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Semiconductor Industry News - June 2024 Update

Semiconductor Industry News - June 2024 Update

An image of a technician holding up a microchip

AI Could Propel Chipmakers into Trillion Dollar Club while Talent Shortages Abound - June 21st, 2024

Semiconductor manufacturing has become the cornerstone of modern-day economies. Over the last several years, innovation has accelerated new developments in everything from smartphones to supercomputers. With the popularity of artificial intelligence (AI) fueling demand, industry giants are posed to become the latest members of the trillion-dollar club alongside Nvidia.

Amidst the new age of AI-capable components comes an unprecedented challenge. A shadow looms over the electronic components industry: the semiconductor labor shortage. Industry titans poised to offer the latest in AI's transformative potential are not immune to the effects of the oncoming labor crisis.  

AI could be the catalyst for unparalleled growth within the electronic components industry over the next decade if the global labor shortage doesn’t derail it first.  

TSMC and Broadcom Could be the Next AI Trend Winners

Nvidia joined the exclusive trillion-dollar company club one year ago. Companies that surpass a trillion in their evaluation are few and in-between. Only Apple, Microsoft, Saudi Aramco, Alphabet, Amazon, Meta, and Tesla had passed a trillion-dollar market evaluation before Nvidia. A year later, Nvidia remains the most recent addition to the trillion-dollar company list.

Nvidia commands around 80% of the AI chip market thanks to its cutting-edge GPUs. Nvidia managed to “briefly surpass Apple as the second most valuable company in the U.S.” by reaching over $3 trillion in market value. As Nvidia continues to reign in AI, two chipmakers may become the next members of the fabled trillion-dollar club thanks to the same ravenous demand for artificial intelligence.

TSMC, the largest semiconductor foundry globally, producing 60% of the world’s semiconductors and 90% of the world’s most advanced chips, hasn’t yet broken through the trillion-dollar ceiling. Most manufacturers, including Nvidia, don’t manufacture their chip designs but contract the process to fabrication specialists or foundries like TSMC. Despite TSMC’s popularity as a chip manufacturer, this hasn’t propelled the company to trillion dollar status. That is, not yet.

Because TSMC’s expertise in chip manufacturing processes can be applied to various semiconductor applications, it is not reliant on any one specific use case. As described by Yahoo Finance, TSMC’s “never-ending march toward faster and more power-efficient computing drives demand for its manufacturing capacity.”

TSMC specializes in contracting out its fabrication process, which has enabled the company to enjoy the recent boom in AI chip demand. According to Yahoo Finance, AI-related revenue is expected to grow for TSMC at an annual rate of 50% over the next five years, reaching 20% of its total business by 2028.  

It’s not the same jaw-dropping gains seen by Nvidia, but TSMC’s slow and steady wins could see the company reach $1 trillion in a couple of years. TSMC’s current market cap sits at $685 billion, meaning it needs to climb 46% to become an exclusive club member.

Yahoo Finance reports that chipmaking giant Broadcom also stands a chance to become the next chipmaker to reach $1 trillion thanks to its AI revenue quadrupling year-over-year during the first fiscal quarter of 2024.  

Broadcom offers AI chips that “focus on overcoming the networking challenges involved in moving around large amounts of data…[Broadcom] also makes chips for smartphones, broadband access, and data storage.”

Aside from its latest AI products, Broadcom’s software arm recently acquired VMWare, “which cements its position in virtualization and mainframe software, complementing security software.”

Like TSMC, Broadcom’s current market cap is $650 billion, with strong growth expected over the next several years the company is in prime position to join the $1 trillion club. With their diverse portfolios, both benefit from the recent AI boom but its wide variety of offerings will attract a greater audience than if they were solely AI service providers.  

CHIPS Act Facing Talent Shortage

The CHIPS and Science Act has been a significant step toward revitalizing the United States semiconductor industry. Since its passage, the U.S. Commerce Department announced “nearly $30 billion in grants and an additional $25 billion in loans” alongside generous tax breaks. In the years after its announcement, a total of $450 billion in private investments have been used to build new factories across the United States, from Oregon to New York.

Unfortunately, even the best-laid plans can hit snags.  

Industry experts tell Fortune that the semiconductor labor shortage is derailing the most recent phase of the CHIPS Act. Factories don’t have enough qualified staff to operate these fabs, which is a challenge TSMC encountered at its new Arizona facilities. TSMC had to bring over trained staff from its other plants in Taiwan to help train new workers and fill existing gaps.

“Workforce is a really, really important potential bottleneck,” an anonymous CHIPS Act official told Fortune. “We have some of the world’s greatest talent in this country. But because we have dramatically reduced our footprint in semiconductor manufacturing over the past 35 years, we have lost many of those skills, and we need to reinvigorate that.”

Due to past trends of outsourcing skilled chipmaking labor, the U.S. is currently short roughly 67,000 skilled workers. Different organizations, including federal officials, nonprofits, and educators, are working together to find solutions to close this gap quickly. Similarly, this problem isn’t inherent to the United States alone.  

China, another country working overtime to boost domestic semiconductor manufacturing efforts, faced an estimated shortage of 200,000 workers in 2023. Even the chipmaking giant Taiwan needs more skilled labor to man all its country's newest facilities.  

“You can’t run an economy like ours without having a solid manufacturing sector,” Mike Russo, President and CEO of the National Institute for Innovation & Technology (NIIT), told Fortune. “It’s a foundational component of innovation. If you want to lead, you have to innovate.”

“Over the years, semiconductor companies like Intel have relied on community college students to fill a large portion of technician jobs at [factories], but the emphasis on technician training waned over the years as companies invested more in science, technology, engineering, and math (STEM) education and research funding for bachelor, master and Ph.D. programs,” Intel wrote in a 2023 report on the semiconductor labor shortage.

Industry officials and chipmaking giants are working together to fund new programs to jumpstart career paths. The goal is to show that these positions are safe and sustainable with strong government support to ensure longevity. The more successful semiconductor manufacturers can prove that becoming a semiconductor fab technician is a long-lasting future career path, the more interested prospective workers will be in learning new skill sets.

“It’s going to be years of hard work on the ground—building programs, building connections, building stakeholder groups, getting middle schoolers excited about semiconductors,” said the CHIPS official. “That’s what it’s going to take. And we’re going to get there, but it will take a lot of work.”

An image of a microchip on a circuit board

Inventory Adjustments at a Healthy Level? AMD’s Latest AI Chip - June 14th, 2024

We are approaching the end of the first half of 2024’s fiscal year. As the electronic components industry nears the start of 2H24, companies are assessing how well inventory adjustments helped stem the impacts of excess stock. Reports from market analysts and company leadership reveal that ongoing efforts have achieved remarkable results thanks to strict adjustments and artificial intelligence (AI) demand.

Meanwhile, AMD continues to capture interest from the AI market, challenging Nvidia’s dominance and Intel’s growing presence. AMD’s latest announcement supports the organization’s continued commitment to expanding its AI portfolio.  

Yageo Leadership Says Inventory Adjustments Now at Healthy Level

After months of adjustments to combat the challenging inventory glut, companies are finally reaching stability. Passive component manufacturer Yageo recently announced that its current inventory adjustments have reached a healthy level.  

Yageo Founder and Chairman Pierre Chen stated, “The capacity utilization rate for standard products has increased from 50% to 65%, and for niche products from 70% to 75%, with the expectation that inventory will be fully adjusted by the first half of 2024.”

Chen and, more significantly, Yageo are optimistic about the rapid growth in high-performance computing (HPC), sensing, high-speed computing, automotive, and AI. Yageo plans to expand its global presence through different avenues, specifically connecting peripheral products to transform the company into a one-stop solution provider.

Many organizations, especially those in artificial intelligence, also aim to become a “one-stop-shop” for their niche. Nvidia is one such company working to become the go-to for all AI needs.

Despite the challenges posed in 2023, Yageo has seen steady results over the last several months. Yageo’s expansion into high-end application markets, optimization of niche product portfolios, execution of acquisition strategies, and realization of consolidation benefits resulted in the organization's robust combined revenue and gross profit performance.  

Yageo’s inventory improvement is an excellent indicator for the electronic components market. Over the last year, companies within the industry have aggressively kept up with inventory adjustments to ensure excess didn’t grow out of hand. Fortunately, stringent corrections and the popularity of artificial intelligence kept inventory overhang from spiraling out of control.

According to Edgewater Research, 2H24 marks the turnaround from glut to growth, and with Yageo’s recent announcement, many organizations might be in the space point of recovery. Despite seeing the most demand from AI applications, memory suppliers have kept tight capacity control. They also see a growing supply-demand gap helping increase prices across DRAM and NAND flash. With Yageo’s latest update, passives may be the next market to follow suit.  

We are still several weeks out from 2H24, and time will tell if this prediction rings true.  

AMD Announces New AI Chip

In June 2023, AMD announced its newest GPU, the MI300X, which became one of the biggest challengers to Nvidia’s flagship GPUs. In a statement on the MI300X series, AMD said that the MI300X’s CDNA architecture was designed for large language models and other cutting-edge AI. AMD also offered Infinity Architecture, which combines eight chips in one system for AI applications, and its software package ROCm, similar to Nvidia’s CUDA.

AMD’s MI300X is more affordable than Nvidia’s GPUs, but it still offers capabilities that endeared Nvidia’s components to developers, such as its software package ROCm. Now, AMD’s new Ryzen AI 300 series will take up the mantle to challenge Nvidia’s dominance.

AMD Chair and CEO Lisa Su said during the conference, “AI is our number one priority, and we’re at the beginning of an incredibly exciting time for the industry as AI transforms virtually every business, improves our quality of life, and reshapes every part of our computing market.”

The Ryzen AI 300 series for next-generation AI laptops would compete directly with Intel’s Lunar Lake and Qualcomm’s Snapdragon X chips. AMD’s partnership with Microsoft will see Microsoft’s popular AI chatbot Copilot powered by AMD’s latest lineup. Su states that the Ryzen 9000 series for desktops is the “world’s fastest consumer PC processor” for gaming and content creation.

Not to be outdone, Nvidia announced new AI chips the day before, named “Rubin,” which is its successor to the previous “Blackwell” model released in March.

Many chip firms compete to launch faster and more powerful processors in the AI race. Nvidia CEO Jensen Huang pledged to release a new AI chip every year, faster than its previous two-year timeline. AMD also plans to release new AI chip tech each year.  

Su went on to detail its upcoming data center chip roadmap, announcing that Instinct MI325X accelerators, a more powerful version of the MI300 series, will be available in Q4. Likewise, its fifth-generation EPYC server processors will be launched in 2H24.  

AMD will continue to outsource the manufacturing of these powerful chips to foundries, mainly industry leader TSMC, which also manufactures Nvidia’s components. However, if TSMC is the sole manufacturer of all in-demand AI chips, this could lead to capacity issues for components. TSMC’s expansion plans could help ease this problem, but AI’s market growth over the next few years and the ongoing labor shortage might throw a wrench in these plans.

For buyers, it is pertinent to partner with an electronic components distributor with the reach and sales expertise to source these popular components. Sourceability is one such company with the skill to source hard-to-find components like AMD and Nvidia’s flagship chip lines.  

An image of a Chinese landmark with China's cityscape in the distance

China Continues to Invest in Chips as HBM Boom Contributes to Possible Shortage - June 7th, 2024

Artificial intelligence, industrial controls, and automotive intelligence are the primary growth drivers for the semiconductor market this year. While consumer electronics demand remains low, artificial intelligence (AI) has bolstered recovery among memory manufacturers, specifically in DRAM, NAND-flash, and storage sectors. As original component manufacturers (OCMs) grapple with AI trends, prioritizing specific components may contribute to an oncoming shortage.

To fortify itself against future supply constraints, China is pushing ahead with a new investment fund to help boost its domestic semiconductor industry. With the latest restrictions and bans in its ongoing trade war with the United States, the fund’s passage saw a new level of urgency.

China Sets Up Third Fund for Chips

China has recently set up its third planned state-backed investment fund for its semiconductor industry, aiming to boost chip production. The fund, a whopping $47.5 billion, will continue to support President Xi Jinping’s goal of achieving semiconductor self-sufficiency for China. Since the growing increase in export control measures over the last couple of years, the U.S. and China are pushing for more domestic competition in advanced semiconductors.

“The third phase of the China Integrated Circuit Industry Investment Fund was registered under the Beijing Municipal Administration for Market Regulation,” according to the National Enterprise Credit Information Publicity System, a government-run credit information agency. The three phases together are more commonly known as “The Big Fund.”  

This is the largest of the three funds instituted by the China Integrated Circuit Industry Investment Fund and will be launched in September, as reported by Reuters. The first part of the phase was established in 2014, with the second commencing in 2019. These funds have provided financing to China’s two biggest chip foundries and more including Semiconductor Manufacturing International Corporation, Hua Hong Semiconductor, and Yangtze Memory Technologies.  

Due to restrictions on advanced lithography equipment, which is essential in creating leading-edge chips, the third fund will primarily support chip manufacturing. This will help promote further self-reliability, which many countries have pursued since the global semiconductor shortage.  

With Huawei’s recent increased reliance on Chinese suppliers, many few these investment funds as successful. As China loses access to some products, such as Nvidia’s cutting-edge chips, domestic companies like SMIC are stepping up to the plate to pick up the slack. However, there is still uncertainty lingering amongst top leadership.

While phase three of the Big Fund is larger than the $39 billion in direct incentives within the U.S. government’s CHIPS Act, Bloomberg notes that Beijing’s past investments don’t always pay off. Some Chinese leaders have been highly critical in how the investment money is utilized, if at all.

Still, the third phase of the Big Fund may see greater success now, especially since most countries recognize the importance of having a solid supply of domestically produced semiconductors.  

HBM Prices Going Up and Could Lead to DRAM Shortages

According to TrendForce Senior Research Vice President Avril Wu, the high-bandwidth memory (HBM) market will make great strides in the coming years. Significant pricing premiums and increased capacity needs for AI components are contributing to price spikes and growing demand.  

Currently, HBM’s unit sales are several times higher than conventional DRAMs and five times higher than those of DDR5. HBM’s share is projected to dramatically increase in capacity and market value thanks to pricing alongside product iterations in AI technology that increases single-device HBM capacity. HBM’s share of the total DRAM capacity is estimated to rise from 2% in 2023 to 3% in 2024 and a considerable 10% by 2025.  

According to TrendForce data, HBM is projected to account for more than 20% of the total DRAM market value starting in 2024 before exceeding 30% by 2025. Avril Wu states that negotiations for 2025 HBM pricing have already begun during 2Q24. With DRAM's limited overall capacity, suppliers have only increased prices by 5%-10% to manage capacity constraints. This is specifically for HBM2e, HBM3, and HBM3e.

Early negotiations have begun primarily due to the overall confidence in AI’s demand prospects in the latter half of 2024 and the next several years. Because of AI's solid demand, customers are willing to accept continued price increases.  

Furthermore, “not all major suppliers have passed customer qualifications for HBM3e, leading buyers to accept higher prices to secure stable and quality supplies. Future per Gb pricing may vary depending on DRAM suppliers’ reliability and supply capabilities, which could create disparities in ASP and, consequently, impact profitability.”

According to TrendForce, “the annual growth rate of HBM demand will approach 200% in 2024 and is expected to double in 2025.”

Samsung Electronics, SK Hynix, and Micron Technology are all investing in HBM production. Likewise, industry sources cite a report from Commercial Times which reveals that DRAM products may face shortages in 2H24. Following the recent rise in memory contract prices, these DRAM suppliers are increasing wafer input for these advancement processes, which will account for 40% of total DRAM wafer input by the end of the year.

SK Hynix is currently the primary supplier of HBM alongside Micron, utilizing 1beta nm processes and shipping to Nvidia. Samsung is close behind, reaching qualification in Q2 to begin deliveries mid-year. Samsung expects its existing facilities to be fully utilized by 2024. All three memory suppliers expect some of their new facilities to start mass production throughout 2025, contributing to the meteoric rise of HBM.  

However, the overall DRAM supply will likely be short due to capacity crowding. Availability will be challenged unless more manufacturing lines are built quickly. With most new facilities expected to come online in 2025 at the earliest, these problems may be unavoidable.

An image of electric cars charging

France Courting Tech Giants and New Ban on China’s EVs? - May 31, 2024

Countries continue to court original component manufacturers (OCMs) and technology giants for their domestic semiconductor ecosystems and artificial intelligence (AI) endeavors. Over the last few years, different laws and programs have helped subsidize new facilities worldwide.

France is succeeding in its ongoing “Choose France” campaign to become the EU’s AI hub. This month, France garnered investments from tech leaders Microsoft and Amazon. Meanwhile, China is grappling with tariffs and bans that further complicate its domestic chip efforts.

Microsoft Invests in France to Expand AI Infrastructure

France’s AI dreams are coming to fruition. Microsoft has recently announced its largest investment to date in France, a whopping $4 billion that will go toward cloud and AI infrastructure, AI skilling, and French Tech acceleration. Microsoft aims to train around 1 million people and support 2,500 AI start-ups by 2027.  

Microsoft announced its plans during the Choose France summit, wanting to accelerate the adoption of AI and cloud technologies to increase France’s competitiveness. Digital technology made in France creates long-term benefits for the French economy and job market. Microsoft will directly contribute to France’s National Strategy for Artificial Intelligence, which will contribute to France’s goal of becoming a leader in AI development and use.

France's new cloud and AI infrastructure will operate under Microsoft’s recently published AI Access Principles, which aim to foster innovation and healthy competition. These principles also reflect Microsoft’s expanding role and responsibility in AI, showing its commitment to investments, forging business partnerships, and creating programs ensuring broad access to AI technology to help empower other organizations and individuals.

Microsoft aims to expand its data center footprint across existing sites in Paris and Marseille to support new additions in the Grand Est Region in Mulhouse Alsace Agglomération.  

Microsoft will expand its “A Vous l’IA” initiative and partner with France Travail to train job seekers in the skills they need to use AI technologies, increasing overall AI fluency within the country's labor pool.

“Artificial intelligence is an essential lever for accessing and returning to employment. Jobseekers cannot do without AI in a context where these new tools will significantly improve job search techniques and impact many job roles. France Travail’s commitment alongside Microsoft is essential to provide job seekers with all the solutions and skills they need to use AI,” said Thibaut Guilluy, General Manager of France Travail.

The company will also work alongside Kokoroe, a French Ed-Tech company specializing in micro-learning, to build this new exclusive content based on short, easy-to-consume modules with no required technical background. These modules will be available through Microsoft’s A Vous l’IA platform and other select mainstream learning platforms.

“In this Year II of generative artificial intelligence, and as it has already entered the age of reason, we are proud to announce a historic investment in France today. Through state-of-the-art cloud and AI infrastructure, a major training plan for the French, and renewed support for startups in the hexagon, we are pursuing our commitment to sustainable and inclusive growth,” stated Corine de Bilbao, Corporate Vice-President of Microsoft France.

Microsoft plans to expand its sustainability efforts by investing in renewable energy as it expands operations in France. This way, Microsoft can also push toward its commitment to reaching 100% renewable energy coverage for company operations by 2025, water-positive by 2030, and zero waste by 2030 by applying lessons learned in France to other facilities.  

Bans and Tariffs on China Electric Vehicles

In a report from Reuters, U.S. Commerce Secretary Gina Raimondo stated on May 8th that the government needed to act upon China-produced cars, suggesting “extreme action” through restriction or prohibition. According to Raimondo, the reason is to prevent the leakage of data belonging to U.S. Citizens.  

Per Reuters, the U.S. administration initiated a review earlier this year in February on whether to import Chinese automobiles. President Biden’s decision to quadruple tariffs is designed to keep Chinese automobiles from undercutting U.S. automakers with electric vehicles (EVs) that cost a fraction of those produced by American companies.  

China’s BYD Auto recently overtook Tesla as the most popular global EV brand. These small but well-built vehicles have quickly become popular in China thanks to their functionality and affordability.  

“Any car company that’s not paying attention to them as a competitor is going to be lost when they hit their market,” said Sam Fiorani, a Vice President at AutoForecast Solutions near Philadelphia. “BYD’s entry into the U.S. market isn’t an if. It’s a when.”

China’s decision to offer subsidies in EV technology has led to a rapidly developing market sector. One that could challenge America’s auto sector, which lacks the same financial support.  

According to the Associated Press, “There currently are very few EVs from China in the U.S., but officials worry that low-priced models could soon start flooding the U.S. market, even with a 25% tariff.”

“A car model launched last year by Chinese automaker BYD sells for around $12,000 in China. The car’s craftsmanship rivals U.S.-made EVs that cost three or four times as much — and is stoking fear in the U.S. industry.”

The Alliance for American Manufacturing stated that “the introduction of inexpensive Chinese autos to the American market “could end up being an extinction-level event for the U.S. auto sector.” The U.S. auto sector accounts for 3% of America’s GDP.”

Tesla CEO Elon Musk added that BYD’s dominance is not unexpected. Musk told industry analysts that Chinese EVs are so good that without trade barriers, “they will pretty much demolish most other car companies in the world.”

As countries continue to urge the public away from gasoline-powered cars, many might find the affordability of Chinese EVs attractive. In contrast, other EV automakers are often pricey and cater to higher-income markets. Hefty tariffs might only slightly offset the eventual domination of Chinese-made EVs, unless the U.S. automakers find new ways to boost efficiency and cost.

Close up image of the American flag in front of a U.S. government building

GPU Shortage Eases and U.S. Raises Tariffs in Trade War - May 24th, 2024

Memory prices are going up as artificial intelligence demand feeds surging orders. Within the next decade, the artificial intelligence (AI) market will see a compound annual growth rate (CAGR) of 28.46%. If it keeps following this rate, generative AI could become a $1.3 trillion market by 2032. With the continual application of AI in different technologies, such as automobiles and search engines, this forecast is likely to come to fruition.  

Due to AI’s high demand, the components that power these innovative technologies have been in short supply. Enterprise AI and the technology sector, such as Google, Apple, and Microsoft, have eagerly ordered the little stock available. This contributed to bottlenecks for some of the most popular components during 2023.

Recent news shows that the constraints for some AI-capable components have been easing. However, a new problem has begun developing.  

AI GPU Shortage Eases but New Problem Arises

In late 2022, OpenAI’s debut of ChatGPT, a generative artificial intelligence large language model (LLM), sparked a wave of innovation in tech. New programs and applications that utilize AI capabilities made headlines, and now, seemingly overnight, one can search on Google and be aided by ChatGPT’s answers.  

As a result, the demand for high-performance graphics processing units (GPUS) surged. Nvidia’s GPU line-up was highly coveted, quickly becoming tight in supply or out of stock entirely. Even as late as March, prices remain high, with Nvidia’s latest Blackwall AI chip costing between $30 to $40 thousand.  

Over 2023, chip giant TSMC reportedly faced the brunt of the demand tsunami. As the leading supplier of advanced packaging technology, specifically its chip-on-wafer-on-substrate (CoWoS), TSMC ran out of production capacity and had inefficient capabilities to meet demands. Since that announcement, TSMC has actively expanded its CoWoS production, and now Nvidia’s GPU supply is more stable.

Earlier this year, market reports revealed that clients who had previously purchased Nvidia GPUs were reselling unused components. This was not an indication of dipping demand but a reflection of TSMC’s improved capacity and the greater availability of competition in the GPU market from other manufacturers such as AMD.

Now, even with ravenous buyer demand, the GPU shortage has eased. Unfortunately, that easement has cleared the way for another, bigger problem.

Meta CEO Mark Zuckerberg stated that the GPU shortage in AI data centers has been alleviated, but the future bottleneck will originate in power supply. With GPUs becoming less constrained, companies can kick-start significant investments in establishing data centers and infrastructure to support AI development.

The challenge here, Zuckerberg believes, is power supply. Zuckerberg said that “many new data centers could consume 50-100MW, and large data centers could reach up to 150MW. As the scale of data center power consumption grows, the AI industry may hit a power supply bottleneck.”

Compared to AI, the energy sector does not have the same ease of building new facilities or infrastructure. Establishing new energy facilities requires abiding by regulations, complex power transmission planning, and construction, which are just the tip of the iceberg. It's one of the problems the electric vehicle (EV) industry is grappling with. Due to these challenges, the likelihood of a potential future power crisis comes closer to reality.

Tesla CEO Elon Musk and OpenAI CEO Sam Altman have echoed Zuckerberg’s concerns. Musk warned organizations in April that there may not be enough electricity to run all the chips made next year. Altman stated that AI will consume more power than initially expected, meaning that future AI development should work alongside energy technology breakthroughs.

U.S. Could Increase Tariffs on Chinese Chips by 100% in 2025

There have been new developments in the ongoing trade war between the United States and China. The Biden Administration has recently announced its plan to increase tariffs on several Chinese imports, specifically semiconductors, EVs, batteries and battery components, solar cells, and many others. In a White House press release, tariffs on Chinese semiconductors will increase from 25% to 50% in 2025, doubling the country's tax rate.

The continued actions in the U.S.-China trade war have pushed Chinese tech firms to develop their domestic alternatives. Since the Netherlands has blocked ASML Holding, the primary manufacturer of advanced lithography equipment, from exporting to China, Naura Technology announced that it would enter the lithography tools market alongside Shanghai Micro Electronics Equipment (SMEE).

Liu Pengyu, a spokesperson for the Chinese Embassy in Washington, said, “We hope the U.S. can take a positive view of China’s development and stop using overcapacity as an excuse for trade protectionism.”

While the Biden Administration’s plan wasn’t met with too many dissenting votes, some representatives have spoken out against the latest tariffs. David French, the executive VP for Government Relations for the National Retail Federation, said, “As consumers continue to battle inflation, the last thing the administration should be doing is placing additional taxes on imported products that will be paid by U.S. importers and eventually U.S. consumers.”

Colorado’s Democrat Governor Jared Polis tweeted on X, “This is horrible news for American consumers and a major setback for clean energy. Tariffs are a direct, regressive tax on Americans, and this tax increase will hit every family.” On the other hand, the Republican National Committee is saying that the Biden Administration wasn’t tough enough.

The new tariffs are expected to increase the prices of semiconductors and other high-tech goods. It will be interesting to see how these tariffs will affect U.S. technology when Chinese companies have made leaps and bounds in developing their tech since the restrictions. Even with the restrictions, China could become a leader in semiconductor development without American chips.

Close up image of someone placing a chip on a circuit board

Market Demand Surges Post-Earthquake and U.S. Invests in Digital Twins - May 17, 2024

The semiconductor industry continues to experience twists and turns along the road to recovery. Inventory overhang and the uncertain market outlook has caused seesawing between low to high demand. As market research firms began to forecast a likely decline in memory demand, it surged again.  

Prices are rising as demand propels them forward. Natural disasters and artificial intelligence are likely the primary reasons demand has surged. With damages from the recent earthquake affecting memory supply, some buyers may be concerned about lasting impacts, even if chip manufacturers have claimed it to be limited in scope.

Memory is Expected to Rise by 20% in Q2.

It has been a little over a month since the devastating earthquake struck the eastern coast of Hualien, Taiwan. While the epicenter of this deadly quake was far from the shores of Taiwan’s more populated cities, many buildings across the island saw reported damage. As a global leader in electronic components, Taiwan is known for its numerous chip-making facilities operated by industry giants such as TSMC. While many of these original component manufacturers (OCMs) had numerous protections against earthquakes, some still experienced damage.

Micron, Nanya, Winbond, and PSMC are several chipmakers that issued impact statements following the Taiwan 2024 earthquake. Micron’s Taoyuan site reported that over 60% of its wafers had to be scrapped. Nanya stated that most of its wafers required additional inspection due to the machines' inability to bear the load. Winbond saw a 1% wafer loss equivalent to the total 2024 output.  

PSMC reported that its P3 fab experienced the most significant losses out of the four. In a report by TrendForce, 90% of PSMC’s wafer capacity was recovered by 4/8, with full recovery expected the same day. By April 18th, most manufacturers had experienced a full recovery, with only Micron’s Taoyuan plant seeing an 80% recovery on the morning of April 18th.

Furthermore, Micron’s cutting-edge processes, for its 1apla and 1beta nm technologies, are anticipated to significantly “alter the landscape of DRAM bit production. Other Taiwanese DRAM manufacturers still use 38 and 25nm processes, contributing to less total output. In its entirety, TrendForce estimates that the earthquake’s effect on DRAM production for Q2 will be a manageable 1%.

However, prices are on the upswing.  

According to TechNews, there has been a significant surge in demand, with prices trending upwards. Korean manufacturers are set to increase DDR5 prices by 13% in May alongside DDR4, which will see a 10% increase. Memory prices in 2Q24 are expected to rise by 20% to 25%. Micron has suspended quotations post-quake but has notified its clients of a 25% increase in DRAM and SSD contract prices.

Samsung’s early decision to cease DDR3 production has increased orders for DDR3 from Nanya and Winbond. Both companies are expected to increase prices by 10-15%.

In 2H24, industry experts predict that the supply-demand gap will begin to exceed 20-30%, further increasing DDR3 prices in the latter half of the year, possibly reaching 100%. This is due to the ongoing trend among major memory manufacturers of transitioning production capacity to HBM and DDR5, away from DDR4 and DDR3.

CHIPS Funding Goes to Digital Twins Research

The U.S. CHIPS and Science Act was a vital $52 billion boon to the American semiconductor industry. After decades of slow decline and moving outside the U.S., everyone’s realized the importance of a domestic semiconductor supply chain after the effects of the global semiconductor shortage.  

To continue to push the envelope in semiconductor manufacturing, the Biden Administration announced that it was taking applications for $285 million in federal funding from the entire $283 billion package that is the CHIPS and Science Act. The U.S. Administration is “seeking companies to establish and operate a CHIPS Manufacturing USA Institute focused on digital twins for the semiconductor industry.”

This funding will include basic and applied research related to semiconductor digital twin development, establishing and supporting shared physical and digital facilities, industry-relevant demonstration projects, and digital twin workforce training. This will be a huge step in achieving U.S. semiconductor goals, as digital twin technology is essential in chip development.  

“Digital twin technology can help to spark innovation in research, development, and manufacturing of semiconductors across the country–but only if we invest in America’s understanding and ability of this new technology,” said U.S. Commerce Secretary Gina Raimondo.  

Digital twins are virtual representations of physical chips that can mimic their real versions. This allows researchers to test new processors before they’re put into production, giving them data on how a component might react to a boost in power or a different configuration. It also makes it easier and less resource-consuming for companies and allows researchers to leverage artificial intelligence to speed up chip development and manufacturing.

The U.S. Department of Commerce said, "Companies, universities, non-profits, and other similar businesses can apply to build and run the CHIPS Manufacturing USA Institute, which will be the first such institute established by the Biden Administration.”

The institute will "focus on the development, validation, and use of digital twins for semiconductor manufacturing, advanced packaging, assembly, and test processes.”  

A close up of a circuit

AI Demands Boost Price Hikes and Experts Warn of Excess Risks - May 10, 2024

Artificial intelligence demand has contributed to bottlenecks and shortage conditions across the memory market. Over the last few quarters, memory manufacturers have raised prices across DRAM and NAND-flash. Strategic production cuts by chipmakers have kept supply tight, and following the earthquake, some DRAM components might see further constraints due to damage incurred by the earthquake.

Last week, Western Digital Corporation (WDC) confirmed to its clients that certain products were experiencing shortage conditions. With the raised demand, WDC stated that it planned to raise prices in the coming weeks as demand fluctuated. Now, another manufacturer is doing the same. Despite these challenges, it is unlikely manufacturers will raise production capacity. This is to keep excess inventory from getting out of hand. A concern that is growing among semiconductor leadership as new facilities continue to pop up.  

Seagate Technology Follows Western Digital with Price Hikes?

Hard drive manufacturer Seagate Technology has communicated to its customers that it will increase prices for new orders. Like WDC, this decision has been made now that demand has exceeded former expectations. The high demand for high-capacity HDD products continues to originate mainly from the AI sector. The reduced production by manufacturers over the last several quarters has contributed to the current HDD supply being unable to meet demand, raising the prices sky-high.  

However, memory manufacturers have not planned to increase production capacity. Ongoing global inflationary pressures and low consumer electronics orders have kept prices high and stock low. Seagate indicates that prices will continue to rise in the coming quarters. Industry sources cited by TechNews agree with the likelihood of supply shortages for high-capacity HDD products throughout the year.

Similarly, a report from ETNews stated that industry sources indicated that Samsung Electronics increased the capacity utilization rate of NAND-flash to over 90%, an increase after 80% in 1Q24. In the same report, ETNews stated that the capacity utilization rate for its Xi’an plant in China has notably increased, following the gradual recovery in capacity at Samsung’s Pyeongtaek facility.

As with HDD, the primary driver in NAND-flash market recovery is the increased demand for enterprise SSDs by AI and cloud computing service providers. Kioxia and WDC are boosting their production capacity utilization from Q1, but other suppliers are keeping their production strategies conservative despite the high demands. This is likely due to the lack of recovery in consumer markets, which are the typical growth drivers throughout the year.

According to TrendForce, there will be a slight dip in NAND-flash purchasing in Q2. This dip is not attributed to market momentum but reflects decreasing supplier inventories and the expected impact of production cuts.

Research Warns that Unchecked Investments Might Contribute to Excess Inventory Risks

The CHIPS and Science Act in the United States, the European Union’s Chips Act, India’s chip grants, and more are just a few of the many government programs by countries worldwide to push for domestic semiconductors. Other countries plan to go for expansion plans to support their current manufacturing industry.  

After the global semiconductor shortage challenges, countries and chipmakers alike have been eager to build domestic chip ecosystems. The greater the diversity, the less likely the semiconductor supply chain will be disrupted by bad weather, geopolitical conflict, or lockdowns.

However, companies might create a more problematic risk in the industry’s mounting efforts to grow the global supply chain.  

According to DIGITIMES Research, the “demand for wafer foundry services in 2024 is unstable, and major wafer foundries have adjusted their capital expenditures downward to regulate the pace of adding new production capacity, with new capacity expansion plans being more conservative than in 2023.”

The problem with a growing amount of chipmaking facilities is the possibility of reaching semiconductor factory overcapacity and increased chip inventories. Excess inventory proved a major adversary throughout 2023, contributing to numerous issues, such as the downturn of memory and diminished purchasing power among organizations.

If the industry and governments are not careful in planning their semiconductor investments, an excessive number of chip facilities could cause inventory overhang, a problem doomed to persist.  

The Global Semiconductor Industry Outlook 2024 conducted by KPMG and the Global Semiconductor Alliance (GSA) shows that “the global economy is impacted by high inflation and interest rates, resulting in weak economic performance, with no significant recovery in end-consumer demand.”

“Only 8% of respondents in KPMG and GSA's survey believe there will be supply chain shortages in the next four years, with 42% even believing that excess inventory has already occurred…However, 19% believe there won't be excess inventory because demand for chips in electric vehicles, AI, and emerging applications continues to increase.”

Over half of the senior executives in the study believe leaders will slow capital expenditures and instead allocate resources toward research and development in 2024. In the next three years, semiconductor overcapacity will rank alongside the talent shortage as one of the top five concerns for the industry.

OCMs must strategically plan, weighing the benefits against drawbacks such as increased risk of overcapacity. Excess electronic component inventory proved to be a challenging behemoth in 2023 and remains a problem many organizations are still fighting against.  

New domestic facilities are necessary for a country’s national security and economic success. Chipmakers must approach each opportunity critically to ensure the risk and reward benefit the entire industry and not put it at greater risk.  

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Micron Joins CHIPS Act Recipients and Is Memory Outlook Truly Positive - May 3, 2024

After months of waiting, the U.S. government is quickly distributing the funding from its long-awaited CHIPS Act. Over the past several months the U.S. government has announced, numerous recipients of the grants. The chipmakers have gone on to inform news outlets on how they plan to allocate the funding they’ve received. Samsung Electronics and TSMC were two of the most recent awardees, alongside Intel and BAE Systems.

Another memory giant joined just a few weeks after Samsung Electronics joined the ranks.  

The memory market has seen a flurry of activity these past months. Artificial intelligence (AI) has contributed to the ongoing rise in memory contract prices. More funding to major memory manufacturers could be the saving grace the industry needs, increasing future production capacity. However, is the memory market really moving in a positive direction for the long haul? Or is this just a short burst of good fortune?

Micron Receives CHIPS Funding

Micron Technology has joined the ranks of United States CHIPS Act recipients. The Biden Administration plans to give Micron up to $6.1 billion in grants, which will go towards its New York and Idaho facilities. In New York, Senator Chuck Schumer announced that the grant would help Micron construct two new facilities by the decade's end.

Since the CHIPS Act was first announced, Micron is one of many chipmakers that planned to expand their manufacturing footprint within the U.S. In September 2022, months after the successful passage of the CHIPS Act, Micron said it would build a $15 billion factory in Boise, Idaho. This would be the first new U.S. memory chip plant in 20 years.

A month later, Micron set its sights on Syracuse, New York, pledging an initial investment of $20 billion by the end of the next decade and plans to spend upwards of $100 billion over the next two decades or more. This massive project could lead to four new manufacturing plants for the Syracuse area, bringing thousands of jobs to New York’s citizens.  

With Micron’s announcement, the funding already given out from the CHIPS Act is now more than $29 billion. Less than $10 billion remains, a significant amount for the other chipmakers waiting for their chance.  

While all CHIPS Act recipients play a crucial role in helping bolster U.S. domestic semiconductor manufacturing, Micron’s role is two-fold. Micron is the last U.S. supplier of DRAM. With a significant stake in flash memory, the memory market is dominated by two giants, Samsung Electronics and SK Hynix, both South Korean companies. South Korea alone is a giant exporter of memory chips, leaving the U.S. with few options if it wants to go completely domestic.  

Before the market consolidation in the 80s and 90s, other massive U.S. players, such as Intel and Texas Instruments, were once part of the market. Only three major players remain: Samsung, SK Hynix, and Micron. Because DRAM and flash memory are mainstays in the greater electronic components market, which is necessary in everything from data centers to AI, having a larger domestic memory manufacturing presence will be critical to U.S. semiconductor aspirations.  

Most of Micron’s manufacturing facilities are in Taiwan, Japan, and Singapore, with its offices remaining in San Jose, California. Micron’s current CEO, Sanjay Mehrotra, has worked hard to spearhead efforts to boost U.S. production and win government subsidies. According to Mehrotra, the recent award of CHIPS grants has worked out well with the market timing.  

Though, that depends on whether the market is really moving in an upward direction.

Memory Chip Prices Are Going Up, but Is It Positive?

During the worst of 2023’s inventory glut, the memory market suffered the steepest decline compared to most components. Prices took months to consolidate at a bottom, finally reaching it in late Q3 and Q4 of 2023. Most memory manufacturers engaged in strategic production cuts to stem the excessive flow.  

These cuts and AI’s popularity prevented the downcycle for DRAM and NAND-Flash from reaching historic lows. While the market downturn hurt plenty, Edgewater Research confirmed that the lows in 2023 were nothing compared to what was seen in 2008.  

In 1Q24, major memory manufacturers announced price hikes, including Micron, Samsung, and Western Digital. Continued production cuts have helped manufacturers keep a tight grip on supply and allow them to raise prices. Likewise, the recent earthquake in Taiwan has only prompted further imbalance, leading to more price hikes.  

However, according to industry experts, the ongoing price hikes do not indicate a greater market turnaround. Instead, the primary driving force lies with the manufacturers keeping supply tight. The main growth areas aren’t consumer electronics, more industrial control, AI large language models (LLMs), and automotive smart technology. All other markets have remained tepid, with no apparent signs of growth.  

Micron may increase the price for its products by 20% over Q2, due to the Taiwan earthquake. However, the company is still in price negotiations regarding this decision. The damage Micron’s facility received because of the earthquake, specifically on its advanced processes, has experts discussing the possibility of greater price increases on its server DRAM than its mobile DRAM. TrendForce reports that it believes there will be an increase of 3%-8% QoQ in mobile in general.

Western Digital confirmed a shortage in its HDD and SSD product lines, warning clients of upcoming price adjustments over the next quarter, with no range given yet. As rumors about an enterprise SSD supply shortage circulate, there is an expectation that Samsung may follow Western Digital’s lead. Industry sources suggest that Samsung might raise its prices for enterprise SSD by 20% to 25% in 2Q24, reversing the downward trend seen in 2023.

Overall, TrendForce reports that momentum for inventory replenishment, which fueled many large purchases earlier this year, is expected to weaken. With a lackluster demand outlook and large price increases, DRAM contract prices will converge to 3%- 8%.

NAND-Flash will see a high increase of 13%-18% as the market climate and reduced supplier inventory influence the procurement trends. Memory is still in uncharted waters at this stage of recovery. Consumer electronics demand isn’t expected to return to normal levels until the latter half of the fiscal year, at a minimum. AI will continue to set the pace, meaning organizations looking for HDD and SSDs should take note of expanding lead times and high prices.  

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Chipmaker Confirms AI Chip Shortage and Samsung Awarded CHIPS Act Funds - April 26, 2024

The semiconductor industry continues to forge ahead with new facility plans and partnerships. Just last week, OpenAI, the company behind the breakout generative artificial intelligence (AI) chatbot ChatGPT, announced its intention to collaborate with Japan’s top semiconductor minds. This new partnership aims to avoid a possible AI chip capacity challenge from the overwhelming demand.

Brad Lightcap, COO of OpenAI, says Nvidia is the leading force behind the high-performance graphics processing units (GPUs) essential for generative AI. Nvidia currently holds 80% of the market, which is already tight, and Lightcap says it will be crucial that the industry avoids a shortage.  

“Our priority is making sure that we don’t end up in a world where there’s so much demand for AI, but we don’t have enough capacity,” said Lightcap. Given how robust demand is now, with forecasts predicting it will extend for several years, we might have already reached that point with some AI components.

AI Demand Contributing to Shortage Conditions

In a recent letter to customers, memory giant Western Digital confirmed that there is a shortage of large-capacity HDD and SSD products. The overall demand from the AI market has caused HDD prices to surge, leading to ongoing adjustments for NAND-Flash and hard drive products.  

Due to AI's requirements for data storage and memory suppliers' strategic production cuts over 2023, HDD prices have skyrocketed. Industry sources say that from 3Q23 to 1Q24, HDD prices rose by 10% to 20%.  

While robust, this jump is smaller than SSD products over the same period. This results from SSD’s growing popularity over HDD in mainstream consumer PC markets for storage devices below 2TB. SSDs have access speeds that surpass HDD by almost ten times, allowing SSDs to narrow the cost gap when NAND-Flash saw declines.  

TrendForce reports that there will be a substantial increase in Q2 for NAND-Flash contract prices, likely falling between 13%-18%, with enterprise SSDs landing on the high end of the spectrum. Kioxia and Western Digital are boosting production capacity utilization rates due to demand, while others remain conservative. There will be an overall dip in Q2 NAND-Flash purchasing, likely influenced by decreasing supplier inventories and production cuts. Western Digital’s supply shortage is evident, and the market demand will remain high for the foreseeable future.

Industry sources believe there will be a supply shortage for large-capacity HDD products through this quarter and possibly the year. Western Digital’s recent letter to customers only affirms this prediction.  

Similarly, HDD and SSD prices could see another price increase of around 5% to 10% in 2Q24. According to TrendForce's sources, suppliers are unlikely to expand production immediately to sustain the upward price trend. Further stabilization depends on AI’s developments and whether HDD fits AI’s requirements or is outdone by enterprise SSDs or other high-performance components. Demand is already higher than previously forecasted.

Western Digital communicated that pricing adjustments will be frequent in the future and that the company has a limited ability to handle unplanned demand and orders. Customers are encouraged to notify their representatives early to accommodate changes better.  

Samsung Receives CHIPS Act Funds

Intel, TSMC, BAE Systems, and others have received their portion of the highly desired United States CHIPS Act. TSMC was the most recent recipient, making headlines with its plans to build a third facility within the U.S. to join its other two fabs. Now, Samsung Electronics is joining these chipmakers with the Biden Administration’s announcement.

Samsung Electronics will receive $6.4 billion in funding to help construct a new semiconductor plant in central Texas. Samsung will invest $40 billion to build new plants in Taylor and expand its pre-existing facility in Austin. The plants will be used for semiconductor research and development and semiconductor packaging.  

A semiconductor packaging facility will be another essential part of the developing U.S. semiconductor ecosystem. U.S. semiconductor companies still have to ship components to Taiwan to be packaged.  

"For the first time, Samsung can conduct core research and development in the United States of America, support the future, manufacturing at scale, and advanced packaging all in Texas," Commerce Secretary Gina Raimondo told reporters on a conference call.

The Samsung plants will also benefit national security endeavors, as they manufacture chips directly for the U.S. Department of Defense (DoD).

"It will boost our production capacity for chips in critical U.S. industries, including aerospace, defense, and autos. And doing so will bolster our national security," Lael Brainard, Biden's top economic adviser, said.

As the third largest recipient of CHIPS Act funds, the Texas state government and the Semiconductor Industry Association (SIA) have expressed their excitement about Samsung’s investment. The White House estimates the construction of the new plants will create 17,000 jobs and require over 4,500 manufacturing jobs within the next decade.  

In an official announcement, Samsung Semiconductor CEO Kye Hyun Kyung said, “We’re not just expanding production facilities; we’re strengthening the local semiconductor ecosystem and positioning the U.S. as a global semiconductor manufacturing destination. To meet the expected surge in demand from U.S. customers, our fabs will be equipped for cutting-edge process technologies for future products like AI chips and help bring security to the U.S. semiconductor supply chain.”

To support the demand for local talent, Samsung plans to “support and participate in the CHIPS R&D program such as NSTC and NAPMP to create new opportunities for the innovation of semiconductor industry. However, for our semiconductor ecosystem to succeed, it is absolutely critical that our efforts here attain active support from the public sector, including more inclusive STEM education, more eligibility for Investment Tax Credit programs, and more…”

More announcements on CHIPS Act recipients are expected to come soon. Each one is certain to strengthen the growing U.S. semiconductor industry in this next decade.

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Facility Plans Canceled? CHIPS Act Not All It's Cracked Up to Be? - April 19, 2024

Domestic semiconductor facility plans continue to forge ahead within the United States. As CHIPS Act subsidies are doled out, new facility plans are on the table. It has been a long road, but the U.S. is finally underway in building a strong foundation for its domestic semiconductor ecosystem.

Not everything is sunshine and rainbows across the board. Due to the prolonged delay in awarding CHIPS funding, some companies have scaled back plans, if not canceled them altogether. It is still too early to tell how much of a detriment the extended wait time will have on U.S. semiconductor dreams.

TSMC Goes All in as SkyWater Technology Folds

After months of waiting for CHIPS funding, TSMC is finally receiving its portion of subsidies. Over the last few years, thanks to the CHIPS Act proposal, TSMC has been developing a vast expanse of the Arizona desert to produce its most advanced semiconductors. Apple has already booked out most of the chip capacity produced at TSMC’s Arizona location, making it a significant player in U.S. semiconductor goals and the broader economy.  

TSMC’s Arizona plant plans have suffered setbacks throughout their creation. Initially, the problems were the lack of local talent, an indicator of the greater global semiconductor labor shortage. To remain on schedule, TSMC brought in some of its domestic workforce to train the incoming U.S. staff. This set back plans and upset local government officials, who stressed the importance of TSMC hiring domestic U.S. employees.

As TSMC grappled with this problem, it was besieged by another pressing issue: the postponed arrival of the coveted CHIPS funding. In response, TSMC pushed out its expected production start date from 2026 to 2027 or 2028. In late February, TSMC Chairman Mark Liu said Arizona’s progress depends on “how many incentives the U.S. government can provide.”

Now, TSMC is moving full speed ahead. The Biden Administration announced that the company would receive $6.6 billion in federal grants. With these funds, TSMC says it plans to invest another $25 billion to expand operations in Arizona, bringing the total number of TSMC facilities in the state to three.

The three plants will produce TSMC’s most advanced chips and, hopefully, its upcoming 2nm fabrication process. These chips will be used in consumer electronics and artificial intelligence (AI) applications. The $6.6 billion in grants includes an allotment of $50 million in workforce development and an additional authorization for up to $5 billion in government loans alongside manufacturing tax credits.

TSMC expects some of the labor challenges it encountered to lessen with each project. Mark Liu said, "Even though we encountered challenges in Arizona for our first fab construction ... we believe the construction of our second fab will continue to be much smoother."

As TSMC prepares for expansion, chipmaker SkyWater Technology is scaling back.  

In a recent announcement by SkyWater Technology, plans to build a $1.8 billion semiconductor R&D and fabrication facility in Indiana have been temporarily scrapped. A Purdue spokesperson stated that SkyWater released its option on the land it planned to develop but would remain a partner with research opportunities in the works.  

“As the details of the CHIPS initiative have unfolded over the last year, we have taken the opportunity to reassess our plans for new fab construction in conversations with the state of Indiana,” SkyWater Technology said. “While we don’t have a definitive plan targeting new fab construction in Indiana, we remain committed to growing the microelectronics ecosystem in the U.S., including Indiana, with emphasis on providing fab access and production support for emerging and strategic technologies.”

While disappointing, SkyWater Technology’s withdrawal isn’t a surprise. In the original announcement, Purdue stated that the project depended on receiving funds from the CHIPS and Science Act. However, Purdue isn’t starting back at square one with SkyWater’s pullback. South Korean memory giant SK Hynix plans to invest $4 billion in a semiconductor facility at Purdue Research Park.

Productivity and Prices are Up with AI

AI is having another stellar year. Continued demand for AI applications and growing competition between Nvidia and its rivals have led to a rapidly developing market. AI’s influence has aided the recovery of DRAM and NAND-flash markets alongside strategic production cuts by their manufacturers. Continued implementation of artificial intelligence will only bolster demand in the coming years, strengthening as the benefits of AI become more well-known.

Research by the International Data Corporation (IDC) shows that applying generative AI to various marketing tasks may result in an estimated productivity increase of 40%. IDC’s research results show that generative AI could handle over 40% of the collective work of marketing teams and potentially 100% of specific marketing tasks. These results will vary from company to company, but the productivity gains already show strong guidance for marketing teams of all sizes.

"In the next five years, GenAI will advance to the point where it will handle more than 40% of the work of specific marketing roles," said Gerry Murray, Research Director at IDC's Enterprise Marketing Technology practice. "Because of the rapid evolution of GenAI capabilities, marketing leaders must prepare their staff for fundamental changes to roles, skills, and organizational structure."

With the growing use cases for AI, such as IDC’s marketing productivity results, components used in these AI applications are also increasing in demand.  

Over the past several weeks, there has been a developing shortage of enterprise solid-state drives (SSDs) within the NAND-Flash market. The shortage has been correlated to the AI boom and “subsequent construction of data centers by global big tech companies, with a particularly explosive increase in demand for storage devices needed for data centers.”

Following the ongoing trend by memory manufacturers over 1Q and 2Q of 2024, Samsung Electronics is expected to raise the price of its enterprise SSDs by 20% to 25% in 2Q24. With the surge in demand exceeding previous marker forecasts, Samsung Electronics is going beyond its original planned price increase of 15%.  

A semiconductor industry insider told DigiTimes, “Server companies seeking to expand their storage capacity are rushing their SSD orders recently, and some products are even experiencing shortages, leading to considerations for increased production.”

The decision to increase SSD prices is also a result of accelerated AI-related storage server expansions by Nvidia and Tesla. Major server companies, including Dell Technologies and Hewlett Packard Enterprise (HPE), are competitively purchasing SSDs.  

Continued reports highlighting AI implementation's benefits will bolster further aggressive purchasing trends among other companies, leading to higher prices for these components throughout the year.  

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Trade Wars and Deadly Quakes Shake Industry - April 12, 2024

Over the last several years, countries have worked overtime to improve domestic semiconductor manufacturing. The global semiconductor shortage emphasized the gaps left behind by declining chip ecosystems. The lack of diversity on a worldwide scale, with most chip manufacturers centered in one geopolitical area, further supported new domestic initiatives.  

Access to semiconductors has become necessary for a country’s economy and national security. Because semiconductors are needed in almost every modern product, it’s pertinent for countries to protect this supply. Unfortunately, this need has contributed to a growing trade war between the two giants over the last few years. The chipmakers they’re trying to court are suffering from the fallout.

More terrifying than the back and forth between governments are devastating natural disasters, like the earthquake that occurred last week in Taiwan.  

Earthquake Shakes Taiwan

One of the largest earthquakes in 25 years struck Taiwan on Wednesday morning, April 3rd. According to the Central Weather Administration, the 7.4 earthquake hit 15 miles south of Hualien before 8 a.m., and 76 aftershocks were recorded in less than five hours post-quake. In preliminary reports, over 1,000 people were reported injured, with nine tragically losing their lives.

On Wednesday, the quake and its resulting tremors, landslides, and damaged buildings trapped over 150 people. A silver lining in the terrifying aftermath was the location of the earthquake’s epicenter. On the eastern coast, Taiwan’s larger cities, including its capital, Taipei, were out of the earthquake’s danger zone on the island's west side. A tsunami warning was issued soon after the quake but was downgraded quickly.

Chipmaking giant TSMC quickly moved staff out of certain facility areas and evacuated others. United Microelectronics Corporation similarly halted production and evacuated some of its facilities in Hsinchu and Tainan. Other chipmakers or semiconductor industry players, such as ASE Technology Holding Co., are assessing the damage to their facilities.

TSMC said in a statement, "Safety systems are operating normally. To ensure the safety of personnel, some fabs were evacuated according to company procedure. We are currently confirming the details of the impact.”

Like many countries along the Pacific Ocean’s Ring of Fire, Taiwan is no stranger to earthquakes. However, Taiwan is more prone to quakes than others due to its proximity to the convergence of two tectonic plates. U.S. officials have long called for Taiwanese semiconductor companies, especially TSMC, to diversify operations off the island due to its earthquake vulnerability. A single tremor can destroy entire batches of precision-made semiconductors.  

However, Taiwan hesitates to lose what has been deemed its “silicon shield” should its semiconductor manufacturing prowess decline. Since the global semiconductor shortage, Taiwan has been expanding its international footprint with new expansion projects in Japan and the U.S. These facilities will take several more years to reach full speed.

In the earthquake's direct aftermath, early assessments of building safety and production have been minimal. TSMC reports that personnel were safe and have returned to their workplace without concerns.

"A small number of tools were damaged at certain facilities, partially impacting their operations. However, there is no damage to our critical tools, including all of our extreme ultraviolet (EUV) lithography tools.”  

Micron Technology, which also has operations in Taiwan, said its staff were safe and that once damage evaluations were completed, consumers would be informed of changes in delivery commitments.  

New Developments in Trade War

The trade war between the U.S. and China continues to escalate. Over the last year, new restrictions or other export controls have been announced every few months. In 2023, the Cyberspace Administration of China (CAC) said Micron Technology had failed to pass a network security review. As a result, Micron products were banned from selling key domestic infrastructure products.  

Luckily, according to experts, the impact on Micron’s sales was expected to be limited as most of Micron’s products were used in consumer electronics such as smartphones. Similarly, Micron planned to work alongside Chinese authorities to solve the problem.  

Some security experts believed Micron’s ban was retaliation against earlier actions by the U.S. that limited the sale of advanced semiconductor manufacturing equipment and chips. In 2023, with AI's rising popularity, the U.S. placed restrictions on the sale of specific AI-capable components, such as Nvidia’s GPUs. China then restricted two elements critical to some chips: gallium and germanium.  

There has been a new development in the trade war escalating tension.

According to a recent report by the Financial Times, Beijing has instructed official institutions in China to refrain from using PCs and servers equipped with microprocessors from Intel and AMD. Similarly, Beijing plans to have businesses reduce procurement of Microsoft Windows operating systems and database software outside of China.  

Neither government officials nor companies have officially responded, but Microsoft and Intel have declined to speak on the situation. The Financial Times says Chinese authorities have “requested state-owned enterprises to promote localization internally.” Intel and AMD dominate nearly all global PC processor market shares.

The move is not entirely unexpected. With increasing restrictions, both countries are focused on establishing a secure and self-reliant domestic semiconductor ecosystem. Chinese officials released new guidelines on the latest PC, laptop, and server procurement standards in late December. Government departments at the township level and above were mandated to incorporate standards for purchasing “secure and trustworthy” processors and operating systems.

Most of the 18 approved processors came from Huawei and Phytium, with China-based processor manufacturers utilizing a hybrid architecture of existing components and self-developed designs. It will take a lot of work for China to achieve its goal of transitioning entirely to domestic processors. Some of its domestically produced processors, such as Zhaoxin’s KaiXian (KX)-7000, are years behind other manufacturers in terms of technology.  

Likewise, as Huawei and SMIC seek patents on self-aligned quadruple patterning (SAQP) processes for chip production, experts believe they will eventually need ASML’s advanced lithography to remain competitive. One can only speculate how hard that will be should these restrictions become more stringent in the coming years.

A machine working on a chipboard

A Star is Born in DRAM Recovery- April 5, 2024

After the harsh decline in the semiconductor industry last year, the DRAM and NAND-Flash market has had to pick itself up by its bootstraps. Seeing the most significant drops in consumer demand, leading memory manufacturers, including Samsung Electronics, SK Hynix, and Micron Technology, engaged in strategic production cuts to quickly prevent inventory overhang from worsening.

Even now, the same manufacturers and others are still planning to continue strategic production cuts and partial facility shutdowns. The goal is to keep supply and demand tight until the market enters its rebound stage in 2H24. Despite increased sales, the market is still relatively poor, which could be attributed to the typical low-sales season following end-of-year holiday shopping.  

DRAM and NAND-Flash are seeing significant upticks in procurement now that buyers are stockpiling specific components. Artificial intelligence (AI) demand, specifically for high-bandwidth memory (HBM), is propelling it to become a major player in DRAM for 2024.

HBM Demand is a Rising Star for DRAM Rebound

HBM is rapidly increasing its market share within DRAM. TrendForce data in a recent report reveals that the DRAM industry will have allocated “approximately 250K/m or 14% of its total capacity to producing HBM TSV, with an estimated annual supply bit growth of around 260%.”  

HBM is expected to increase its revenue share from around 8.4% in 2023 to 20.1% by 2024, a major spike.

The growing demand for HBM is likely due to two major factors. Firstly, HBM’s use in AI applications. Secondly, in 1Q24, unfulfilled DDR5 orders triggered aggressive buying trends among procurement teams. Buyers were stockpiling components because of the uncertain market outlook and undelivered products. HBM has a much longer production cycle than DDR5, which may have triggered similar strategies as buyers considered their long lead times.

TrendForce reports that “the die size of HBM is generally 35%-45% larger than DDR5 of the same process and capacity. The yield rate (including TSV packaging) for HBM is approximately 20% -30 % lower than that of DDR5, and the production cycle (including TSV) is 1.5 to 2 months longer than DDR5.”

The complex packaging required of HBM, which consumes three times the DRAM capacity for DDR5, has indirectly led to capacity constraints for non-HBM. This tight supply-demand has contributed to DRAM’s improvement in the market, as tight supply allows manufacturers like Samsung to increase product prices.  

If TrendForce’s forecast rings true and HBM rises to 250K/m, Samsung Electronics total production capacity for HBM is 130K, while SK Hynix’s is 120K. Micron Technology’s CEO, Sanjay Mehrotra, says Micron’s HBM capacity has been fully allocated for 2024 and 2025’s capacity booked too.  

Micron expects that its revenue forecast will surge 58% year-on-year (YoY), massively surpassing Wall Street expectations. This is a big turnaround from losing $2.3 billion in the same period last year. This year, reduced production and explosive AI growth have immensely benefitted upstream memory manufacturers.  

Mehrotra said, “We believe Micron is one of the biggest beneficiaries in the semiconductor industry of the multiyear opportunity enabled by AI.”  

New Production Method for China-Made 5nm Chips?

According to a recent Bloomberg report, patents for a chip production process called “self-aligned quadruple patterning (SAQP)” have been submitted. Huawei and presumably China’s Semiconductor Manufacturing International Co. (SMIC) are behind the submission to produce chips using this 5nm-class process technology.  

SAQP is a process that has been used before. Unfortunately, the results were not overly spectacular. This process is cited as a contributing factor to the failure of Intel’s 1st generation 10nm-class process technology. Intel used the SAQP technology to eliminate reliance on high-end lithography, specifically extreme ultraviolet (EUV) lithography.  

ASML explicitly dominates EUV lithography production. When one manufacturer holds most of the market share or is the only manufacturer, bottlenecks and shortages become more frequent. However, due to SAQP’s failure to measure up, Intel reverted to more conventional manufacturing processes, such as AMSL’s lithography machines.

Unlike Intel, Huawei and SMIC have little choice otherwise, having but cut off from leading-edge chip manufacturing tools due to export restrictions. SAQP technology is the only tool they may have to increase transistor density.

This doesn’t mean that Huawei and SMIC’s endeavor is automatically doomed to failure. The SAQP process could enable SMIC to build chips on sub-10nm technologies related to SMIC’s rumored 5nm fabrication process.  

Huawei’s SAQP technology patent is reported to involve “etching lines on silicon wafers multiple times to boost transistor density, reduce power consumption, and potentially increase performance.” If this technology works as planned, it could help increase the production of more sophisticated chips by SMIC, such as the Kirin 9000S. Bloomberg also notes that SiCarrier, a state-backed chipmaking gear developer working with Huawei, has also been granted a patent for multi-patterning.  

TechInsights Vice Chairman Dan Hutcheson believes that even if these multi-patterning technology processes help Chinese OCMs manufacture 5nm-class chips, they will eventually need the aid of EUV machines. The help of advanced lithography machines is necessary to remain competitive in the market and go beyond 5nm nodes. Without EUV lithography, the cost per chip using SAQP technology might exceed economic feasibility. Eventually, these companies must procure or develop their own EUV technology.  

Advances in chip technology are critical to modern-day country economies. Consumers within China would like to possess competitive products, such as Apple iPhones, which require smaller and smaller chip nodes. SMIC must catch up to supply Huawei with the chips to accomplish such a feat, requiring advanced chipmaking process technologies.  

Whether Chinese manufacturers will eventually be able to purchase EUV machines or develop their own is still up in the air.  

An image of an machine producing transistors

NAND-Flash Prices Rising as Companies Expand Globally- March 29, 2024

Mitigation efforts continue to eliminate remaining inventory overhang and excess electronic component stock. Many manufacturers plan to continue with strategic production cuts or engage in partial shutdowns to keep supply-demand tight for the coming market rebound.

Organizations are seeking new ways to expand their global operations during the transition from glut to growth. Likewise, countries with small domestic semiconductor ecosystems or those eager to build more stable supply chains are considering new proposals to strengthen such areas.

Samsung NAND-Flash Price Could Increase by 20%

According to a report by the South Korean news outlet, The Chosun Daily, Samsung Electronics is coming out of the other side, after enduring the worst of the 2023 market downturn. Its strategic decision to reduce production on some of its product lines has paid off. Since late 2023, memory chip prices have consolidated at a price bottom and are now increasing.

In a recent report, an anonymous semiconductor industry source says that Samsung plans to increase its NAND-Flash chip prices by 20%. This is to restore the profitability of its memory chips. Price hikes are a common trend amongst DRAM and NAND-Flash suppliers this year, since forecasts were made in early 1Q24 regarding the likelihood of growing component costs.

“The first-quarter price negotiations between major memory manufacturers such as Samsung Electronics and SK Hynix and their customers have not yet been concluded,” said the industry source. “However, customers are rushing to secure supplies as the price of NAND flash has been steadily increasing, and fears spread that NAND flash cuts will continue this year.”

With growing demand for mobile, PC, and server products, Samsung plans to renegotiate prices with major customers in these areas for March and April. Samsung will push for an increase of 15% to 20%.  

After months of declines in the memory sector and strategic production cuts, NAND-Flash prices have steadily increased over the last five months. Despite being in the middle of a traditional low-demand season, TrendForce data reports buyers are stockpiling NAND-Flash to establish safe inventory levels. This action is also reflected in the DRAM market, where undelivered stock for DDR5 products has increased buyer stockpiling.

With buyer attitudes changing, Samsung’s decision to push for higher prices to minimize previous losses is expected. While the NAND-Flash market is not as consolidated as the DRAM sector, NAND-Flash is still dominated by five major players, with Samsung and SK Hynix holding the greatest market share. Samsung continues to remain in the top position.  

If Samsung goes forward with the planned increase, the others will likely follow suit.  

UAE Investors Interested in OpenAI Plans

Earlier this year, Sam Altman, CEO of ChatGPT creator OpenAI, came out with an ambitious and expensive proposal: a multi-trillion-dollar venture to establish an artificial intelligence component supply chain. This proposal would help OpenAI achieve its goal of creating its own semiconductor chips in-house, reducing OpenAI’s reliance on Nvidia, the current king of AI chips.  

OpenAI made a deal with Thrive Capital by selling company shares in February 2023 as part of its process and funding efforts. This dramatically increased the company's valuation, skyrocketing the price to over $80 billion—nearly a threefold increase in under ten months.  

It is a crucial step in the right direction, but OpenAI needs a lot more to achieve its goals. It's one of the reasons Altman is courting leadership in the United Arab Emirates (UAE). UAE’s state-backed group, MGX, is reportedly in discussions to back OpenAI’s venture, according to two people with “knowledge” of these talks.

MGX, the group behind the potential UAE investment, is an AI-focused fund recently formed and headed by UAE’s National Security Advisor, Sheikh Tahnoon Bin Zayed al-Nahyan.

The fund was also created in collaboration with “G42 and Mubadala, the former having already entered into a partnership with OpenAI in October 2023 as a part of the company's Middle East expansion.”  

Altman says the partnership with G42 plans to bring AI solutions that “resonate with the region's nuances.” The UAE and others are attempting to establish themselves as hubs for emerging technologies such as cryptocurrencies and the metaverse.  

Sources say the fund hopes to create “a structure that will put Ahu Dhabi at the center of this AI strategy with global partners worldwide.” The UAE’s recently launched free zone will help support companies involved in digital and virtual assets such as blockchain and Web3.  

TSMC is Looking to Japan to Increasing Advanced Chip Packaging Capacity

During 2023, despite the overall market decline, there were some bottlenecks, specifically with components used in artificial intelligence. TSMC saw dramatic drops for several product lines but could not meet the high demand for advanced packing orders or its chip-on-wafer-on-substrate (CoWoS) packaging.  

This advanced packaging technology is used in Nvidia’s flagship GPUs, which propelled the company into the trillion-dollar club over 2023. TSMC’s CoWoS is a high-precision technology that stacks chips on each other to boost processing power while saving space and power consumption. All of TSMC’s CoWoS capacity is located within Taiwan.

According to two unnamed sources, Reuters says that TSMC wants to expand its advanced packaging capacity with new facilities within Japan. Deliberations are still in the early stages, but should they evolve, this move would be a welcomed boon to Japan’s domestic semiconductor revitalization efforts.  

TSMC’s ongoing attention in Japan might indicative its future global expansion plans. TSMC just built one plant and is moving forward with a second plant in Kyushu, same as the first. TSMC is partnering with Sony and Toyota for these facilities, with a total investment expected to reach over $20 billion.  

As a leader in semiconductor materials and equipment makers, Japan is uniquely poised to take a more prominent role in advanced packaging should it be given the opportunity. However, TrendForce analyst Joanne Chiao said that should TSMC move forward with building advanced packaging capacity in Japan, it would be limited in scale.  

Besides TSMC, Intel and Samsung want to establish advanced packaging capacity within Japan. Intel declined to comment on specific plans, but two separate sources have spoken about Intel’s interest in establishing an advanced packaging research facility within the country. With government support, Samsung Electronics is already working on setting up its own facility in Yokohama.  

The renewed interest in manufacturing capacity within Japan is helping the country’s revitalization efforts in semiconductor production capacity. Like other countries, Japan hopes to regain its lost domestic semiconductor manufacturing ecosystem ever since the dramatic effects of the global semiconductor shortage.  

A close-up image of microelectronics on a board

Sales Are Up, but Production Delays Continue - March 22, 2024

The semiconductor industry is slowly gaining traction after a year of poor consumer demand. Artificial intelligence spurred a wave of orders for specific components, especially Nvidia’s GPUs, but it couldn’t draw the entire industry out of its decline. Many manufacturers, including memory giants Samsung Electronics and SK Hynix, engaged in strategic production cuts to soften the harsh blow.

According to experts, these mitigation efforts have helped reduce the inventory overhang currently plaguing the semiconductor industry. However, more corrections are needed in the next few months for a truly successful market rebound in 2024. That said, semiconductor demand is ramping up, a great sign after a year of low sales.

Global Semiconductor Sales are up 15% in January 2024

The Semiconductor Industry Association (SIA) has good news for the semiconductor industry. Year-on-year (YoY) analytics indicate that the semiconductor industry saw sales increase 15.2% YoY in January 2024 compared to January 2023. Sales in January reached $47.6 billion, up from $41.3 billion in 2023. However, January fell behind December 2023 by 2.1%, or $48.7 billion, in total sales.

The slight decline from December to January is easy to explain. December, a massive holiday shopping season, is one of the best months for companies globally. Numerous businesses, such as Apple, release new products around late Q3 and early Q4, sparking interest and demand. The fact that January demand didn’t drop too drastically is good news.

“The global semiconductor market started the new year strong,” said John Neuffer, SIA President and CEO. “With worldwide sales increasing year-to-year by the largest percentage since May 2022. Market growth is projected to continue over the remainder of the year, with annual sales forecast to increase by double-digits in 2024 compared to 2023.”

Regionally, year-to-year sales were up across China, the Americas, Asia Pacific, and others, with exceptions in Japan and Europe. Similarly, month-to-month sales were down across all markets, as expected in the post-holiday shopping season.  

Monthly sales data is compiled by the World Semiconductor Trade Statistics (WSTS) organization, with the SIA representing 99% of the U.S. semiconductor industry and 2/3rds of non-U.S. chip firms.  

This news comes right after the SIA’s most recent analytics showing that the semiconductor industry saw an 8.2% decline in global sales revenue in 2023. This noticeable decline contributed to some strategic production cuts and new facility construction delays as chipmakers, distributors, and others prioritized retaining capital during the worst of the slowdown.  

The industry isn’t out of the woods yet, but it is gaining ground on clawing its way back to a rebound.  

Tower Semiconductor Halts Operations

While the semiconductor industry sees positive numbers indicating returning consumer demand, excess electronic component inventory remains. Mitigation efforts continue, with some chipmakers taking more drastic steps than others. Samsung Electronics and SK Hynix made headlines last year for their decision to engage in production cuts after memory saw the worst of the market decline.  

According to research firms, the first half of the year will be critical in efforts to reduce the remaining industry overhang. Customers are still reducing orders as they clear inventory that has accumulated over the past two years. Considering the fragile state of the semiconductor industry recovery, memory manufacturers, despite seeing increased orders in DRAM and NAND-Flash, are continuing production cuts to keep supply tight.

Similarly, Tower Semiconductor is planning a 3-week shutdown for most of its operations in Newport Beach, as Data Center Dynamics reports. Nearly 700 employees will be taking leave from April 1st to 7th. Further shutdowns are expected from July 1st to 7th and October 7th to 13th. The announcement also details that most of Tower’s employees will be affected by the 3-week furlough period.  

According to IJIWEI, Tower Semiconductor management announced that its equipment will remain in a “warm shutdown,” and power to unused plant areas will be shut off. This is typical for semiconductor facilities as they cannot be switched “on and off” from no production to full production the same way an automotive manufacturing line can.  

Despite Tower Semiconductor’s planned shutdown and sales falling behind other chip behemoths like Intel and TSMC, these actions do not indicate the company’s performance. Tower Semiconductor produces components for major clients like Broadcom and enjoys a high market position in rapidly growing fields like electric vehicles (EVs).

Likewise, Bloomberg recently reported that Tower Semiconductor has proposed a $9 billion investment to establish a facility in India. This planned facility is a step in Tower Semiconductor’s overall strategic goal of expanding its global operations and producing 80,000 wafers per month.

Like so many other chipmakers, Tower Semiconductor has needed to adjust due to lingering inventory challenges and last year’s decline. Given the company's massive room for growth, it is unlikely that Tower Semiconductor will continue this trend in the future. Tower is preparing itself for the coming market rebound during its transitional period.  

High-Demand Nvidia Chips Experiencing Excess Challenges? - March 15, 2024

The semiconductor market is going through a transition. Consumer demand hasn’t returned in full yet, and excess inventory mitigation remains a priority among chipmakers. There are still several months until the market rebound many hope for is expected to arrive. In the meantime, low customer demand is affecting everyone, even AI-chip leader Nvidia.

Nvidia’s H100 Is Being Resold By Customers

After a year of explosive growth and demand, Nvidia’s highly coveted and elusive products are beginning to see challenges in the company’s AI-chip dominance. The popular and scarce Nvidia data center GPU, H100, is experiencing a noticeable reduction in lead time and improved market conditions.  

Over 2023, despite poor market conditions, Nvidia experienced spectacular growth after the AI boom, thanks to ChatGPT’s success. Customers, including tech giants like Microsoft and Google, battled to purchase large stockpiles of Nvidia’s components, including H100. While there was no genuine shortage for these GPUs in 2023, bottlenecks occurred. TSMC struggled to meet production capacity for advanced packaging utilized in Nvidia’s GPUs.

Due to the recent easement in market conditions and part lead time, customers who once purchased large quantities of H100 chips are beginning to resell them.

In a report by Tom’s Hardware, the H100 saw a reduction in delivery wait times from 8-11 months to 3-4 months, indicating a relief in supply pressure. While there is still an ongoing surge for artificial intelligence, major cloud suppliers such as AWS, Google, and Microsoft Azure offering access to AI computing services have also contributed to enterprises' decisions to offload their GPUs.

Reduced scarcity and high maintenance costs have led to enterprise customers selling their stockpiles, but this change does not indicate a more significant market trend. Current orders for AI remain robust, with large-scale artificial intelligence model computation keeping overall demand greater than the supply. Ongoing AI popularity and integration efforts have prevented a steep drop in price for H100 GPUs.

According to the report, customers are now prioritizing price and practicality when leasing AI computing services from cloud service providers rather than immediately going all in on their own AI services. Likewise, competitors' alternative solutions to the H100 have since emerged on the market, offering comparable performance and software support. These new products provide some customers with more affordable pricing, contributing to a more equitable market condition.  

In new data by TrendForce, research suggests that the 2024 market landscape for high-demand AI servers powered by Nvidia, AMD, or other top-tier ASIC chips will be influenced by North America’s cloud service providers. Around 60% of the global demand will be divided between Microsoft, Google, AWS, and Meta, with Microsoft leading the charge with 20.2%.  

However, despite the saving grace, Nvidia is still contending with some challenges. These problems go beyond Nvidia’s stronghold in AI, as even with competition from AMD and others, Nvidia’s GPUs hold 70% of the AI market. The issue lies with limited growth, attributed to U.S. restrictions on technological exports to China. Nvidia, trying to enter China’s market with chips that work around restrictions, such as H20, might not be able to challenge Huawei, which has capitalized on Nvidia’s market absence.  

Similarly, while Nvidia holds the AI throne now, AMD is quickly rising as a competitor with cost-effective strategies. AMD offers similar products at 60%-70% of Nvidia’s comparable model price. This has allowed AMD to break into the market effectively, carving out a section against Nvidia’s pressure. Microsoft, one of Nvidia’s largest clients, is expected to be “the most enthusiastic adopter of AMD’s high-end GPU MI300 solutions in 2024.

The M1300 series, debuted by AMD last year, offers similar software solutions that developers have praised Nvidia for. Should H100 continue to see reselling throughout the year, it will probably not indicate poor customer demand but rather the growing competition Nvidia faces.  

Newport Wafer Fab Acquired by Vishay

Since the summer of 2021, the former Newport Wafer Fab factory in the UK has been awash in national security concerns and other controversies. In July 2021, Nexperia, the Dutch-based technology company subsidiary of Shanghai-listed Wingtech, purchased a majority stake in the plant. The action led many ministers in the UK government to express concerns over national security if a Chinese company controlled the firm.  

As a result of these concerns, the UK government forced Nexperia to sell 86% of its stake in what was then known as Newport Nexperia. Most of the problem seemed to originate from the worry that China would be able to undermine the UK’s domestic semiconductor manufacturing ability by transferring knowledge of critical technology used in modern digital devices to a Chinese-owned entity.  

In November 2023, Vishay announced it would buy the plant outright from Nexperia for $177 million. However, just like before, the purchase wasn’t a simple handoff. The deal still required national security clearance by the UK’s Cabinet Office. This clearance would take another four months before Secretary of State Oliver Dowden issued the consent order.  

The Newport Wafer Fab is the UK’s largest manufacturer of semiconductors and mainly supplies components for the automotive industry. Vishay is eager to expand the site and prioritize research and development of compound semiconductors.  

Vishay and the UK government will have to keep in close communication, as stated in some of the conditions that came with clearance for the purchase to be approved. If Vishay plans to enter future agreements to sell, transfer, or lease to a third party that would give them access to the property, the company must inform the UK government. Likewise, ministers want the intellectual property and sensitive information now owned by Vishay upon the Newport Wafer Fab purchase to be tightly controlled.  

In an official company statement, Toni Versluijs, Country Manager Nexperia UK, said that Nexperia would have liked to continue its strategy with the Newport Wafer Fab location but agrees that Vishay’s solid customer base and capabilities will ensure the site’s future success.

UK’s Economy Minister, Vaughan Gething, said: "I am pleased that the long-overdue decision to permit the acquisition of Newport Wafer Fab by Vishay International has now been taken. Today's news brings security to a hugely talented workforce after a long period of uncertainty, and I hope they can look forward to a new sense of optimism."

An image of the Japanese flag flying among buildings on a sunny day

New Facilities and AI Driving Sales - March 8, 2024

The semiconductor industry is poised for a market rebound in 2H24. New semiconductor manufacturing facilities are entering construction or preparing to begin chip production. Due to low consumer demand in 2023, some chip manufacturers have readjusted their schedules, no longer expected to commence production in 2024, as previously suggested. In the United States, the government's delay in awarding the CHIPS Act’s highly coveted subsidies has led to slowdowns in construction as manufacturers wait to receive additional funding.

That’s not to say all countries are facing similar delays. While some manufacturers have scaled back in the United States, waiting for more suitable timeframes, they are ramping up production in other global locations. Geopolitical volatility has pushed for greater diversification, and many chipmakers are eager to add new locations worldwide to their corporate footprint.  

With artificial intelligence expected to buoy demand as a primary growth driver in the coming months, these new facilities can’t come soon enough.  

TSMC Joins Japan’s Domestic Chip Push

TSMC isn’t just bringing its power to the desert of Arizona in the U.S. Last month, TSMC opened its first chip fabrication plant in Japan, with a second one in the offing. Construction on the second plant may begin at the end of 2024 and represents TSMC’s continued push toward diversification outside of Taiwan.  

The new chip fabrication plant in Kumamoto is slated to begin production in late 2024. The facility was constructed by Japan Advanced Semiconductor Manufacturing Inc. (JASM), majority-owned by TSMC. Established in 2021 with support from the Japanese government, Sony Semiconductor Solutions, and Japanese automotive components maker Denso Corporation, the goal was to help power Japan’s semiconductor ecosystem.

Japan, once a powerhouse in semiconductors, lags ten years behind chip-making leaders TSMC and Samsung, according to the Center for Strategic & International Studies. Trade challenges and disputes with the U.S., missed opportunities during the PC revolution, and other scenarios have contributed to Japan’s decline. Since the global semiconductor shortage, Japan has been striving to strengthen its semiconductor presence, much like the European Union and the United States.  

With the ongoing trade war between the U.S. and China, Taiwanese companies like TSMC are eager to diversify production outside Taiwan. Japan has become a great option.  

Earlier this year, TSMC, Sony Semiconductor Solutions, Toyota, and Denso agreed to further invest in JASM for the second planned plant. It will produce semiconductors for automotive, industrial, and consumer uses for high-performance computing-related needs. Morris Chang, TSMC’s founder, believes that the resurgence of Japan’s semiconductor industry will begin with the inauguration of TSMC’s first facility, enhancing the country’s resilience.  

The Japanese government, represented by Minister Ken Saito, has shown “strong support for TSMC's investment, viewing it as a model for semiconductor industry growth. The new plant is already positively impacting the local economy in Kyushu, offering higher-than-average wages and promising to contribute to the region's economic development,” according to Reuters’ latest article detailing the plan.

Chang is very optimistic about TSMC’s success in Japan, citing the country’s history of production quality and previous positive encounters, including his 1968 joint venture with Sony and Texas Instruments. With the rising demand for artificial intelligence, Chang says it’s not just that AI chipmakers are looking for tens of thousands of wafers but “multiple new fabs with formidable semiconductor manufacturing capacity.”

A need that TSMC’s new plant can offer. Should it continue, especially with the Japanese government doling out investments, TSMC’s total subsidy would put it beyond the 1 trillion-yen mark.  

Nvidia’s Earnings Report Powers Up AI Sector

Nvidia recently released its earnings report for the end of 4Q2023. It’s a big one, which isn’t unexpected news considering Nvidia’s prolific boom last year thanks to the rising popularity of artificial intelligence. Two days after it released its quarterly earnings report, Nvidia briefly hit $2 trillion in market value for the first time. This high comes directly from the insatiable demand for its components that power most AI applications today.  

Beyond Nvidia, the AI craze has made winners out of many AI companies, including Super Micro Computer and Arm Holdings. Nvidia’s shares are up 60% year-to-date, Super Micro Computers have grown by 200%, and Arms’s shares are up 77%. For Nvidia, 2023 was a record year in revenue, coming in at $60.9 billion, up 265% from a year ago.  

“Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries and nations,” said Jensen Huang, CEO of Nvidia.

“Our Data Center platform is powered by increasingly diverse drivers — demand for data processing, training and inference from large cloud-service providers and GPU-specialized ones, as well as from enterprise software and consumer internet companies. Vertical industries — led by auto, financial services and healthcare — are now at a multibillion-dollar level,” Huang said about Nvidia’s recent report.

Huang continued, “NVIDIA RTX, introduced less than six years ago, is now a massive PC platform for generative AI, enjoyed by 100 million gamers and creators. The year ahead will bring major new product cycles with exceptional innovations to help propel our industry forward. Come join us at next month’s GTC, where we and our rich ecosystem will reveal the exciting future ahead.”

Furthermore, Nvidia expects this growth to continue through 2024, into 2025 and beyond. Its earnings report included previous product announcements, detailing which components supported its fantastic rise over 2023. The markets that contributed the most to Nvidia’s climb were data centers, gaming, professional visualization, and automotive sectors. In 2024, similar exciting launches are bound to come.  

The AI craze will help drive the semiconductor market to rebound and Nvidia will be there to provide the next generation of leading-edge AI chips.  

An close-up of 100 dollar bills stacked

Chip Fab Funding is Coming, But Delays Remain - March 1, 2024

The semiconductor industry is on its way toward a market rebound. As recovery approaches, funding for semiconductor programs and facilities continues to be proposed and given out to chipmakers across the globe. In the United States, the multi-billion-dollar CHIPS Act that sparked over $200 billion in investments from chipmakers is finally starting to be divvied up.

The market downturn in 2023 and tax concerns have delayed that process until now. With the slow response of the U.S. government to hand out the CHIPS funding, some chipmakers are starting to readjust their projected production schedules as concerns over CHIPS incentives rise. This could evolve into a larger problem, since market growth is expected to return before global production capacity has been sufficiently increased.

GlobalFoundries Receives CHIPS Funding

The U.S. government has recently awarded GlobalFoundries $1.5 billion to subsidize the company’s semiconductor production. This is the first major announcement of the CHIPS Act’s funding allocation since its passage. The $39 billion fund for domestic semiconductor production continued to be divvied up in the coming weeks. GlobalFoundries will use its allotment to expand and upgrade its facilities in New York and Vermont.

These facilities are responsible for producing components utilized mainly in automotive and defense industries. The coming improvements to both factories are especially welcome after the impact of the global semiconductor shortage. Both automakers and defense contractors ran into numerous problems when they could not secure necessary stockpiles.

"The chips that GlobalFoundries will make in these new facilities are essential to our national security," Commerce Secretary Gina Raimondo told reporters. Later, Raimondo told Reuters that the agency is in active talks with numerous applicants and expects to make several announcements by the end of March.

"We're in the process of really complicated, challenging negotiations with these companies," Raimondo said. "These are highly complex, first-of-their-kind facilities. The kind of facilities that TSMC, Samsung, Intel, are proposing to do in the United States -- these are new-generation investments -- size, scale complexity that's never been done before in this country."

Despite the good news, production delays have haunted chipmakers over the last year. TSMC and its widely publicized $40 billion Arizona plant have faced several obstacles. Last summer, TSMC had to push back its production start date from 2024 to 2025 when it needed more workers with the expertise to install sophisticated equipment.  

More recently, TSMC stated that its second plant will not produce chips until 2027 or 2028 rather than 2026 due to concerns over tech choices and federal funding. TSMC Chairman Mark Liu, said that Arizona’s progress depends on “how much incentives the U.S. government can provide.”

TSMC isn’t the only chipmaker encountering problems either. Intel, Microchip Technology, and others have needed to adjust production schedules to manage infrastructure due partly to the sales slump in microelectronics last year. New facilities are massively complex. To ensure organization and focus, funding and construction timelines were delayed to prioritize surviving the worst of the market decline last year.

Meanwhile, concerns have risen over the success of the CHIPS Act. The U.S. government has been locked in negotiations with major chipmakers over the funding amount and timing. These impediments could lead to rival countries with subsidy programs, such as the EU and East Asia, obtaining other projects.  

“The longer the U.S. government waits to distribute benefits, the more other geographies are going to snap up these investments, and more leading-edge investments will be made in East Asia,” said Jimmy Goodrich, Senior Advisor for the RAND Corporation. “So, the clock is ticking.”

White House and Treasury Department spokespersons say that the delays have been due to questions over tax credits and the overwhelming number of companies that submitted interest statements for the grants. After the shock of the low demand drop from last year, many organizations have been left with inventory overhang and no immediate need for new factories.

“Companies are rethinking how and what and when investments will occur,” said Thomas Sonderman, the Chief Executive of SkyWater Technology.

Microchip and Intel have adjusted purchases of factory tools, waiting until business conditions improve before considering investing further. Operations have slowed but not ceased entirely. Others, such as Micron Technology and Texas Instruments, are pushing ahead despite the market downturn. Rather than delay the inevitable, Micron’s Vice President, Scott Gatzemeier, said that construction projects should be based on future demand over current conditions.  

“Once you start, you don’t want to stop,” he said. “Renting massive cranes and other equipment and securing construction workers are big expenses that might need to be repeated if a project is halted.”

Arm Considers AI as SIA Forecasts Major Growth

SoftBank, the controlling stakeholder behind world-renowned chip designer Arm, is considering a new strategy to take on the reigning king of artificial intelligence (AI) chips, Nvidia. This new AI strategy will require a hefty $100 billion investment, broken up by $30 billion from SoftBank and $70 billion from Middle Eastern institutions.  

Codenamed Izanagi, the recent news increased SoftBanks’ share price by 5%. Arm’s chip designs are crucial for dozens of chipmakers, including Nvidia. Due to this, antitrust concerns could become prominent if Arm partners with any specific chipmaker, echoing Nvidia’s failed takeover of Arm two years ago.  

Something else that sounds familiar is the recent trend of turning to the Middle East for investments. OpenAI’s Sam Altman is currently attempting to do the same with his proposed multi-trillion-dollar AI supply chain venture. Like Arm, there is concern that Altman could unwittingly put OpenAI in a place of antitrust scrutiny if it ends up being a separate venture from OpenAI. Altman would require the blessing of the U.S. government before receiving investments from the Middle East as well.  

Despite the challenges, SoftBank’s push into AI is an expected next step for the chip designer, considering the overwhelming growth in AI over the past year. The semiconductor market is poised to rebound, with memory and AI leading the charge. The Semiconductor Industry Association (SIA) forecasts that the semiconductor industry will see a sales rise of 13% in 2024 after announcing a decline of 8.2% in 2023.  

“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 SIA CEO John Neuffer, “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 barriers to trade will help the industry continue to grow and innovate for many years to come.”

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.

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