip landscape.

Quotengine: Your Ultimate BOM Tool
With Quotengine’s real-time data on over 1 billion part offers, managing your BOM effectively has never been simpler.
Upload Your BOM
What’s Your Excess Worth?
Real-time market data, quick response time, and unique price offers to help you maximize your return on excess inventory.
Get an Estimate
The Last Integration You’ll Ever Need
Streamline manual processes and gain real-time access to inventory data, pricing updates, and order tracking through Sourcengine’s API
Sign-up Here
Sourcengine’s Lead Time Report
Strategize for upcoming market shifts through lead time and price trends with our quarterly lead time report.
Download now
Sourcengine’s Lead Time Report
Strategize for upcoming market shifts through lead time and price trends with our quarterly lead time report.
Download now