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Semiconductor Industry News - December 2023 Update

Semiconductor Industry News - December 2023 Update

An image of semiconductors being manufactured

Asia is Moving to Increase Domestic Chip Capabilities - December 1, 2023

The entire world is working to expand chip production and turn out more advanced semiconductors. Unsurprisingly, Asia is investing heavily in both chip innovation and manufacturing as it seeks to fend off a fresh wave of competition from the U.S. and Europe.  

In Japan, Rapidus is an exciting startup that aims to revamp the nation’s domestic industry and jumpstart 2nm chip production as soon as 2025. Meanwhile, China is navigating a sweeping list of trade restrictions by purchasing more chipmaking equipment to advance its manufacturing capabilities.  

Rapidus is Japan’s Best Chance at Revitalizing Domestic Chip Production

Rapidus has been dubbed one of the most ambitious collaborations in the history of the semiconductor industry. The startup was founded shortly after the pandemic by a group of Japanese companies to revive the country’s chip sector. Toyota, Sony, NTT, Denso, Softbank, NEC, Kioxia, and others all chipped in to bring the vision to life.  

Now, Rapidus aims to bring IBM's groundbreaking two-nanometer chip design to reality. Notably, today's most advanced chips are only being produced at three nanometers by firms like TSMC and Samsung. Rapidus has an ambitious goal of achieving mass production of 2nm chips by 2027. The move comes as part of Japan's wider plan to reinvigorate its chip industry over the coming decade to better compete with industry giants like Taiwan and South Korea.

Though Rapidus has only been around for roughly 14 months, the startup has a vision for creating a tech hub similar to Silicon Valley in Japan's Hokkaido prefecture. In an interview, Rapidus CEO Atsuyoshi Koike said, “My big ambition is to realize a Hokkaido valley that spreads from Tomakomai to Ishikari, and that can compete against Silicon Valley in size.”  

To accomplish this, Rapidus is building a new factory in Hokkaido where it will carry out research and manufacture 2nm chips based on IBM’s technology. The new facility is expected to go online for pilot line operations as soon as 2025. Getting there, however, we'll take a significant investment of both money and manpower. The facility is estimated to cost at least $37 billion and has an aggressive timeline for construction.

Koike said in a September interview, “We will complete the plant at an unprecedented speed, as the company name rapidus implies.”

One of the biggest challenges standing in the way is the startup's lack of advanced chip production expertise compared to giants like Samsung and TSMC. Indeed, skipping over several nodes and opening production with two-nanometer chips is essentially unheard of.  

However, Rapidus intends to make this happen thanks to several key partnerships, including one with Belgium's IMEC, which is tasked with building international cooperation for the project. Dutch semiconductor equipment maker ASML is also involved and is reportedly considering setting up a new base of operations in Hokkaido given the new facility’s need for its advanced EUV equipment. Nikkei previously reported that 50 ASML engineers are already scheduled to install an EUV machine on Rapidus' new production line.

Meanwhile, Rapidus will need to deal with an unprecedented labor shortage in Japan which is currently increasing labor costs, making construction difficult, and threatening to delay the start of production. A lack of engineers in the country is another pressing concern. However, Rapidus has already started to address this issue and has reportedly hired more than 200 chip engineers to help bring its new fab online. Even so, TSMC has plans to establish a second chip facility in the region shortly, which will only serve to intensify competition for the best workers.

For Japan, reestablishing its domestic semiconductor industry is a top priority, no matter the cost. Rapid itself is in part the result of generous government subsidies to the tune of $510 million. Japan has also committed to granting the startup $1.8 billion in additional funding to partially fund the construction of its new plant in Hokkaido. Still, Koike claims billions of dollars are still needed to get the facility off the ground and achieve the startup's ambitious goal for 2nm chip production by 2025.

After dominating the chip sector for many years, Japan's leading semiconductor companies largely stopped taking risks and thus lost ground to more ambitious firms. Now, Rapidus’ lofty goals and approach to chip production give the country a chance to reestablish itself as a global chip superpower. Whether or not this approach will be successful remains to be seen. Regardless, Rapidus is an exciting project and an important one to monitor since, if it is successful, it has the potential to revolutionize chip production around the world.

China Spends Big on Chipmaking Gear, Improves Manufacturing Capabilities Despite Trade Bans

As China aims to bolster its domestic semiconductor industry amid a slew of export restrictions from the U.S. and others, the country is spending big on chipmaking equipment. According to data analyzed by Nikkei Asia, Chinese imports of chip manufacturing gear rose by more than 90% year-over-year last quarter to $8.7 billion.

Lithography equipment was in high demand and leading lithography equipment maker ASML saw China account for 46% of its sales last quarter. This marks a significant increase from the 14% share the country took in 2022. According to ASML's CFO Roger Dasse, the company's shipments to China mostly included equipment for older production processes—not advanced nodes. Such equipment is well within export regulations.

Even so, it is believed that China is making strides to improve its advanced chip manufacturing technology with great success. Huawei recently released a new 5G smartphone featuring a 7nm chip that experts believe was produced by China's Semiconductor Manufacturing International Corp (SMIC). This development is an indication that China has not been hindered by chip equipment bans, but rather is using the opportunity to advance its manufacturing capabilities. It also suggests that SMIC may already be able to mass produce advanced chips using older technology that is readily available in China.

A report from the U.S.-based Center for Strategic and International Studies (CSIS) claims that, “Additional future purchases [of chipmaking equipment] could increase SMIC’s potential 7nm production.”  

Aside from equipment purchased from Dutch-based ASML, China also increased its purchasing of equipment from Japan by roughly 40% year-over-year in the last quarter. These shipments included both lithography machinery and deposition equipment, the latter of which is a specialty of Tokyo Electron.

Chinese imports of chipmaking gear from the U.S. also increased, though significantly less than imports from other nations. Last quarter saw a jump of roughly 20%, but notably, that figure is 9% lower than the same quarter in 2021. This comes after the U.S. expanded its export restrictions last month to “close loopholes” in the original ban while urging its allies to do the same.

Experts believe the sudden increase in Chinese chip equipment imports may in part be due to fears of access being cut off in the near future via another round of trade restrictions. Since lithography equipment is not typically delivered for several months after an order is placed, it makes sense that chip makers are trying to stay ahead of the curve by placing their orders now.  

Senior analyst at the Tokai Tokyo Research Institute, Masahiko Ishino, said “Chinese manufacturers, seeing a possibility that they could lose access to equipment, may have rushed to place orders regardless of actual demand.”  

Whether or not this trend continues in the coming months is yet to be seen. However, given China’s intense drive to increase the capacity of its domestic chip production, it would not be surprising to see equipment imports continue to rise. This is an important situation to monitor as the semiconductor industry’s global dynamics continue to shift and supply chains become more diverse than ever.  

For chip equipment manufacturers, China continues to be a key market. According to SEMI, the country accounted for 29% of global chip gear sales in the quarter lasting from April to June. At this point, it's clear that China does not intend to back down from export restrictions and instead is leaning into its domestic industry with a heavy period of investment and innovation.

An image of completed microchips

China Strengthens Domestic and Foreign Semiconductor Supplies - Nov 24, 2023

China is making big moves to bolster its chip industry. From funding investments in new chip fabs to working with domestic manufacturers to churn out more components, it’s clear China has big plans for the semiconductor space in the next decade.  

Now, it appears global tensions may be easing as the country has agreed to let Micron resume chip sales with its companies following an alleged security review failure earlier this year. Meanwhile, Arm is working to expand the reach of its architecture in China by developing innovative products to help fuel the chip sector’s reinvigoration.

Micron, China Ease Relations Following Earlier ‘Security’ Chip Sales Ban

It’s an understatement to say trade tensions between the U.S. and China have been rocky, particularly for chip companies. Following several rounds of export bans and retaliatory moves back and forth, it now appears relations between the two may be warming. That’s true at least on behalf of Micron, the first U.S. chipmaker China targeted with a partial sales ban earlier this year.  

During a recent meeting, China’s commerce minister Wang Wentao said, “We welcome Micron Technology to continue to take root in the Chinese market and achieve better development under the premise of complying with Chinese laws and regulations.”

Notably, Beijing banned key Chinese firms from buying Micron’s components after the country’s Cybersecurity Administration said it failed a security review. While it’s unclear exactly what went wrong, many experts believe the move had more to do with retaliation following a decision by the U.S. to ban certain chips and advanced manufacturing equipment from being sold in China. To date, Chinese authorities still have not publicly specified why Micron failed the review.

Despite the quick change of heart, the move still impacted Micron’s financial picture for the latter half of the year. The memory chip maker originally estimated that the China ban would cost it $4 billion in annual revenue. Notably, Micron’s 2023 revenue was reported at $15.4 billion, marking a sharp decline from the $30.8 billion it brought in during 2022. The drop can’t all be attributed to the China ban given the wider memory market’s recent struggles. However, it certainly played a role.  

Micron CEO Sanjay Mehrotra echoed this sentiment, saying, “Q4 results and Q1 guidance reflect the net effect of the loss of revenue in China as well as the success with some of the mitigation, and of course we are working on mitigating the China revenue loss.”  

Now, Micron will be able to restart its business with buyers in China as the ban is lifted. It’s unclear what requirements it will need to meet in the future to ensure it remains welcome. However, Wentao recently told Mehrotra that China plans to foster a friendly environment for business—including service guarantees and foreign investment opportunities. The Micron CEO has reportedly “expressed willingness to expand investments in China” though it remains unclear how this sentiment may manifest itself.

Micron, like many leading chipmakers, is also taking strides to diversify its global footprint. The firm has announced several multi-billion-dollar fab projects in the U.S., including a $15 billion facility in Idaho and four new fabs in upstate New York worth $100 billion. The new fabs are expected to enter production in 2027 and promise to be a key component of the effort to revitalize the American semiconductor industry. It also recently began construction on a new advanced packaging facility in India.  

Over the coming months, it will be interesting to see how Micron handles its business in China. While the market is too large, and too important, to move away from entirely, it wouldn’t be surprising to see the chipmaker take a careful approach to doing business in China after its revenue was severely disrupted without a clear or seemingly just cause. Despite assurances that it plans to invest in China, Micron won’t soon forget the past few months.  

Arm Working with Chinese Companies to Spark Domestic Chip Innovation

China’s domestic chip industry is on the brink of a big period of growth thanks to commitments from government leaders and a necessary push as a result of export restrictions from other countries. Of course, this involves every level from chip design to manufacturing and the post-sale supply chain. For chip designer Arm, China is a promising market. The firm’s ARM China licensee recently hosted the “Smart IoT EcoSystem Seminar” in Shenzhen, the country’s electronics design and manufacturing center.  

The Arm architecture is exceedingly popular today—and for good reason thanks to the potential for innovation it unlocks. When ARM China was established in 2018, its goal was to develop IP products specifically for China’s chip industry. It currently is the only entity licensed to sell Arm IP in China, giving it a unique position within the industry.  

The division has been working hard to expand the reach of Arm architecture in the country and was rewarded with a 10% increase in Arm-authorized customers during the first half of 2023. Today, four million of Arm’s 15 million developers hail from China. Arm executive vice president of strategy and ecosystem Drew Henry said at the recent seminar, “China is one of Arm’s fastest-growing markets.”  

“Arm has a close collaborative relationship with ARM China in the Chinese market… Arm continues to invest in China, and it is Arm’s long-term commitment to help Chinese companies serve customers worldwide,” he added.  

ARM China has primarily focused on internal research and development since it was established and now has several offerings of its own IP. Those efforts have reportedly led to deals with more than 160 local customers for self-developed products. Chip shipments based on Arm architecture from those deals have exceeded 200 million.  

According to JW Insights, ARM China focuses on “heterogeneous and intelligent computing and strategically selects AI, CPU, information security, and multimedia, launching processor product lines and achieving mass production.”

Meanwhile, ARM China’s Ecosystem Partner Program, which it launched last year, has attracted over 60 chip companies as well as leaders in key market segments like IoT, smart cars, and consumer devices. This measure is designed to empower chip partners throughout the design process and foster increased innovation in the industry.  

Moving forward, China will continue to be a key market for Arm to pursue as the country seeks to further develop its domestic chip industry. As the rest of the globe works to diversify supply chains, China is leaning heavily into self-reliance among its top firms and smaller players alike. For Arm, which focuses solely on chip design rather than production, this offers a unique opportunity to expand in the market where others may not be able to.


An image of an aerial view of cars parked in a parking lot

Quantum Semiconductor Breaks Records and EV Demand Slows - Nov 17, 2023

New technologies promise to revolutionize the way the world looks and operates over the course of the next decade. From electric vehicles cutting down on transportation emissions to quantum computing speeding up complex problem solving, innovation with next-gen solutions remains central to current efforts in the tech world. While these technologies promise a better future, unlocking their potential is not without challenges.  

Onsemi Sees EV Chip Demand Slow in Q4, But Headwinds Won’t Last Forever

Demand for electric vehicles (EVs) has been high for most of the year as lawmakers around the world push to keep new combustion engine vehicles off the road. While EVs will undoubtedly play an important role in climate protection efforts over the next decade and beyond, their adoption is hitting a bump in the road according to fourth-quarter performances from several automakers and key chip suppliers for the industry. Leading automotive chipmaker Onsemi recently announced that it is cutting 900 jobs amid a grisly outlook for the final frame of 2023.  

Onsemi projects Q4 quarterly revenue of $1.95 billion to $2.05 billion. Notably, this estimate is well below analyst expectations of $2.18 billion. A supply glut in the European automotive market is one of the major headwinds contributing to the poor results.  

In an earnings call, Onsemi CEO Hassane El-Khoury said, “We are starting to see pockets of softness, with tier 1 customers in Europe working through their inventory and increasing risk to automotive demand due to high interest rates.”  

Onsemi supplies chips to several top car manufacturers, including Volkswagen and DaimlerChrysler. It makes chips for a wide range of applications but has significantly increased its focus in the automotive sector. In the first quarter of this year, auto chip sales accounted for half of Onsemi’s total volume.  

Macroeconomic challenges, including high interest rates, also continue to put pressure on the EV market. Many automakers, including Tesla, missed revenue estimates last quarter thanks to car buyers being more reluctant to finance the purchase of an expensive new EV.

Notably, Onsemi claims the latest round of layoffs has been on the roadmap of its long-term strategy for some time and isn’t a response to the latest challenges facing the industry. The chipmaker is working to streamline its operations by prioritizing the production of its most profitable chips while outsourcing manufacturing for other chips or cutting them entirely. This move comes alongside a heightened focus on silicon carbide (SiC) technology.

Experts believe SiC chips will revolutionize the auto industry’s buying habits thanks to their increased efficiency and resiliency. As SiC chips develop, Onsemi is making an early bet on the technology with plans to secure as much as 40% of the SiC market by 2027.  

Despite the short-term challenges currently facing the industry, Onsemi still sees EV demand growing in the future—albeit with a more tempered forecast. According to BloombergNEF’s 2023 Electric Vehicle Outlook report, EV sales are expected to surge over the next few years to nearly 27 million in 2026.  

In the U.S., the transition to EVs has been slower, but new rules from the Biden Administration mandate EVs to make up half of all new vehicle sales in 2030 and beyond. Even in the face of slow adoption, the market for EVs in the U.S. was worth nearly $385 billion in 2022. That figure is expected to soar to $1.58 trillion by the end of the decade. Meanwhile, EV market shares in Europe and China have already surpassed and are nearing the 50% mark, respectively.  

Clearly, electric vehicles will play a critical role in transportation moving forward. Their eventual adoption is all but inevitable with both lawmakers and car manufacturers leading the push for a transition away from gas-powered cars. For Onsemi and other chipmakers that supply this booming industry, short-term hurdles like interest rates and supply gluts are important to navigate, but won’t stop the incoming surge in demand.  

Researchers Discover New Semiconductor Material 1 Million Times Faster Than Silicon

The world of quantum computing is exciting and filled with mystery. Despite many experts claiming the technology is just a decade away from achieving mainstream relevance, the industry hasn’t come to a consensus on the best way to make quantum computers work—or even how to make them. This has left the door open for plenty of experimentation. Now, an accidental discovery by researchers from Columbia University may be the key to achieving faster quantum computing than any technology currently in use.  

Jack Tulyag, a PhD student, brought a material called Re₆Se₈Cl₂ to the lab for an experiment involving super-resolution microscopes. The team believed the material, made of rhenium, selenium, and chlorine, would have a low conducting capacity. Instead, they found it acts as a semiconductor, stabilizing electrons and allowing them to travel micrometers in less than a nanosecond. The team published their findings in the journal Science.  

Until now, electron motion at those speeds wasn’t believed to be possible. In regular materials, including silicon, electrons move quickly but bounce around erratically, which slows their movement from point to point. According to the Columbia University team, Re₆Se₈Cl₂ makes the electrons heavier, thus slowing their movement. However, this also increases their stability, in turn making them faster thanks to being more efficient.  

Jose Luis Salmeron, one of the most cited scientists in the literature according to both Elsevier and Stanford University, explained that the structure of Re₆Se₈Cl₂ is made up of layers organized by van der Waals forces. He says, “These are attractive forces that act between atoms and molecules due to temporal fluctuations in electronic charge distributions. This peculiar arrangement gives it semiconducting properties, which means that it can conduct electricity differently from conventional conductors and insulators.”

The team believes this approach theoretically allows electrons to move one million times faster than they can in silicon. Ironically, the differential is similar to the speed of today’s computers compared to those of 20 years ago.  

Columbia University assistant professor of Chemistry Milan Delor said in an interview, “In terms of energy transport, Re₆Se₈Cl₂ is the best semiconductor we know of, at least so far.”

For now, the commercial applications of Re₆Se₈Cl₂ are limited due to the rarity of rhenium. Fortunately, though, the team believes a substitute can be found that possesses similar capabilities.  

Delor says, “This is the only material in which sustained ballistic transport of excitons has been observed at room temperature. But now we can begin to predict what other materials that we simply hadn’t considered before might be capable of this behavior.”  

This breakthrough is an exciting one for the world of electronics and computing—both quantum and traditional. As Moore’s Law falls out of date and chipmakers must find increasingly creative ways to boost the power of their components using the same materials, Re₆Se₈Cl₂ (and similar materials discovered down the line) could revolutionize how semiconductors are made and dramatically improve their performance.

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Plans to Increase Semiconductor Resilience Continues - Nov 10, 2023

The chip industry is advancing at a rapid pace, forcing both manufacturers and buyers to adapt or risk being left behind. With the automotive industry increasing its reliance on cutting-edge silicon carbide chips, Hyundai and Kia have partnered with Infineon to secure their supply chain through 2030. Meanwhile, the new MAPT Roadmap offers chipmakers a path forward and identifies critical research areas for the next decade as the industry navigates a series of disruptive changes.

Infineon Inks Deal with Hyundai, Kia to Reserve SiC Chip Capacity Until 2030

Semiconductors have become increasingly essential for today’s automotive industry. As cars get smarter, more and more chips are needed on the assembly line. Shortages have caused a headache for automakers over the past several years and without the right chips on hand, many have been forced to delay or halt production for extended periods.  

As a result, carmakers have started to ink deals directly with chipmakers to secure their supply chains. Hyundai and Kia are the latest to continue this trend. The two recently signed an agreement with Infineon for silicon carbide (SiC) and silicon power semiconductors. The deal will last until 2030 and includes funding for Infineon to expand its production capacity for both products.  

In a statement, Hyundai’s head of strategy Heung Soo Kim said, “This partnership empowers Hyundai Motor and Kia to stabilize its semiconductor supply.”  

“Infineon stands as a valuable strategic partner, boasting steadfast production capabilities and distinct technological prowess within the power semiconductor market,” he continued.

The deal centers around silicon carbide chips and Infineon’s expertise in the sector. It currently produces the majority of its SiC chips in Malaysia, but also has production facilities in Austria and Germany. The deal with Hyundai and Kia includes an undisclosed amount of funding from the carmakers that will allow Infineon to increase the capacity of its fab in Malaysia. The chipmaker claims that it will be the world’s largest 200nm SiC power facility following the expansion.  

Notably, silicon carbide chips are gaining more attention thanks to rising demand from the auto industry. These semiconductors offer unique advantages over chips made with regular silicon, including increased temperature resistance and improved stability at high voltages. Their resilience and efficiency make them ideal for vehicular applications—particularly in electric cars.  

Experts believe these advantages will drive a significant spike in demand for SiC chips over the next decade. The deal with Infineon shows that automakers aren’t willing to risk being left behind.  

In an interview with Automotive New Europe, analyst Claudio Vittori said, “Owing to all the advantages of the [SiC] technology, the market demand for silicon carbide-based devices is going to accelerate at breakneck speed in the years to come.”  

As if on cue, Allegro Microsystems announced a SiC deal of its own on the same day as Infineon’s. The New Hampshire-based firm, which specializes in current sensor ICs, inked a deal with the BMW Group to become its sole supplier for these components.  

Moving forward, the silicon carbide segment is an important one to watch. Governments around the world are pushing for EV adoption as a crucial tool in the fight against climate change. Automakers have also embraced the shift, with many announcing a pivot to full-electric lineups within the next decade.  

As the market for EVs warms and consumers become more willing to purchase them, demand for SiC will rise even higher. Chip firms that are able to strike deals with automakers now stand to benefit from this trend by cementing their status as essential members of the supply chain. With reserved capacity and funding to expand their fabs, chipmakers have a lot to gain by offering peace of mind to EV manufacturers. Meanwhile, automakers must carefully plan for the future and avoid underestimating the need for SiC components in the years ahead.  

The MAPT Roadmap Outlines Critical Chip Priorities for the Next Decade

The chip market is entering a period of massive change. Amid ongoing geopolitical tensions, countries around the world are working to bolster their domestic chip industries and secure the global supply chain. Plus, the increasing adoption of artificial intelligence (AI) and clean energy is opening new doors for chipmakers and necessitating massive leaps forward in chip technology.

With this much disruption, clear and strong guidance is needed to keep the industry moving in the right direction. The MAPT Roadmap recently released by the Semiconductor Research Corporation (SRC) does just that.  

The guidelines come as a follow-up to the Decadal Plan for Semiconductors, which was released in January 2021 with the purpose of identifying key research challenges and opportunities for the next decade. While the Decadal Plan highlights broad needs for the industry, it doesn’t explore the logistics of how those needs will be met. The SRC’s MAPT Roadmap focuses on this aspect of chip innovation and outlines a plan to achieve system-level goals.  

The guidelines are a collective effort put together by a team of more than 300 individuals who represent leading chip companies, academia, and government organizations. In a statement, SRC chief scientist Dr. Victor Zhirnov said, “The commitment demonstrated by such a wide array of scientists, engineers, and researchers to the development and production of the MAPT Roadmap indicates the importance of such an effort.”  

The Decadal Plan outlined five major shifts in the chip industry that must be addressed, including smart sensing, communication, security, memory and storage, and energy efficiency. The MAPT Roadmap offers guidance for meeting these goals centered around research into cutting-edge technology. Advanced packaging, 3D integration, nanoscale manufacturing, and new materials research are all identified as critical areas.  

SRC president and CEO Dr. Todd Younkin said in a statement following the release, “The MAPT Roadmap directly supports the CHIPS and Science Act, led by the U.S. Department of Commerce, in efforts to develop a robust domestic [chip] ecosystem.”  

The guidance within the MAPT Roadmap accounts for “fundamental and practical limits” in both chip technology and sustainability. It acknowledges that the advances needed to support next-gen computing industry breakthroughs are out of reach with current technologies and methods. For instance, as semiconductor components continue to shrink, the reality of size constraints will make generational advances impossible without creative solutions like chiplet packaging or 3D integration. The critical areas identified in the MAPT Roadmap are designed to meet these challenges and tear down barriers to future innovation.  

Moving forward, the MAPT Roadmap will be a crucial beacon of guidance for the chip industry. Companies at the leading edge of chip innovation must heed its advice and come together to back research and develop strategies that will advance the industry and pave the way for the next generation of technology.

The world of chip manufacturing, especially advanced semiconductors, is more complex than ever. Canon is introducing a nanoimprint lithography machine positioned as a challenge to ASML and its highly successful EUV gear. The new machine is capable of producing chips at the 5nm node and beyond.  

Meanwhile, the U.S. is extending restrictions on advanced chip and equipment sales to China after discovering a series of loopholes in its initial rules that allowed manufacturers to get their hands on powerful AI chips. The move has drawn conflicting reactions from both chipmakers and the Chinese government.  

An image of semiconductor manufacturing equipment printing on a silicon wafer

Canon Challenges ASML as AI Chips Face More Restrictions - Nov 3, 2023

The world of chip manufacturing, especially advanced semiconductors, is more complex than ever. Canon is introducing a nanoimprint lithography machine positioned as a challenge to ASML and its highly successful EUV gear. The new machine is capable of producing chips at the 5nm node and beyond.  

Meanwhile, the U.S. is extending restrictions on advanced chip and equipment sales to China after discovering a series of loopholes in its initial rules that allowed manufacturers to get their hands on powerful AI chips. The move has drawn conflicting reactions from both chipmakers and the Chinese government.  

Canon’s New Nanoimprint Lithography Machine Challenges ASML for Advanced Chipmaking

For years, ASML has dominated the chipmaking equipment stage with its extreme ultraviolet (EUV) lithography machines. Used to make the world’s most advanced semiconductors, EUV equipment is an essential tool for chipmakers like TSMC and Samsung. Now, Japanese firm Canon has released a challenger.  

Canon’s new FPA-1200NZ2C machine uses a technology called nanoimprint lithography (NIL) rather than EUV lithography. It claims the system is capable of producing chips 5nm and below. Future advancements in mask technology could help it go further and reach the 2nm node. Per Canon’s announcement, the machine can execute circuit pattern transfer in two or three dimensions, a crucial step in the chip manufacturing process.  

This development is noteworthy given the near-complete lack of challenge from other equipment manufacturers up to this point. ASML has dominated the market with its EUV machines thanks to their quality and capabilities.

Meanwhile, NIL technology has been around for more than two decades. It simply hasn’t caught on given the popularity and success of EUV since ASML debuted this technology in 2006. Leading chipmakers prefer EUV, claiming it works better during the production process.  

However, Canon believes NIL has a place in chipmaking. For one, the new FPA-1200NZ2C machine doesn’t rely on a specific wavelength of light to etch patterns into chips. This cuts production costs by significantly reducing power consumption.  

Energy use is an increasingly hot topic in the chip industry given the immense amount of electricity being used. Running one of ASML’s latest-gen EUV machines consumes roughly one million watts of electricity—enough to power about 750 homes. TSMC is by far the leader in EUV machinery, owning roughly half of all units shipped by ASML, according to expert estimates.  

Canon’s latest NIL equipment is a bold challenge to ASML in the lithography market. It’s highly unlikely the newcomer will unseat EUV as the preferred production equipment. However, NIL could certainly play a role as demand for advanced semiconductors continues to outpace production capacity.  

Notably, both TSMC and Samsung are eyeing 2nm chip production as early as 2025. If Canon’s NIL equipment is truly capable of producing chips at this node with strong yield and high reliability, it could find itself in the mix.  

Meanwhile, experts are already discussing the machine’s potential implications on the semiconductor industry’s geopolitical balance. Current U.S. and international export rules, including those from the Dutch government, restrict ASML from shipping EUV equipment to China. These bans seek to stop China from making the advanced semiconductors needed for artificial intelligence (AI) and 5G domestically, citing security risks due to the military applications for these technologies.  

If Canon’s equipment can reliably produce advanced chips as the Japanese firm claims, it will surely come under scrutiny from global regulators. All signs point toward similar export restrictions being placed on the NIL machinery to keep the equipment out of reach for Chinese chipmakers.  

Notably, though, existing trade rules don’t exclude Canon’s NIL machine from being shipped to China since it doesn’t use EUV technology. Adjustments will need to be made before exports can be blocked since the restrictions would need to include coverage for NIL technology as well as EUV. This could take some time, allowing China to get its hands on advanced chipmaking gear in the process.  

Canon’s latest chipmaking equipment and its foray into the world will be a key development to monitor in the coming months. It’s been decades since the chip industry was shaken up by a novel piece of equipment for advanced nodes and has been dominated by ASML’s hardware throughout that span. Canon’s latest innovation could be a challenger and reshape the industry, but only time will tell.  

U.S. Expands AI Chip, Equipment Bans as China Utilizes ‘Loopholes’ in Original Rules

The U.S. government is once again cracking down on advanced chip exports to China with a sweeping set of tightened restrictions. Designed to close “loopholes” in the initial restrictions set forth late last year, the newest changes target lower-power AI chips and certain manufacturing equipment. Unsurprisingly, the news has been met with conflicting responses from all parties involved, including both chipmakers and the Chinese government.  

The export rules put in place last October aimed to stop the most powerful AI chips from being obtained by companies in China. This includes the likes of Nvidia’s H100 AI accelerator and the machinery needed to make advanced node chips, particularly ASML’s extreme ultraviolet lithography (EUV) equipment.  

However, experts have determined that several loopholes in the initial regulations have allowed Chinese firms to continue working on AI development. Nvidia moved quickly to get around the restrictions by releasing its H800 and A800 chips just months after they were put in place. Some key performance aspects of these chips are limited compared to the flagship H100. Even so, the H800 has as much computing power as the latter in certain areas of AI work.  

The latest regulations will curb exports of Nvidia’s alternative AI chips and more as well as additional types of manufacturing equipment. Moreover, the U.S. is now compiling a list of less advanced chips that are of interest. Chipmakers will need to notify the government if the listed components are being sold to China—though their sale remains legal for the time being.  

Following the move, the Semiconductor Industry Association (SIA) released a statement saying, “We are evaluating the impact of the updated export controls on the U.S. semiconductor industry. We recognize the need to protect national security and believe maintaining a healthy U.S. semiconductor industry is an essential component to achieving that goal.”  

“Overly broad, unilateral controls risk harming the U.S. semiconductor ecosystem without advancing national security as they encourage overseas customers to look elsewhere,” it continued.  

Based on the nature of the tightened restrictions, U.S. chipmakers Intel, Nivida, and AMD are expected to be the most affected. They are responsible for making the most popular AI chips on the market today.  

Meanwhile, the Chinese government responded strongly to the move amid ongoing bilateral efforts to ease geopolitical tensions. “The U.S. needs to stop politicizing and weaponizing trade and tech issues and stop destabilizing global industrial and supply chains,” says China’s foreign ministry spokesperson Mao Ning, “We will closely follow the developments and firmly safeguard our rights and interests.”  

While the tightened restrictions will certainly be a speed bump for China to overcome, experts believe the move could spark renewed growth in the country’s domestic industry. Indeed, China has been investing heavily in its chip sector as it seeks to achieve 70% self-sufficiency in semiconductors by 2025. It has yet to pass 20% at the time of this writing. However, stricter export bans will continue to force China’s hand if it wants to pursue AI development or 5G technology.  

As for the impact of the latest round of restrictions on U.S. chipmakers, the result is unknown. Time will tell whether these new rules are successful in closing the loopholes lawmakers are concerned about. Given the size and scope of the chip industry and the constant pace of innovation, it’s realistic that China could once again bypass the rules and gain access to AI hardware in one form or another. For now, though, chipmakers and governments alike will need to act quickly to adjust to the new precedent.

An image of blue chemical containers stacked up

Taiwan Manufacturers See Losses but Eye Future Opportunities - Oct 27, 2023

Perhaps the biggest trend in the semiconductor industry today is a push for diversification to protect essential supply chains from political and economic disruption. Given Taiwan’s chip leadership, the region is often under the microscope. Although Taiwanese foundries are suffering from the same macroeconomic pressures affecting the entire industry, they are poised for a rebound in 2024, according to experts.  

Meanwhile, in Europe, chipmakers seek to expand their capacity for the first time in decades. However, the local supply chain ecosystem isn’t currently equipped to keep up. In the meantime, Taiwan’s leading suppliers are eying a profitable opportunity to expand their own operations.  

Taiwan Foundries See Revenue Drop in 2023, Eye Rebound Next Year

As macroeconomic conditions remain gloomy, the chip industry continues to deal with unpredictable demand in key segments, especially consumer devices. For Taiwan’s foundries, this influence is expected to lead to a sharp decline in revenue compared to last year’s marks, according to research from DigiTimes.  

In 2023, Taiwan’s wafer foundry industry is projected to bring in a total of $77.9 billion in revenue. That figure marks a 13% drop from last year and the gap continues to widen as new projections roll out. The average utilization rate of Taiwanese foundries fell to just 70% in the second quarter of this year, contributing greatly to the revenue decrease.

Fortunately, the outlook isn’t entirely negative. Foundries in Taiwan are expected to increase their capacity in 2024 with more fabs coming online and new expansions being completed. The arrival of TSMC’s 3nm process will also breathe a spark of life into the local industry and help the latter half of this year to outperform the first. A combination of these factors leads experts to predict revenue for Taiwan’s foundries will grow by 15% in 2024 compared to this year.

Despite an expected rebound next year, analysts warn that growth will likely be limited. Continued headwinds in the consumer device industry are discouraging buyers from spending on new smartphones and laptops. Meanwhile, inventory depletion in the IT product space remained stagnant in the first half of the year as manufacturers and retailers alike struggled to move products off the shelves. Even as new 5G devices become available in the final months of 2023, poor economic conditions will drag down sales numbers.  

On the other side of the spectrum, demand for high-performance computing (HPC) chips for artificial intelligence (AI) applications continues to increase. Companies of all sizes are exploring new ways to use AI to streamline their operations or deliver profits. As this technology evolves, key hardware to support it looks like it will be a leading segment for the chip industry moving forward. Advanced smartphone chips to support new 5G devices are also needed as the transition to the next-gen connectivity protocol continues. Both of these areas will be key growth drivers for Taiwanese foundries in the coming year.  

The chip industry has many challenges to solve. Navigating industry supply gluts and uncertain demand are some of the biggest. For Taiwan, tackling these challenges continues to provide an opportunity for innovation and growth, setting the stage for a promising future. The industry’s ability to pivot and meet changing demands as it aims to rebound next year is a sign of its strength and ensures Taiwan will remain a key player in the global chip sector despite a push to geographically diversify the supply chain.

As Europe’s Chip Industry Grows, Taiwanese Chemical Supplies Will Remain Essential

Taiwan’s thriving semiconductor manufacturing industry features some of the most advanced facilities in the world. They operate in part thanks to suppliers who make the most refined and advanced chemicals and equipment available today. However, the world’s chip interests are quickly growing beyond Taiwan as governments seek to diversify critical chip supply chains to protect them from political and economic tensions.  

In Europe, leading chipmakers are investing heavily in new facilities thanks to the European Chips Act and its $52 billion in subsidies and state support. TSMC is planning a state-of-the-art $12 billion fab in Dresden, Germany, which is expected to begin production in 2027. It is a collaboration with auto supplier Bosch as well as European chipmakers Infineon and NXP.  

Meanwhile, Intel plans to spend nearly $36.5 billion on two advanced chip fabs in Germany. To the west, GlobalFoundries is teaming up with STMicroelectronics to build a $7 billion facility in France.  

Despite these exciting developments, experts warn that Europe’s chip supply chain infrastructure is severely lacking. Many fear it isn’t prepared to support this sudden increase in capacity.  

After decades of focusing on chip design rather than production, chemical suppliers have fallen behind their competitors in Taiwan. This means foundries must turn to Asia for key supplies, including sulphuric acid, which is used for cleaning and etching chips. Isopropyl alcohol, essential for cleaning wafers, is also in short supply. As a result, many European chipmakers are forced to use lower-grade supplies, leading to compromised yield and production quality issues.  

This trend has Taiwan’s leading chip industry suppliers eyeing an expansion into Europe’s rejuvenated market. LCY Group, which makes cleaning agents and solvents for TSMC, is one of them. In a recent statement, its president and CEO Vincent Liu said, “We are planning investments in Germany, and the European market is going to be ours.”

“Companies like Infineon are not using quality chemicals because their suppliers’ capacity is decades old. They have no awareness of how much state-of-the-art chemicals could help them raise their yield rates,” he adds.  

Indeed, TSMC’s CEO Mark Liu noted that Europe’s supply chain ecosystem was one of his company’s largest concerns when moving into the region. While the German government has agreed to address the matter, it’s unlikely changes can be made quickly enough to keep up with skyrocketing demand as Europe seeks to rapidly increase its chipmaking capacity.  

Experts believe TSMC’s expansion in Europe will serve as a motivating factor for other chipmakers in the region. The Taiwanese firm’s dedication to advanced processes and production methods could very well push European fabs to update their own. But doing so won’t be easy.  

An anonymous executive from one of Europe’s leading petrochemical companies told Financial Times, “Europe today is a net importing region for key electronic grade chemicals. Changing this to become competitive is a long-lasting and expensive challenge requiring a lot of capital expenditure in Europe.”  

For Taiwan’s leading chip material suppliers, this investment represents a gold mine of potential. Over the coming years, expect LCY Group and others to aggressively pursue the European market until local suppliers can catch up. With a growing emphasis on a diverse supply chain, ensuring regional chip ecosystems are ready to scale in tandem is crucial. Until then, leading suppliers from current chip hubs like Taiwan will continue to play an essential—and irreplaceable—role.

An image of an electric car charger in a car charge port

Diversification Can Help Prevent Shortages and Gluts - Oct 20, 2023

Doing business in the semiconductor industry is tough. For both chipmakers and the companies buying their components, navigating a complex web of supply issues, economic tensions, and staggering demand is a constant battle. With supply chain issues continuing to plague the industry, experts are pleading for more diversification.

Ideally, moving some manufacturing operations out of Taiwan will lead to a more stable supply of essential components and ease fears of future shortages. Firms like GlobalFoundries have taken this advice to heart. Its sound diversification strategy and unconventional roadmap have helped it become a titan in today’s industry.  

Chip Leaders Urge Diversification as Overordering Pressures Supply Chain

As the global supply chain continues its prolonged recovery in the wake of the COVID-19 pandemic, it’s easy to forget this challenging environment has persisted for nearly four years. This hasn’t changed the fact that many chip buyers are still scrambling to get their hands on the right components. Although chipmakers are racing to increase their capacities and push more chips into the market, the problem isn’t solved.  

So why can’t the supply chain fully stabilize? In short, nothing has drastically changed since the pandemic threw operations out of sync in 2020. The majority of the world’s chip production still comes out of Taiwan, a geographical area filled with uncertainty and tensions. As such, many experts point to a lack of geographical diversity as the primary influence behind the chip sector’s woes. Indeed, this sentiment has been echoed many times over as top chipmakers pursue opportunities to expand into countries like India, Mexico, and the U.S.  

But the issue isn’t as simple as most of the world’s top semiconductor facilities being located in a densely packed hub in eastern Asia. Businesses across all sectors fear running out of chips again like they did during the pandemic. Some companies still haven’t fully recovered—particularly in the automotive industry.  

Tesla CEO Elon Musk recently noted this trend in a post on X, formerly known as Twitter. He said, “Never seen anything like it. Fear of running out [of chips] is causing every company to overorder—like the toilet paper shortage but at epic scale.”  

Indeed, chipmakers have struggled to maintain smooth operations as buyers drift back and forth between overordering and inventory management. This has led to a series of shortages and gluts in the chip industry over the past few years and made life a nightmare for chipmakers. It should go without saying this pattern isn’t optimal—or sustainable—for a stable supply chain.  

The solution comes back to diversification. Today’s largest tech firms source the majority of their chips from manufacturers in Taiwan. The list includes Apple, Amazon, and Google, among many others, who buy from TSMC, the leader in providing the advanced chips needed by all of today’s top companies. Given that this has been the norm for many years, pivoting away is difficult. Even so, many Big Tech firms are beginning to realize the impact of an unstable supply chain—and the importance of correcting it.  

Musk says, “It’s going to be a challenging and long journey for them [tech companies] to diversify away and thinking about how long it takes for the chip development and cooperation—it’s going to take a while.”  

Steps are being taken to move some percentage of chip production out of Taiwan and into other countries around the world. Governments, including the U.S., have supported this with a variety of incentives and lucrative subsidies designed to lure chipmakers to open new facilities on their soil. However, results will take time to show. Meanwhile, tech firms are beginning to look inward for new chip designs—although manufacturing is still being outsourced.

Most of the large chip fabs currently being constructed outside of Taiwan aren’t expected to open until next year at the earliest, with many being pushed back to 2025 and 2026. Until then, experts are encouraging chip buyers to avoid panic buying as doing so is a self-fulfilling prophecy that puts the supply chain and future orders at risk. Ideally, a more diverse chip supply chain in the coming years will mitigate these behaviors and lead to a more stable flow of components for chipmakers and buyers alike.  

How GlobalFoundries Shot to the Top in 14 Years

Succeeding in the semiconductor industry is fraught with challenges. Despite a global pandemic and rising trade tensions around the world, GlobalFoundries has found a way to defy the odds over the last decade and a half. The U.S.-based chipmaker has become the third-largest foundry in the world, joining the likes of TSMC, Samsung, and SMIC.

GlobalFoundries’ path to getting here has been anything but conventional. As other top foundries raced to boost capacity for advanced chips, it took a step back. Guided by CEO Thomas Caulfield, the firm turned its attention to “essential chips” roughly five years ago.

The move came after TMSC had largely won the battle for advanced chip supremacy while Samsung and SMIC gobbled up the remainder of the market share. But as the pandemic demonstrated, advanced chips aren’t the only components in demand. Shortages of legacy chips ground automotive production lines to a halt and caused havoc in the consumer device market.  

Enter GlobalFoundries. “Look at every electronic device in your house, and I would bet money that every one of those devices has at least one GlobalFoundries chip in it,” Caulfield said in a recent interview.  

From power management to wireless connectivity and display connections to image sensors, these essential chips are behind just about everything in today’s digital world.  

But where did GlobalFoundries come from? The firm started as a spinoff of AMD in 2009 when the chipmaker decided to focus exclusively on design. That year, GlobalFoundries started building a new headquarters and fab in Malta. That facility now processes 400,000 wafers per year with “about a half-billion dollars” of inventory rotating through in any given 90-day period.  

From there, GlobalFoundries continued to grow. It acquired IBM’s chip division in 2015, expanding its production capacity in the U.S. and eventually reaching a valuation of $6 billion in 2018. The switch to making essential chips, all 12nm or above, then sent the foundry into the stratosphere.  

Flash forward to today and GlobalFoundries is worth just over $31 billion with plans to expand even further. Notably, those plans involve diversifying its production footprint in areas not involved with current political and economic turmoil. It just completed a $4 billion expansion in Singapore and recently finalized a deal to open a co-owned fab with STMicroelectronics in France.  

GlobalFoundries plans to continue pursuing essential chip production while finding new ways to innovate at older nodes and improve its manufacturing quality. Caulfied points to his firm’s silicon on insulator technology and radio frequency chips as areas where it is outpacing TSMC, which also produces legacy chips  

Though the outlook isn’t entirely rosy with the smartphone market continuing to struggle, GlobalFoundries has an optimistic outlook for the future. Much of this comes from the automotive industry, which is expected to greatly increase its chip spending in the coming decade as electric vehicles become more popular. Undoubtedly, GlobalFoundries will continue to be a key player in the chip industry for many years thanks to its unconventional approach to supplying today’s buyers and powering the world’s technology behind the scenes.

An image representing a chip on a production line

Labor Shortage and Demand Slowdown Continue to Plague Industry - Oct 13, 2023

The chip industry continues to navigate headwinds both in the form of slumping orders and empty positions. For some chipmakers, including TSMC, these issues have overlapped to form a perfect storm of challenges. The Taiwanese chip giant is reportedly delaying 2nm production by another year. As the industry takes steps to manage slowing orders, establishing a secure workforce for tomorrow remains a top priority. Intel has launched a new certificate program in Ohio to bolster the number of technicians in the area through affordable access to education.

TSMC Could Reportedly Delay 2nm Production to 2026 Due to Slowing Orders

As global demand for semiconductors continues to decelerate, chipmakers are being forced to make tough decisions about their production capacity and forward-looking strategy. Despite its massive size, TSMC isn’t immune to these market influences. The chipmaker is now considering a delay to its 2nm mass production schedule, according to recent reports.

Originally planned to begin in 2025, 2nm node production could now be postponed until 2026. Construction at TSMC’s forthcoming fab in Hsinchu Baoshan has reportedly slowed down, seemingly confirming the rumors.  

TSMC is currently building three new fabs in Taiwan to support its leap into 2nm production. The other two facilities are located in Taichung Zhongke and Kaohsiung Nanzi. Originally, the chipmaker planned to start running pilot production of its 2nm chips next year with mass production beginning in 2025.  

The slowdown is allegedly the result of decreasing orders as buyers take a more cautious stance and closely monitor their inventory. Demand for consumer devices and smartphones has remained low. But more recently, orders from other end markets, including the automotive sector, have also stalled.  

Notably, however, slumping market conditions aren’t the only hurdle standing between TSMC and 2nm production. The latter will introduce the chipmaker’s transition from FinFET to Gate-all-around (GAA) transistor architecture. TSMC chips made at the 2nm node will utilize a vertically stacked design that allows the gate to touch the channel on all four sides. This approach reduces current leakage and lowers energy consumption to enable more efficient chips. Samsung has already overcome this hurdle by using GAA at its 3nm node.  

Although TSMC has pushed back against the GAA transition being the reason for delays, it’s difficult to picture slow demand being the only factor. Given the momentum behind artificial intelligence (AI) hardware and TSMC’s prowess in this arena, the reported decrease in orders is especially puzzling.  

Regardless of the reason, the delay is big news for the chip industry and is worth monitoring. Should mass production be pushed too far back, other chipmakers like Samsung and Intel could swoop in to capture some of TSMC’s market share. Importantly, all indicators still point to Samsung starting 2nm mass production in 2025. Intel, meanwhile, plans to debut its 18A node (1.8nm) in 2025, potentially enabling it to grab process leadership from its two largest competitors.  

TSMC is facing setbacks on many fronts—not just in Taiwan. It was also recently forced to delay the start of production at its new $40 billion fab in Arizona due to a workforce shortage in the area. The firm reportedly plans to send workers from Taiwan to help install machinery and run the facility until local workers can be trained. However, this approach has met pushback from Arizona labor groups.  

Over the coming months, TSMC’s progress will be important to monitor. Whether or not the chipmaker indeed pushes its 2nm production back to 2026 remains to be seen. In the meantime, the industry will need to respond quickly to a slowdown of orders across several key end markets.  

Intel Teams With Ohio Community Colleges to Launch One-Year Chip Technician Certificate Program

The semiconductor industry is expected to undergo a period of growth over the next decade, increasing demand for trained workers to operate fabs and perform chip research. However, current education programs aren’t churning out enough engineers, technicians, and computer scientists to fill the vacancies. Intel, which has invested heavily in the U.S. domestic chip industry, wants to change that narrative. To do so, the chipmaker is teaming up with several community colleges in Ohio to offer a one-year semiconductor certificate program.  

Research from the Semiconductor Industry Association (SIA) suggests there will be 115,000 new U.S. chip jobs in 2030 as the industry grows by 33%. However, more than half of them risk going unfilled at the current rate of degree completion. Before any lofty goals for the domestic chip sector can be realized, the U.S. first needs to solve its workforce shortage.  

Students in Intel’s new certificate program will gain both classroom and hands-on skills to prepare them for chip jobs. Courses include Introduction to Manufacturing, Semiconductor 101, and Vacuum Systems. Through these, students will cover topics like chip defects, safety, lean manufacturing, problem solving, electrical basics, and chemical basics. The program is expected to launch in 2023-24.  

In a statement, Intel said, “Closing the talent gap is critical to the success of the U.S. economy and semiconductor industry. Intel is facing this challenge head-on by creating specific regional programs in partnership with local community colleges.”  

Intel’s new fab projects are a major incentive for supporting the local workforce. The chipmaker has invested upwards of $20 billion to build two manufacturing facilities just outside of the state’s capital of Columbus. The firm projects at least 3,000 new Intel jobs being created as part of the project in addition to more than 10,000 construction and supplier jobs in the materials and equipment sectors.  

To develop an ideal certificate program, Intel leaned on research from the SIA. The data explored various ways to close workforce gaps in the Ohio area ahead of its fabs coming online.  

Intel said, “To support the Ohio fabs, Intel has taken key lessons from these other regions to reinvent the way technician education is developed.”  

The certificate program aims to tackle common barriers to entry, including confidence in math and science skills and financial situations. By offering the program as a one-year certificate rather than a longer degree track, Intel hopes more students will be able to participate. Students who enroll in the curriculum will also be able to transfer their credits to other technical centers and undergraduate university programs.  

Training for chip technicians has fallen off in recent years as firms invested more heavily in STEM education and traditional degree programs. This has left aspiring technicians the industry sorely needs with fewer options for training. Intel’s new certificate program aims to help close this gap and give workers in Ohio a quick, affordable way to obtain new skills and launch a fulfilling career.  

Outside Ohio, Intel is also working with the National Science Foundation to create two additional programs. One covers engineering topics while the other focuses on technician skills for chip manufacturing.  

This is an important step forward for Intel as it seeks to get its Ohio fabs online with fewer hurdles than TSMC has faced in Arizona due to worker shortages. However, continued efforts from both private and public sources alike will be needed to fully address the staggering scope of this issue in the U.S.

Image of boxes stacked in a warehouse

How Problems Drive Innovation as an Uncertain Future Causes Delays - October 6, 2023

The chip industry is no stranger to challenges. Indeed, struggles are often the very force driving innovation and leading to the greatest breakthroughs. For China, which is facing harsh export restrictions on advanced chipmaking gear from the U.S., this tenacity has seemingly paid off. Huawei recently unveiled a 5G smartphone that features a 7nm chip reportedly produced using outdated ASML equipment—a major development in the nation’s race to become self-reliant in semiconductors.  

Meanwhile, in the face of continued demand slumps in key end markets, TSMC has reportedly asked its suppliers to delay equipment deliveries. Even the radical force of AI hasn’t been enough to keep the world’s largest chipmaker from feeling the crunch. How it responds to this adversity will be a strong message to the rest of the industry.  

Huawei’s New 5G Phone Signals Breakthrough for China’s Chip Industry Despite Trade Restrictions

U.S. sanctions on the Chinese semiconductor industry had seemingly done their work. Until Huawei announced its new Mate 60 Pro 5G smartphone. Powered by a 7nm chip, the phone’s hardware shouldn’t be possible to produce efficiently in China without the equipment currently banned from being sold to the country. Yet, the Mate 60 Pro is on sale.  

For Huawei, this is the first time it has put a 5G smartphone on the market in more than three years—ever since the U.S. imposed sanctions on Chinese chip manufacturing equipment meant to stifle its access to advanced technologies. But as China pushes for self-reliance in its chip industry, it seems the sanctions may instead be serving as a catalyst for innovation.  

The Mate 60 Pro boasts a Kirin 9000S processor, a chip manufactured with 7nm technology. While Huawei hasn’t offered details on the chip’s specs, teardown videos from online creators claim its performance rivals other top-end 5G phones. Elsewhere in the world, a chip of this nature would be made with extreme ultraviolet (EUV) lithography courtesy of ASML’s flagship machinery.  

In theory, China shouldn’t have access to this equipment. Unsurprisingly, questions are now swirling regarding how the partially state-owned Semiconductor Manufacturing International Corporation (SMIC) was able to produce this chip for Huawei.  

One theory suggests China was able to sidestep U.S. regulations and acquire the necessary advanced chipmaking equipment. However, the more likely answer comes in the form of innovation in China’s domestic chip industry. Notably, SMIC’s most advanced chip prior to this was at the 14nm node. Without EUV technology, the chipmaker would have to produce the 7nm chip using deep ultraviolet (DUV) systems.  

While possible, producing chips at this level of miniaturization with DUV technology results in horrendous yields—likely around 50% compared to industry norms of 90% and higher. This makes the manufacturing process far more costly. However, it’s also a sign of tremendous innovation and persistence. Experts believe SMIC was likely compensated by the Chinese government for its efforts.  

Huawei’s latest smartphone is much more than an upgraded device. For the greater semiconductor race between the U.S. and China, this development has profound implications. The new phone’s powerful processor is a sign that strict U.S. sanctions may not be enough to keep China’s chip industry at bay.  

China’s ability to produce advanced chips domestically would send shockwaves through the chip sector. Not only would Chinese firms reduce spending on semiconductors from international chipmakers, but the growth of the country’s tech-involved industries would also speed up dramatically.  

To this point, China has been taking large strides to achieve self-reliance with chips. It recently announced a new $40 billion state-backed investment fund intended to bolster its domestic chip manufacturing. It’s unclear when this fund will be launched, but expect aggressive incentives and subsidies for Chinese chipmakers looking to expand their operations.  

In the grand scheme, a 7nm chip isn’t exciting compared to the 3nm and 4nm silicon being produced by the likes of TSMC and Samsung. However, it could be a sign that China is overcoming adversity to position itself as a powerful player in the chip world—even if the rest of the world wants the opposite.  

TSMC Delays Equipment Orders Amid Slow Demand, Fab Setbacks

Under pressure from several struggling end markets, TSMC has reportedly told its suppliers to put a hold on delivering high-end chipmaking equipment, according to two anonymous sources who spoke to Reuters. The Taiwanese firm is seemingly growing nervous about customer demand while also juggling delays at its new $40 billion fab in Arizona.  

In July, TSMC CEO C.C. Wei pointed to weak economic conditions and soft end-market demand as key factors affecting its customers. He reported that customers were growing more mindful of controlling inventory, prompting less chip buying.  

TSMC hasn’t officially commented on delaying its equipment deliveries. However, quotes from leading suppliers, including Netherlands-based ASML, seem to confirm the move.

The Dutch firm’s CEO Peter Wennink told Reuters last week several of its high-end equipment orders had been pushed back. Though he didn’t specify which buyers had delayed their orders, it now appears TSMC is at least one of the parties. “We’ve had several (news) reports about fab readiness. Not only in Arizona, but also in Taiwan,” Wennink said.  

ASML’s shares fell 2.5% following the news. It wasn’t the only supplier to feel the pain. ASM International, Applied Materials, KLA Corp, and Lam Research also saw their shares drop in the wake of TSMC’s delivery delays.  

Market analyst Michael Roeg said of the news, “There has been a lot of excitement about artificial intelligence and the implications for the semiconductor industry. However, the strength of AI chips is not strong enough to compensate for what is happening in other segments.”

Indeed, while the sudden emergence of AI has been a boon for many in the chip sector, not all are experiencing the benefits equally. Those making high-end GPUs and the latest generations of DRAM memory have seen a surge in orders. Meanwhile, other end markets remain sluggish. Smartphones and laptops have experienced low demand ever since the pandemic-driven boom dried up. Automotive chips have been a stronghold over the past few years but even that market is beginning to show problematic signs.  

For TSMC, demand isn’t the only challenge. The contract chipmaker was also forced to delay the opening of its new advanced chip fab in Arizona until 2025. Originally, TSMC struggled to find enough workers to install and operate the complex chipmaking equipment needed for the facility. Its attempts to bring trained workers from Taiwan over to the U.S. have since been met with stiff resistance from local labor unions.  

TSMC is also dealing with an increase in capital expenditure as it undergoes several expansions—most of which were launched during the post-pandemic chip boom. Last year, the firm increased its spending by 21% to the tune of $36 billion. This year, it expects to spend less, but still likely around $32 billion according to a July estimate.  

Moving forward, this is an important situation to monitor. Prolonged or repeated delays could further harm confidence in the chip sector, especially coming from a powerhouse like TSMC. Fortunately, experts and inside sources expect the delays to be short-lived and TSMC should be able to get back on track quickly.

An image of a microchip under a magnifying glass

Market Rebound and Counterfeits on the Rise - Sept 29, 2023

An influx of component orders from the display sector gave chipmakers a lifeline to close out Q2. Now, experts believe the industry is ready to rebound in Q3 largely thanks to high-performance chips. Though consumer device demand remains mellow, chipmakers are finding creative ways to stay afloat and pursue growth.  

Meanwhile, an increase in counterfeit chips entering the supply chain is causing a headache for chipmakers and buyers alike. These fakes not only pose a threat to bottom lines, but they are also a major safety concern as chips continue to play a larger role in daily life around the globe.  

Semiconductor Industry Poised for Q3 Rebound Supported By High-Performance Chips

The ever-complex semiconductor industry is eyeing a rebound in Q3 2023, according to a new report from TrendForce. The analytics firm points to the iPhone’s upcoming production cycle, new manufacturing process introductions, and demand for high-performance chips as key drivers of growth. However, the recovery won’t be unilateral for all chipmakers as unique challenges stand in the way for each company.

Looking backward, Q2 brought a surge of last-minute component orders in its closing weeks. Demand for TDDI chips and TV components helped boost foundry capacity utilization at the end of the quarter and served as a vital lifeline in the otherwise sluggish market. Sadly, experts don’t believe this rush in orders will carry through the remainder of the year. It lasted long enough, though, for Nexchip, a key producer of components for the panel industry, to vault back into the global top ten rankings.  

Demand for consumer devices, including smartphones and PCs, has remained low. Meanwhile, sectors that have previously steadied the market, including automotive and servers, have started to undergo inventory correction, TrendForce notes. As a result, the world’s top ten semiconductor foundries saw their revenue decline by 1.1% in Q2. Even so, these firms brought in a collective $26.2 billion.

Moving forward, the third quarter promises to be kinder. The world’s largest chipmaker, TSMC is eyeing the new iPhone’s upcoming production cycle as a boon. The Taiwanese firm is also introducing its revolutionary 3nm process in Q3, which should be a helpful boost for its advanced chip segment.  

Elsewhere, Samsung’s foundry business enjoyed a profitable Q2, bringing in $3.23 billion—a quarter-on-quarter improvement of over 17%. Unlike TSMC, Samsung’s Q3 outlook is murky. In the face of sluggish consumer device demand and decreased utilization of its 8-inch fabs, last quarter’s revenue growth may be short-lived.  

For other key chipmakers, Q3 appears to be friendly. Per the TrendForce report, GlobalFoundries will stabilize its capacity utilization rates on the back of long-term contracts covering specialized niches—including healthcare and aerospace. SMIC is focused on its 12-inch chips, which saw their demand surge by 9% quarter-over-quarter in Q2, as it sees continued improvement in its capacity utilization.  

Analysts remain highly bullish on Nexchip, which is expected to continue capitalizing on demand for display components. TrendForce points to China’s increase in domestic substitution and an aggressive marketing approach as the main drivers behind the firm’s 60-65% capacity utilization rate.  

For this year’s third quarter, experts believe seasonal demand will be softer than usual. Once again, consumer device spending remains low, putting strain on the market. However, fabs making chips to fill Apple’s sweeping supply chain will benefit. Likewise, surging demand for artificial intelligence (AI) products has led to an uptick in orders for high-end, high-performance AI chips. These factors have led TrendForce to project a Q3 rebound for the world’s ten largest chipmakers.  

This latest report comes in the wake of similar sentiments from analysts who point to a sunny outlook for the chip sector moving into Q3 and beyond. Though the push-and-pull of market influences will limit growth to a gradual increase, the market appears well-positioned for a rebound in the latter half of the year.  

As Counterfeit Chip Worries Rise, Experts Urge Cooperation

Counterfeit clothes, shoes, and collectibles are fairly easy to spot. But those aren’t the only industries being affected by a wave of fake goods entering the market. The semiconductor industry has always had to deal with counterfeit chips, but the problem has been growing in recent years.

In 2017, the Semiconductor Industry Association estimated counterfeit chips cost the industry $7.5 billion annually. DARPA projected the cost of lost electronics revenue at $170 billion in the same year. Of course, these estimates came before the COVID-19 pandemic and the ensuing chip shortage that wreaked havoc on the industry. Chip counterfeiters jumped on the opportunity, sending a rash of fake components into the market.  

Many counterfeit chips produced around the pandemic weren’t cutting-edge designs. Rather, they largely affected mature nodes like 65nm, 90nm, and 130nm, which saw the most significant shortages.  

Now, experts warn this issue must be dealt with as counterfeit concerns rise across the chip sector. Fake semiconductors pose great safety risks as chips become further integrated with every aspect of daily life. From healthcare devices to self-driving cars, today’s chips play a crucial role in protecting the lives of those using the gadgets and equipment they power.

Security consultant for Infineon Technologies Konrad Bechler said in a recent interview, “Just think of an airbag not deploying properly in a crash, or medical equipment like an automated electric defibrillator not working in a life-threatening situation.”  

Indeed, these risks shine a light on a major issue for the industry. Chips can be faked in five ways, though one accounts for the majority of counterfeits—recycling. “There are recycled chips anyone could do,” Mark Tehranipoor, chair of the University of Florida’s ECE department, says. “Anyone, anywhere in the world can take chips off of discarded PCBs, clean them up, and put them back into the market. That doesn’t require a tremendous amount of resources or money.”  

This is why recycled chips account for 80% of the counterfeit silicon entering today’s supply chain. The other types, cloning, re-marking, over-producing, and forging are also a problem. For chipmakers, a close look at the risks and benefits of preventing counterfeit chips is necessary. In some cases, taking steps to stop counterfeiters isn’t profitable.

Tehranipoor thinks otherwise. He says, “There are solutions that have become much more acceptable and easier to deal with. For example, recycling is actually quite easy to detect. If you place an odometer into your chip, which is extremely cheap, it will easily tell you whether the chip was used or not.”

Other forms of counterfeiting, such as cloning and over-production, are much harder to detect—and therefore address. Still, solutions such as electronic chip IDs and monitoring chip usage can help guarantee the authenticity of chips. Performance monitoring to identify deviations in chip behavior also helps detect fraud.  

Experts note that the counterfeiting issue must be addressed by the entire supply chain to be effective. Ensuring security at every point is a vital aspect of building trust and safety for both chipmakers and buyers. Indeed, counterfeits must be avoided not just in the form of chips, but also in the raw materials used to make them and in the software they run.  

The solution? Doing business with authorized distributors. The electronics industry is designed to be secured through a genuine ecosystem that puts accountability and tracking at the forefront. But it only works when everyone participates. Buyers seeking lower prices or “good” deals may look toward distributors who operate outside this supply chain, thus opening the door for counterfeit chips to pollute the market.

Moving forward, Bechler says, “It is vital that every part of the supply chain, from chip manufacturers to software and device providers and consumers purchase from authorized sources and distributors keep the electronics supply chain secure.”

A graphic of a chip overlayed with China's flag

Intel Partners with Tower as China Fortifies Domestic Supplies - Sept 22, 2023

Trade tensions around the chip world are high. With no signs of easing, chipmakers are forced to find creative ways to continue doing business despite international challenges. Intel and Tower Semiconductor have teamed up for a foundry services partnership just weeks after a massive merger deal fell through thanks to inaction by Chinese regulators.

Meanwhile, China aims to increase its domestic chip production as trade restrictions choke off its advanced semiconductor and equipment supplies. With a new $40 billion investment, the country seeks to become self-sufficient in chips in the coming years.  

Intel, Tower Semiconductor Team Up for Foundry Services After Merger Collapse

Intel has invested heavily in its foundry services division as it seeks to compete with TSMC on the global stage. Now, just weeks after a $5.4 billion merger deal with Tower Semiconductor fell through, Intel plans to work with the Israeli chipmaker to produce its next-generation 300mm chips. The move is reportedly worth $300 million and will see the funds invested in Intel’s New Mexico foundry.  

Tower Semiconductor CEO Russel Ellwanger said in a statement, “We see this as a first step towards multiple unique synergistic solutions with Intel.”  

The previous deal between the two chipmakers fell through after failing to secure approval from Chinese regulators despite waiting 18 months for their proposal to be reviewed. Many viewed the silence as retaliation for economic barriers being put in place by the U.S. government which aim to cut China off from advanced semiconductor imports and manufacturing capabilities. At the time, Intel and Tower reinforced their intentions to work together in some capacity. Now, this foundry services partnership appears to represent the clearest path forward.  

Notably, Intel agreed to pay Tower a fee of $353 million for failing to close the merger deal. So the latter’s $300 million investment into Intel’s Rio Rancho fab isn’t coming from nowhere. Tower will both acquire and own the necessary equipment, which will be installed at Intel’s $3.5 billion facility. Tower will gain over 600,000 photo layers per month production capacity to meet demand for its 65nm power management BCD flows among others.  

“This collaboration with Intel allows us to fulfill our customers’ demand roadmaps, with a particular focus on advanced power management and radio frequency silicon on insulator (RF SOI) solutions, with full process flow qualification planned in 2024,” Ellwanger said.  

Intel has been a major cornerstone for U.S. chip ambitions as economic tensions with China continue to rise. Many important players in the chip industry are seeking to diversify their operations around the globe. Chip leaders hope doing so will ensure a more stable supply chain in the case of future disruption.

Intel’s foundry services segment has been a focal point of the chipmaker’s strategy in recent years. During the second quarter of this year, it reported $232 million in revenue for the division. This is a noteworthy increase from the $57 million it brought in during the same frame in 2022. Aside from its plant in New Mexico, Intel has also announced plans to build a $20 billion chip fab in Ohio. Both will be crucial to its goal of challenging TSMC in the contract chipmaking space.  

Moving forward, this is an important partnership to follow. Intel and Tower seem to have strong intentions of working closely with each other. While this deal isn’t quite as exciting as the previous merger, it’s still a step in the right direction for both sides.  

China’s New $40 Billion Domestic Chip Investment Prioritizes Self-Sufficiency

China is doubling down on its efforts to stimulate domestic chip production. According to insiders familiar with the matter who spoke to Reuters anonymously, the country plans to launch a third state-backed investment fund. Chinese officials aim to raise roughly $40 billion to bolster chip production and design.  

The China Integrated Circuit Investment Fund, often referred to as the Big Fund, has previously launched similar initiatives in 2014 and 2019. Respectively, the two funds amounted to $19 billion and $27 billion worth of incentives and funding for domestic chips.  

The latest investment is intended to stimulate chip manufacturing specifically, with the majority of the funding going toward fab equipment. As China’s President Xi Jinping emphasized the need for China to be self-sufficient in the semiconductor space, the fund gained approval from the necessary authorities. According to the anonymous sources, China’s finance ministry will contribute over $8 billion to the new fund. At this time, however, other contributors are unknown.  

The timing of China’s new investment comes amid growing tensions with the U.S. and other major chip nations. As rivals around the globe race to dominate high-end semiconductor production, China hopes its latest round of funding will keep it in the running. As the U.S., Japan, the Netherlands, and others impose trade restrictions on China’s chip industry, increased manufacturing is essential to remaining competitive. The new fund is reportedly a counter to the U.S. government’s CHIPS Act, which injected $39 billion into its domestic chip industry.  

For now, the launch date for China’s new chip fund remains unclear. However, experts believe the process will likely take several months to complete.  

Likewise, the administrators of the fund remain unnamed. The Big Fund’s previous two investments were managed by China Development Bank Capital, China National Tobacco Corp., and China Telecom—all state-owned entities. Sources claim several institutions are being courted to manage the new fund’s capital. SINO-IC Capital is a frontrunner despite numerous senior officials being the target of an ongoing investigation by China’s anti-graft authority. China Aerospace Investment is also reportedly in the running to manage the fund.  

Money from the Big Fund has been given to the two largest chip fabs in the country: Semiconductor Manufacturing International Corp. and Hua Hong Semiconductor. Flash memory chipmaker Yangtze Memory Technologies has also received funding alongside other small manufacturers.  

Whether or not the latest round of funding will make China a relevant force in the chip manufacturing race remains to be seen. Historically, its investments haven’t moved the needle away from dominant chip nations. Renewed interest and even more money could change the narrative, though thanks to the added pressure of becoming self-sufficient.

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Arm IPO Battle Begins and Mexico Eyes Chip Crown - Sept 15, 2023

One of the most hotly anticipated IPOs of the year is here as Arm returns to the public market amid a frenzy of interest from chipmakers and tech firms. The British chip designer is eyeing a strong valuation and could reignite interest in the IPO market after a multi-year downturn.

Meanwhile, as the chip industry continues to grow thanks to demand for AI and connected devices, countries not typically known for their semiconductor prowess are taking notice. With the U.S. investing heavily in its domestic industry and looking for partners outside of China, experts believe Mexico could become an important chip nation in the coming years.

Arm’s IPO Launch Attracts Top Chip, Tech Firms—Likely Largest of 2023

Eyes across Wall Street are focused on one chip designer amid an industry-wide uptick in semiconductor excitement—Arm. The British firm is on the brink of launching its IPO, making a highly anticipated return to the public market after being bought by SoftBank in 2016. Now, experts believe Arm’s IPO could be the largest of the year.  

There is also hope the chip designer’s arrival on the Nasdaq will reinvigorate interest in the IPO market, which has been downtrodden over the past few years thanks to macroeconomic headwinds. According to recent reports, Arm’s IPO debut is poised for success, with many believing the company’s shares will be priced at the high end of their initial valuation, around $51. This would give Arm a valuation of nearly $55 billion and raise $5 billion.  

Interest in Arm’s IPO offering has been strong as top chipmakers and tech companies seek to deepen their relationship with the firm. Given Arm’s historically neutral stance, not overcommitting to any one buyer, nabbing a significant portion of shares puts chipmakers in a strong position. Indeed, interest has been so strong that Arm closed its share orders a day earlier than expected and five times oversubscribed.  

Notably, top chipmaker TSMC has announced that it will invest $100 million in Arm’s IPO when it goes live this week.  

As for Arm’s recent performance, the numbers are uninspiring. With global smartphone sales taking a hit, the U.K. chip designer’s revenue declined by roughly 2.5% year-over-year in June and 7.8% from the previous frame. Meanwhile, its net income for this year’s second quarter was slashed to $105 million.  

Even so, Arm remains one of the most important and influential companies in the chip world. As such, its IPO ambitions are based primarily on a bright-looking future.  

The firm’s designs can be found in billions of devices globally, accounting for some 99% of smartphone chips. They’re also already making an impact in the booming artificial intelligence (AI) space. The company said 30 billion Arm-based chips were shipped in the last fiscal year, marking a 70% increase from seven years prior. The AI boom has driven massive demand for new high-end chips, specifically GPUs and advanced DRAM. This trend is only projected to grow in the coming years as the technology expands.  

Experts do warn, however, that investing in Arm’s IPO is not without risk. The chip designer’s business is heavily dependent on the Chinese market as well as smartphone sales. Tensions between China and the U.S. have made doing international business more challenging for players in the chip sector. Seemingly purposeful inaction by Chinese regulators recently led to the collapse of a $5 billion acquisition deal between Intel and Tower Semiconductor. In the face of declining revenue from China, which currently makes up about 25% of its total, Arm will need to find a way to make up the difference.  

Even so, the company’s listing is a breath of fresh air for the IPO market. Experts believe it will be the first in a deluge of new filings that aim to capitalize on investors’ excitement in Arm. The first follower, Instacart, recently announced its own IPO eyeing a valuation of $9.3 billion. Klaviyo, meanwhile announced an IPO targeting a valuation of $6.3 billion.

While Arm dominates the IPO market this year, it will be important to watch how this story unfolds. For the chip sector, deepened connections with Arm are a positive. But whether the market can support the designer’s growth over the long term depends on many unpredictable factors.  

Could Mexico Become a Semiconductor Powerhouse Amid Moves to Diversify Global Supply Chain?

As a result of international trade tensions with China, chipmakers are looking for ways to diversify their manufacturing and supply chains. For many, this involves outsourcing production to other Asian countries, including Japan, South Korea, and Vietnam. India has also increased its stake in the semiconductor industry in recent years as it now works to attract top chipmakers with lucrative incentives. The U.S., meanwhile, is making significant strides to bolster its domestic chip industry while decreasing its reliance on China.  

Partnerships with the above countries reflect their abundant skilled workforces, low labor costs, and existing infrastructure to support chip production. However, experts worry that simply allying with other Eastern Hemisphere nations isn’t enough. Though the route is not without challenges, many believe Mexico could become a key ally for the U.S. en route to becoming an important chip player itself.  

Mexico is already the largest trade partner of the U.S. thanks to a long-standing free trade agreement and a massive land border that minimizes logistical challenges associated with transcontinental shipping. Unfortunately, Mexico lacks the chip infrastructure and supply chain networks of most Asian countries thanks to years of middling policies and lacking incentives. But experts believe the current shift in the electronics industry towards global diversity is an excellent opportunity for both countries to help reshape the “norm.” Both Mexico and the U.S. have incentives for decreasing reliance on China. Likewise, both stand to benefit from boosting their domestic chip industries in preparation for a projected massive period of growth driven by artificial intelligence (AI).  

The U.S. is a key participant in chip design and research. However, it has fallen significantly behind in both production and packaging. While strides are being made to reverse this trend thanks to the CHIPS Act, it takes time to develop the infrastructure and workforce needed to support a strong domestic chip sector. TSMC knows this well, already being forced to delay the opening of two advanced chip fabs in Arizona due to workforce shortages.  

Of course, any country vying for a fully self-sustaining chip ecosystem is not realistic. International support from friendly nations is necessary for the supply chain to function. For Mexico, surging U.S. chip ambitions are an opportunity to get on board and uplift its own chip sector at the same time.  

But to get there, collaboration will be needed. Many believe significant strides could be made following the 2024 Mexican election season if lawmakers with more favorable chip policies come into office. However, before the country can claim a larger slice of the $528 billion chip industry, Mexico will need to invest. This means establishing more lucrative incentives to lure chipmakers into the country and increasing collaboration with not only other key governments but also manufacturers and chip-intensive users.  

Fortunately, the rest of Mexico’s economy is well-positioned to make this leap. Foreign Affairs recently noted the country’s integration with international manufacturing supply chains as well as 12 free trade agreements with major economies. These favorable conditions have led several U.S. firms to invest in Mexico, including HP and Texas Instruments. Though the mass majority of chip packaging work is currently done in Asia, with chip production picking up in states like Arizona and Texas, it makes sense to start looking south rather than east.  

Still, barriers remain. Mexico’s chip infrastructure simply cannot match those of Asian nations that currently handle the majority of production. This can change, but it will take time. Meanwhile, costs for labor and manufacturing are higher as a result. Chip firms who want to invest in Mexico could be turned off by these factors, but they must be overcome if hopes of a more diverse global supply chain are to be realized.

Illustration marking the difference between legacy chips and advanced chips

Intel Loses Tower as China Fortifies Strength in Legacy Components - September 8, 2023

The global chip supply chain continues to face uncertainty in the form of complex economic challenges. While experts and regulators focus on advanced semiconductors, the need for legacy chips remains paramount. China, which has been cut off from advanced chips and manufacturing equipment by the U.S., is doubling down on legacy components.  

Meanwhile, these rocky economic conditions are complicating matters for chipmakers operating on a global scale. Intel and Tower Semiconductor recently saw a $5.4 billion merger scuttled by the Chinese government as regulators failed to review their documents. Navigating tensions with China will be a key issue for chipmakers seeking to do business in the country.  

Legacy Chip Concerns Loom Large as Industry Focuses on Advanced Semiconductors

Cutting-edge semiconductors dominate most chip headlines today. However, a much quieter trend is unfolding around the globe with its epicenter in China—the importance of legacy chips. Despite making up just a tenth of the industry’s overall revenue, chips made using pre-2005 technology account for two-thirds of all sales. They are also largely responsible for the semiconductor shortage that occurred following COVID-19.  

As the U.S. tightens its stance against Chinese semiconductor ambitions, the latter has focused its attention on legacy chips as an answer. According to Fortune, nearly three-quarters of the world’s manufacturing capacity for legacy chips is located in China and Taiwan. Unsurprisingly, as China faces harsh economic sanctions on advanced chips and manufacturing equipment, it has chosen to double down on legacy silicon.  

China is currently working to open legacy chip fabs at a shocking rate. Experts believe it could open more of these plants than the rest of the world combined over the next few years. This would give China near total control over the legacy chip market, allowing it to strong-arm the rest of the world’s chip buyers thanks to the immense leverage this provides. The government is already flexing its muscle as it shut down a merger between Intel and Tower Semiconductor last month. The latter produces legacy chips and the merger would have given Intel access to those fabs.  

But if advanced semiconductors are the focus of lawmakers and tech giants, why do legacy chips matter? Globally, demand for these chips is far outpacing supply. The automotive sector relies on legacy chips for 95% of its total supply and the auto chip sector is projected to grow by 11% over the next few years. Yet, legacy chip manufacturing growth is projected to rise by just 2% in the same timeframe.  

Chipmakers simply aren’t incentivized to ramp up legacy chip production or open new fabs based on old technology. Most of today’s legacy fabs only exist because they produced advanced chips when they were opened. After all, most legacy semiconductors barely turn a profit, often selling for just pennies. As such, expensive advanced chips draw the majority of investment from chipmakers and account for the lion’s share of their profits.  

But experts warn that ignoring legacy chips is a road to disaster. Without proper supply, the American economy will suffer—along with national security and chip autonomy.

Taking steps to address the legacy chip supply chain before it’s too late is essential. Many believe additional subsidies beyond the CHIPS Act are unlikely. Moreover, U.S. chipmakers have largely failed to display interest in opening new legacy chip fabs.

Experts believe turning to friendly nations is a more realistic alternative. As countries like India seek to scale their domestic semiconductor industries, encouraging the production of legacy chips could help stabilize the global supply chain and diversify the market.

Meanwhile, the U.S. may need to divide its attention in the realm of economic sanctions and export controls. The majority of legislation today focuses on advanced chips. But additional rules overseeing legacy chips and related equipment could be necessary to prevent overproduction as China leans into this technology.

Moreover, the U.S. dominates the regulatory bodies that inspect and certify devices across industries like healthcare and automotive which rely on legacy chips. Maintaining a firm hand over these standards could help steady the supply chain and prevent monopolization by Chinese chipmakers.

Ultimately, the push-and-pull between advanced and legacy chips illustrates two sides of a complex problem. Global supply chain challenges require dynamic solutions. Though advanced chips draw much of the world’s attention, legacy chips should not be overlooked. Indeed, China’s push to expand in this area is a strong indication of their importance. Moving forward, chip companies and industry leaders alike must not fail to ignore this vital sector.  

Intel, Tower End Merger Amid Regulatory Silence from China

Amid icy tensions between the U.S. and China, Intel has reportedly agreed to terminate its planned $5.4 billion merger with Tower Semiconductor. It first announced plans to acquire the Israeli chipmaker in February 2022. Since then, both sides have waited for China’s State Administration for Market Regulation, the body responsible for overseeing mergers and acquisitions, to review their filing.  

The Chinese government has seemingly failed to review the merger after 18 months, prompting both Intel and Tower to head separate ways. Notably, the proposed acquisition had already passed antitrust reviews in the United States and multiple other countries. In a statement, Intel said it will pay Tower $353 million for failing to close the deal.  

Notably, Intel employed 12,000 workers in China as of last year and brought in over $17 billion in revenue—about 27% of its total. Tower Semiconductor, meanwhile, has operated an office in Shanghai since 1993.

The move is a blow to Intel’s hopes of challenging TSMC as a manufacturer of chips designed by other firms—particularly the legacy chips Tower specializes in. Despite this, Intel remains committed to its Foundry Services division.  

CEO Pat Gelsinger said in a statement, “Our foundry efforts are critical to unlocking the full potential of IDM 2.0, and we continue to drive forward on all facets of our strategy.”

Gelsinger also mentioned in a previous earnings call that he had traveled to China to try and push the deal through. Prior to the delay, the acquisition was expected to be completed within 12 months.  

China’s State Administration for Market Regulation has been quiet, often failing to engage with foreign governments and businesses. In 2018, it took over merger reviews from the Ministry of Commerce, which is staffed with experts in international business and political affairs.

From a wider perspective, the failed merger highlights fraying economic relations between the U.S. and China as the former continues to tighten export restrictions on advanced chips and manufacturing equipment. Experts warn this poor relationship could pose future problems for companies that do business internationally. Having operations in China could result in difficulty passing acquisition deals and mergers—even if a Chinese company isn’t involved.  

Moving forward, chipmakers who meet the revenue threshold for mandatory reviews will need to carefully consider investment in China given the current economic tensions. Those already heavily invested in the country now have additional motivation to diversify their global presence.

Fortunately for Intel and Tower, the future remains bright. Gelsinger said when announcing the deal’s termination, “Our respect for Tower has only grown through this process.”  

Both sides note they plan to continue to “look for opportunities to work together in the future.” Intel, meanwhile, will continue investing in its Foundry Services division as a core component of its ongoing growth strategy.

An image of an engineer surrounded by chemical barrels

Labor Shortage and Chemical Ban Complicate US Chip Dreams - September 1, 2023

The U.S. is investing heavily in its domestic semiconductor industry in an effort to reduce reliance on global supply chains and increase its production of advanced chips. However, macroeconomic and regulatory challenges have not been kind. Between a looming talent shortage nearing crisis levels and controversial regulation from the EPA poised to restrict crucial chip manufacturing chemicals, the industry has an uphill battle to face. Navigating these roadblocks over the coming years will put U.S. chip ambitions to the test.  

U.S. Chip Talent Crisis Looms, Complicating Path to Semiconductor Renaissance  

As the chip industry continues to grow year-over-year, a new challenge is appearing on the horizon. According to a recent report from the Semiconductor Industry Association (SIA), the industry should brace for an expected workforce shortage of 67,000 workers by the end of the decade. Unfortunately, this is only a sliver of the whole picture. The U.S. as a whole is projected to have a shortage of 1.4 million computer scientists, engineers, and technicians by 2030.  

As the government and private companies alike work to solve this problem, it’s unclear whether preventing a crisis is possible. However, numerous initiatives have been launched to find plausible solutions.  

The CHIPS Act, passed last year, unlocks $280 billion in funding to bolster the U.S. chip industry. Government officials hope that attracting top chipmakers to open new facilities in the States will also increase interest in the positions required to fill them. But as chip giants move in, the cracks in this plan are showing. TSMC has already been forced to delay production at its new Arizona fab due to a worker shortage. The firm reportedly brought in roughly 500 workers from its headquarters in Taiwan to get the foundry online and train local replacements.  

Meanwhile, Arm recently announced a new collaboration project between chipmakers, universities, and researchers dubbed the Semiconductor Education Alliance (SEA). The initiative aims to improve access to resources and career opportunities for those interested in the chip sector. Students, educators, and practicing engineers all stand to benefit from these resources and chip projects.  

Notably, interest in chip jobs has been on an unfavorable trajectory in recent years. As demand for machine learning and AI skyrockets, computer science careers have become more popular. Thanks to “boot camps” and accelerated learning programs, the path into a computer science job is far easier—and shorter—than the multiple degrees and years of on-site experience needed for a career in electrical engineering.  

But even computer science isn’t keeping pace with the excessive demand for new jobs. A recent report from Deloitte claims that fewer than 100,000 graduate students enroll in U.S. computer science and electrical engineering programs each year. The same report claims more than one million skilled workers will be needed by 2030. At this pace, the odds of avoiding a workforce crisis seem slim.  

Fortunately, it’s not too late. Aggressively deploying solutions to address the semiconductor talent shortage, such as improved talent pipelines and expanded partnerships like Arm’s SEA, will increase interest. If the U.S. hopes to reclaim its status as a semiconductor superpower, these changes will be essential. For now, chipmakers eyeing the U.S. for potential expansion must take domestic workforce challenges into account and have a plan to deal with the growing shortage of top talent.  

Chip Associations: EPA’s Proposed PFAS Rule Changes ‘Catastrophic’ to U.S. Chip Ambitions

In May, the Environmental Protection Agency (EPA) proposed a regulation that would revise (and tighten) many of its existing policies regarding per- and polyfluoroalkyl substances (PFAS). These “forever chemicals” were revered 50 years ago when they debuted to make non-stick Teflon pans and Gore-Tex jackets. Now, concerns about their impact on human health have led activist groups and government agencies to ring the alarm bells.  

But PFAS are essential to the manufacturing of many products, including semiconductors. The chemicals are used for photolithography patterning and making protective coatings that are crucial to the chip’s function. PFAS are also used in packaging and manufacturing equipment thanks to their durability and heat resistance.  

Notably, the proposed rule changes would remove the accelerated 30-day reviews the EPA offers when a company wants to make small amounts of a new chemical. This low volume exemption (LVE) allows chipmakers to bypass the standard 90-day review process and produce the needed chemicals much faster.  

As such, chip industry bodies have spoken out against the proposed regulation, calling them catastrophic for hopes of rebuilding U.S. chip production. The Semiconductor Industry Association (SIA) and SEMI both commented on the proposed rule.  

In a statement, the SIA said, “Revoking these LVEs would result in the semiconductor industry being able to manufacture devices in the U.S. The economic consequences of such a summary action by the EPA are immeasurable.”  

Echoing the sentiment, SEMI wrote, “Revoking all PFAS LVEs would be catastrophic. This would result in a complete shutdown of all U.S. domestic semiconductor manufacturing operations.”  

Others rallying against the proposed regulations claim it conflicts with the Toxic Substances Control Act’s 2016 amendments. These require the EPA to use the best available science to make its regulations. The American Fuel & Petrochemical Manufacturers and American Petroleum Institute said in a statement, “Making PFAS ineligible as a category is not supported by science.”  

On the other hand, proponents of the new rule changes claim the EPA cannot, in 30 days, determine whether a new chemical poses a risk to the environment or human health. More than 12,000 PFAS chemicals have been documented to date. Research shows that PFAS, which are found in countless products from healthcare to clothing to cosmetics, do not degrade in the environment—or the human body. The family of chemicals has also been linked to serious health issues, including cancer, birth defects, and hormone irregularities. As such, it’s important to have legislation in place to guide the handling, use, and disposal of these chemicals.  

For the chip industry, though, PFAS chemicals are a necessary evil as they are crucial to semiconductor production. But should the EPA tighten its stance, chipmakers in the U.S. may need to start looking for alternatives. Researchers are working hard to find PFAS replacements, such as using oxide-based materials for photolithography. But despite promising results, significant investments of both time and money are still needed.  

In the meantime, the proposed regulation would undoubtedly derail U.S. ambitions of becoming a global chip leader. However, it’s uncertain whether the EPA will move forward with the restrictions as outlined. With the goal of reinvigorating the domestic chip industry top-of-mind, semiconductor makers will hope the industry gets an exception.

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How Shortage Turned to Excess with AI Reigniting Demand – August 23, 2023

The COVID-19 pandemic led to a boon for the chip industry as consumers sought out new devices to stay connected. Now, though, that demand has waned, and chipmakers are facing an industry-wide supply glut.

While the world’s largest memory chip manufacturers posted losses and poor results in the second quarter, there’s hope for recovery on the horizon. Growing demand for advanced chips to power AI accelerators is playing no small role as technology becomes more and more ingrained in every aspect of business and entertainment.  

After Surging Demand, Memory Chip Makers Continue to Struggle Amid Supply Glut

Think back to the peak of the COVID-19 pandemic. With nothing to do amid strict quarantine guidelines, most people turned to at-home entertainment in the form of new game consoles, computers, and Internet of Things (IoT) gadgets. As the world shut down, billions of people wanted new devices to stay entertained and connected to work and loved ones. This massive surge in demand quickly led to a semiconductor shortage—the likes of which the industry had never experienced—as chipmakers couldn’t keep up and shaky supply chains gave out.  

Now, though, the world’s largest chipmakers are paying the price for several ultra-profitable years. As device manufacturers and other buyers work through a massive inventory glut, chip sales have slowed to a halt. The memory market is taking the hardest hit, with firms like South Korea’s Samsung, SK Hynix, and Micron suffering the most. Meanwhile, TSMC, which relies heavily on the smartphone market, finally gave in to the downward pressure.  

Both NAND and DRAM memory chips are currently in oversupply as companies around the world stockpiled these units during the pandemic. As the world returned to normal, demand for devices like laptops and smartphones vanished, leaving device makers with far too many memory chips.  

Bain & Company analyst Peter Hanbury said in a recent CNBC interview, “…sky high demand during the chip shortage suddenly dried up as end markets stopped ordering chips and instead focused on selling through the inventory they already had.”  

As a result, chipmakers who primarily supply memory components are struggling against the headwind. Samsung saw its Q2 operating profit plummet 95% year-over-year in its latest report. Its neighbor SK Hynix posted its second quarterly consecutive loss this year where it had profited a year before. The world’s largest chipmaker, TSMC, watched its net income for the second quarter drop by 23.3%. Notably, it was also the company’s first quarterly profit decline in four years.  

Of course, not all industries have an excess. The auto sector remains hungry for new chips—as it has since the pandemic began. With vehicles becoming “smarter” each year, there isn’t an end in sight for automakers despite recent improvements. This is a bright spot for firms like NXP, STMicroelectronics, and Texas Instruments, which supply crucial silicon for automotive manufacturers.  

But chipmakers and industry experts have a bleak outlook for the global PC and smartphone market. Demand is expected to remain low for the remainder of 2024, including a less-impactful Q4 according to TSMC. This has led many chipmakers to announce drastic production cuts, especially to NAND and DRAM memory, in an effort to boost sagging prices and reduce the abundant supply currently in the market.  

Whether or not demand for consumer products like laptops and smartphones will recover remains uncertain. As the wider economy struggles and consumers feel the pressures of inflation and rising costs, increased spending on new gadgets is far from certain. Chipmakers are relying on an eventual upswing, but the source remains unclear. Perhaps surging demand for AI chips will reinvigorate the market where consumer devices cannot.  

AI Accelerators Increasing Demand for HBM Chips and Creating New Competition

Globally, demand for AI products has increased throughout 2023 as the public becomes more aware of the technology and businesses learn how to leverage its power to their advantage. As a result, demand for AI accelerator chips, such as those made by Nvidia, and in-house chips being developed by Cloud Service Providers (CSPs) and other major tech firms, has also risen.  

For the slumping memory chip market, this is timely news. High Bandwidth Memory (HBM) plays an important role in AI accelerator chips, allowing the system to process tasks and make complex calculations much faster. Thus, three major manufacturers: SK Hynix, Samsung, and Micron, have seen an influx of fresh demand. Notably, these three have struggled over the past two years thanks to an industry-wide supply glut that has restricted sales of new chips in the wake of the COVID-19 pandemic.  

But with device manufacturers aiming to introduce products containing cutting-edge HBM3 and HBM3e chips as soon as next year, projections may finally swing in the positive direction.  

As the industry transitioned to the HBM3 generation, naming conventions seemingly went out the window. It’s important to note these chips should be categorized based on speed. HBM3 products typically run at speeds between 5.6 and 6.4 Gbps. Meanwhile, HBM3e is essentially “version two” HBM3 and is much faster at 8 Gbps. The latter is also referred to as HBM3P, HBM3A, HBM3+, and HBM3 Gen2, creating much confusion for both device manufacturers and consumers.  

Notably, both SK Hynix and Samsung began their foray into the latest HBM generation with HBM3. Samsung’s variation is found in Nvidia’s ever-popular H100 and H800 chips as well as AMD’s MI300 series products.  

Micron skipped over the standard HBM3 products and jumped directly to HBM3e, which is currently giving it an edge. While Samsung and SK Hynix plan to sample HBM3e products early in 2024, SK Hynix is already sampling its high-performance silicon to customers—including Nvidia. All three manufacturers plan to begin mass-producing their respective HBM3e products by the second half of 2024.  

This is particularly relevant given an increasingly competitive market for AI accelerators. Currently, Nvidia dominates the segment with its H100 and H800 chips. Analysts estimate the California-based company controls 85% of the AI workload market. But its high prices are giving some buyers pause. These prices coupled with the fact that AI servers require an eight-card configuration have led several CSPs to start working on their own AI accelerator chips.  

Google’s Tensor Processing Unit (TPU) and Amazon Web Services’ Trainium and Inferentia chips are already established. Meanwhile, these two tech giants are working on next-gen chips that will feature HBM3 and HBM3e memory when available. Google and Amazon aren’t alone, either. Facebook, Telsa, and several other CSPs have in-house AI chip projects ongoing to decrease reliance on external suppliers who control pricing.  

In all, it appears the recent AI craze isn’t just driving demand but also creating a new form of competition. Nvidia will need to navigate this new challenge and entice buyers with even more powerful chips to avoid losing them to in-house design efforts. Meanwhile, HBM3 and HMB3e manufacturers may finally be able to return to profitability as these chips are rolled out next year.

A picture of India at sunset on the river

Arm Works to Address Chip Industry Talent Shortage with New Global Education Alliance - August 18, 2023

Countries in every corner of the world are making efforts to bolster their domestic semiconductor industries. Partially, nations like the U.S. and the U.K. want to decrease their reliance on chips made in Asia by increasing their domestic fabrication capacity. A wider aim is diversifying the global supply chain to reduce the impact of a future event like the COVID-19 pandemic and avoid a repeat of the widescale disruption we saw in 2020.  

Governments around the world have allocated funding to boost their domestic industries. However, throwing money at the problem only goes so far. A lack of skilled workers and engineers could hamper growth over the coming decades as the next generation takes over.

Cambridge, England, based Arm is addressing this global challenge with a new initiative designed to give teachers, researchers, and students access to learning resources and career opportunities. Dubbed the Semiconductor Education Alliance (SEA), the initiative brings together several high-impact chip companies and universities who support the mission.  

As global demand for chips continues to reach new heights in the coming years, the world will need more workers. Practically every country either currently has or is predicting a shortage of skilled workers for the chip industry.  

The U.K. saw just 3,245 students enroll in electronic or electric engineering courses in 2021. Meanwhile, 80% of chip companies in the U.K. have unfilled vacancies. In the U.S., the Semiconductor Industry Association (SIA) foresees a shortage of 67,000 technicians, computer scientists, and engineers by the end of the decade. Meanwhile, the China Semiconductor Industry Association (CSIA) estimates the country has a shortage of 200,000 skilled industry workers this year.  

These shortfalls are a major problem for the industry as they hamper productivity and innovation. But solving them isn’t simple—and takes time.  

Arm’s executive vice president for central engineering, Gary Campbell, said in a statement, “The Semiconductor Education Alliance aims to better align the industry around common goals, shared resources, and communities of best practice to tackle the skills gap that threatens progress today.”  

Indeed, as numerous countries work separately to solve their existing workforce challenges, bringing them together makes sense. The SEA allows members to share resources and opportunities through forums and uses a “federated and open model.”  

A host of companies and organizations are already involved, including Arduino, Cadence, STMicroelectronics, Synopsys, Semiconductor Research Corporation, Cornell University, Taiwan Semiconductor Research Institute, the All-India Council for Technical Education, and the University of Southampton.  

Arm already had an extensive education model before announcing the SEA. Now, it is taking its educational leadership to new heights. The chipmaker calls the alliance “an evolution of our existing education model” and aims to play a “vital coordination role.”  

Through the SEA, members can share resources and expertise to improve access to resources and opportunities. Notably, several projects are already underway.  

Arm is working with Electronic Design Automation (EDA) partners to develop and compile resources for chip design. The firm is also providing a system-on-chip (SoC) design platform for use in academia. This will give teachers and students access to cutting-edge semiconductor fabrication technology from Arm and other participating firms.  

The SEA also views diversity as a critical point for building the next generation of chip industry talent. As such, it supports several routes into the industry, including technical and vocational schools and self-study. Moreover, alliance learners of all backgrounds will have access to internships, apprenticeships, and co-ops with member companies and organizations.  

For the semiconductor industry, innovation must extend beyond chip design and shrinking fabrication methods. Finding new ways to attract and train fresh talent is just as essential. Arm’s SEA will be an important route for young learners and second-career professionals alike to grow their skills and launch empowering new careers. Given the intense demand for chip talent around the world, this likely won’t be the only such initiative to arise in the coming years.

India Continues to Woo U.S. Chipmakers, Downplays Challenges for Outside Investors

India has been vocal about its ambitions to become a major hub in the semiconductor industry. Late last month, industry executives and government officials met at SemiconIndia to discuss the country’s role in chipmaking and future investments. At the event, the Indian government continued to heap praise on U.S. chip giants following several pledges to bring new billion-dollar facilities to the country.  

Micron, Cadence, Applied Materials, and AMD were all in attendance and spoke positively of India’s chip ambitions. However, despite significant investments already in place, India has significant challenges to navigate before it can become a global chip powerhouse akin to Taiwan, South Korea, or the U.S.

Multiple chipmakers have already announced sizeable investments in India. This comes in the wake of the government’s $10 billion incentive plan for the chip sector which was passed last year. Both domestic and international firms who bring their business to India qualify for the program’s lucrative offerings, including fiscal support for up to 50% of a project’s cost.  

Foxconn was quick to jump on the offer, outlining a $19.5 billion venture with Indian mining and power generation firm Vedanta. However, the proposal fell through due to a lack of chip production expertise. The iPhone chip supplier is now eyeing a new partnership with TSMC and Japan’s TMH to establish foundries for both advanced and legacy nodes in India.  

In a statement, it said, “Foxconn is committed to India and sees the country successfully establishing a robust semiconductor manufacturing ecosystem.”  

The second pillar of India’s chip strategy is establishing partnerships with global semiconductor leaders, including the U.S., which was visited by Prime Minister Narendra Modi in June. At SemiconIndia, multiple U.S. chipmakers voiced their support for India’s semiconductor plans and either announced or discussed upcoming investments.  

During a keynote, AMD’s CTO, Mark Papermaster, said, “India teams will be pivotal in advancing AI machine learning and both hardware and software capabilities.”  

The firm plans to invest roughly $400 million in India’s chip industry over the next five years. Central to the investment is a planned campus in Bangalore that will serve as AMD’s largest design center.

Meanwhile, Micron recently announced that it will open a chip assembly and testing facility in Gujarat that will cost up to $825 million. Micron CEO Sanjay Mehrotra said at the event, “We are hopeful that this investment will help catalyze other investments in the sector, strengthen indigenous manufacturing capability, encourage innovation, and support broader job creation.”  

Despite offering generous incentives, India has struggled to attract top semiconductor firms to its shores. Likewise, even with new ventures bolstering the packaging and testing segments, foundry investments are few and far between. Major Taiwanese firms have also been hesitant, with none yet bringing their business to India.  

Pranay Kotasthane, deputy director of the Takshashila Institution said recently, “The lack of policy consistency and high import tariffs are the bottlenecks that can explain why Taiwanese companies haven’t moved ahead.”  

“None of the fab proposals have been able to find good technology partners,” he adds.  

The latter, which grounded Foxconn’s massive proposal, has been a major tie-up for companies interested in bringing their operations to India. While the relatively low-skilled labor needed for packaging and testing operations is available, the needed resources to support new fabs are limited.  

Yet, hopes remain high. Prime Minister Modi said during the event, “Skilled engineers and designers are our strength. Anyone who wants to be a part of the world’s most vibrant and unified market has faith in India.”  

Indeed, many experts believe the country’s chip ambitions are realistic. Ajit Manocha, CEO of U.S.-based SEMI, said in a keynote, “For the first time in India’s history, geopolitics, domestic policies, and private sector capacity are aligned in India’s favor to become a key player in semiconductor production.”  

India’s huge domestic market and lucrative government incentives have certainly attracted U.S. chipmakers. However, to truly become a semiconductor stalwart, the country will also need investments from major Taiwanese and South Korean firms in the coming years.

Two engineers examining blueprints at a construction site

TSMC Delays Production at New 4nm Arizona Plant Due to ‘Insufficient Amount of Skilled Workers’ - August 11, 2023

TSMC’s plan to bring its 4nm process online in Phoenix, Arizona, has hit a bump in the road. According to recent reports, the company’s new facility won’t enter production next year as planned due to a shortage of skilled workers in the area. Thanks to the delay, TSMC now plans to start producing 4nm chips at its first Arizona fab starting in 2025.

The delayed facility is the first of two planned for Phoenix, with the latter slated to produce 3nm chips starting in 2026. Whether the second plant will also be delayed remains unclear at this time. 

‘Working to Improve the Situation’

With TSMC’s planned expenditure of $40 billion between the two facilities being one of the largest outside investments in American history, many eyes have been on the project. Now, as it hits a delay so close to its projected opening, plans to reinvigorate the U.S. semiconductor industry also take a major blow. 

In TSMC’s Q2 earnings call, chairman Mark Liu said that his firm is “encountering certain challenges as there is an insufficient amount of skilled workers with the specialized expertise required for equipment installation in a semiconductor-grade facility.” 

He added that TSMC is, “Working to improve the situation.” 

This shouldn’t come as a shock given the lacking state of the U.S. chip manufacturing industry. In the meantime, however, TSMC plans to fill the void with staff from its Taiwanese plants. Some 500 experienced technicians are reportedly being sent to Phoenix to assist with getting the equipment set up and training local workers. 

This is a notable problem for the U.S. as it dreams of becoming a chip giant once again on the world stage. But government officials seem unbothered—at least for now. White House representative Oliva Dalton said in a statement that last year’s CHIPS and Science Act will help get “the workforce we need.” 

Indeed, the provisions outlined in the Biden administration’s plan to reinvigorate domestic chip manufacturing are part of what incentivized TSMC to build its two Arizona plants. The world’s largest semiconductor manufacturer is reportedly seeking roughly $15 billion in tax credits for the pair. 

Unfortunately for TSMC, growing a domestic workforce with the skills and experience needed to run advanced semiconductor fabs takes time. 

Meanwhile, the delay in getting its newest plant online will negatively impact TSMC’s projects. Following the delay announcement, the company’s stocks fell by 3%. It also forecasts a 10% dip in sales for this year—though that is largely the result of a sluggish chip market.

Perhaps the company taking a harder hit will be Apple, which plans to source chips for its upcoming iPhone and MacBook models from TSMC’s new stateside facility. The iPhone maker plans to use both 4nm and 3nm chips produced at the new fabs. 

The delay could throw a wrench in Apple’s plans if it persists, causing it to push back its product launches or turn to another supplier. That would be significant inventory to fill given that TSMC produces over 90% of the world’s advanced chips—many of which find their way to Apple. The latter accounts for upwards of 20% of the chip giant’s revenue. 

U.S. plans to bring more of its chip supply chain closer to home will also be pushed back. Despite the nearly $53 billion in funding and incentives laid out in the CHIPS Act, this delay goes to show that bolstering a nation’s semiconductor industry—even in a country as developed as the U.S.—isn’t straightforward. Reaching key milestones and eventually bringing a larger share of the market closer to home will take time. 

Although TSMC’s recent setback isn’t ideal, it isn’t the end of the world. Perhaps it will teach not only the Taiwanese chipmaker, but also others interested in setting up fabs in the States, valuable lessons on how to make the process smoother in the future. Likewise, the U.S. gains a little extra time to continue developing its workforce to meet the demands of advanced chip manufacturing.

Japan’s New Export Controls Target China’s Chip Capabilities but Not All Officials Are Happy

Japan’s latest export controls, which restrict the sale of several key semiconductor manufacturing machines to China, went into effect recently. The move aligns well with the efforts of the U.S. and several other countries to cut China off from advanced chipmaking capabilities. Despite this, Japan maintains that its move is not meant to follow the U.S. or directly target China. 

Even so, some Japanese officials are uncomfortable with the latest restrictions, fearing retaliation from Beijing. Experts worry China could respond by cutting off or limiting exports of key materials like gallium nitride, germanium, or rare-earth metals. 

Notably, 23 types of equipment are named in Japan’s latest round of export controls. This includes extreme ultraviolet (EUV) lithography, nanoimprint lithography, photomasks, high-speed valves, etching, annealing, deposition, inspection, and cleaning tools. Each piece of equipment can be categorized based on its potential use for military purposes. This allows Japan to regulate exports under its Foreign Exchange and Foreign Trade Control Law. 

But while these pieces of equipment can be used to manufacture military hardware such as weapons systems and artificial intelligence computing, they are not the sole uses. Thus, it appears Japan is keeping its restrictions broad, giving officials the flexibility to handle export licenses on a more lenient basis. 

Notably, the country has also repeatedly said its move is not targeted directly at China. Rather, Japan’s trade and industry minister said in March that the move affects 160 countries—of which China is just one. 

In a statement to Reuters following the restrictions going into place, another industry ministry official said, “We feel an odd discomfort with how the U.S. is doing this. There’s no need to identify the country, all you need to do is control the item.” 

This rather cleanly sums up Japan’s stance on its most recent restrictions. While the move is clearly an effort to hamper China’s advanced chip and military capabilities, Japan is delicately maneuvering the situation to avoid the ire of Beijing. Whether or not that stance is successful remains to be seen. 

Japan’s move also comes as part of a much larger global effort to control China’s chip capabilities. Tokyo joined the U.S. and several other industrial democracies earlier this year on a decision to “de-risk” from potential coercion by the Chinese government. Export controls from the participating nations play a large role in following through on that commitment. 

Yet, the countries within this alliance have differing levels of strictness governing their restrictions. Experts note this could be an important test of unity moving forward. 

Emily Benson of the Center for Strategic and International Studies in Washington, D.C., told Reuters, “Each country is responsible for its own licensing policies, and on top of that it’s up to each country to enforce the licensing decisions that it undertakes.” 

Japan’s stance could allow more lenient exports despite its regulations. This is noteworthy given Japan accounted for roughly 30% of China’s chip equipment imports last year. 

For now, it is important to monitor the fiscal impact of this move. Japan’s leading chip tool maker, Tokyo Electron, which generated 23% of its sales from China in the first quart of 2023, expects Japan’s new controls to have a limited impact on its business. Meanwhile, leading lithography machine makers Nikon and Canon have remained mum. The true impact won’t be known until the affected companies release their quarterly sales reports later this year. 

Still, the intricate nature of the global supply chain and tense relations with China means billions of dollars stand to be lost if relations sour. This has left some Japanese officials unhappy with their country’s decision to align with the U.S. on China policy. Given that Japan’s total trade with China is significantly larger than its trade with the U.S., they have a point. 

Whether or not this stance holds will be interesting to see as time goes on—especially if China chooses to retaliate. For now, though, it appears Japan is willing to act alongside the U.S. and many other nations in trying to limit China’s chip industry.

Electronic design in a lab

Foxconn begins to court TSMC for India plans - August 4, 2023

Following a $19.5 billion venture that crumbled last month, Foxconn is now reportedly in talks with Taiwanese chip giant TSMC and Japan’s TMH to build new chip factories in India. The move comes amid generous subsidies from the Indian government which could offset roughly 75% of the total project costs. 

Following a $19.5 billion venture that crumbled last month, Foxconn is now reportedly in talks with Taiwanese chip giant TSMC and Japan’s TMH to build new chip factories in India. The move comes amid generous subsidies from the Indian government which could offset roughly 75% of the total project costs. 

Foxconn aims to open at least four to five fabrication lines in the country with supporting incentives from the India Semiconductor Mission (ISM). The new facilities will reportedly produce both advanced designs and legacy nodes, however, specific details remain undisclosed at this time. 

Foxconn is Seeking a New Partner

Foxconn previously sought to partner with Vedanta, a leading mining and power generation company in India. However, the country’s government quickly struck down the venture, citing a lack of chip production expertise. As a result, the two firms agreed to abandon the deal, leaving Foxconn, “actively reviewing the landscape for optimal partners.” 

According to sources with knowledge of the development, the Apple chip supplier remains keen on extending its reach in India. In a statement following the Vedanta partnership collapse, it said, “Foxconn is committed to India and sees the country successfully establishing a robust semiconductor manufacturing ecosystem.” 

Enter TSMC and TMH. The two bring extensive chip fabrication knowledge and operational experience to the venture—if Foxconn can get them on board. 

Given that both Foxconn and TSMC are based in Taiwan, the partnership seems natural. What’s more, the two sides have reportedly been talking for some time and are working to finalize an agreement. 

TSMC, which produces more than 50% of all chips worldwide, would strengthen the project’s validity immensely with its fabrication experience. Meanwhile, TMH brings industry-leading expertise in the operation and maintenance of fabrication equipment to the table. 

Notably, the deal between these three remains far from certain. ET reports that a partnership between Foxconn and either European firm STMirco or U.S.-based GlobalFoundries is still a possibility. While partnering with TSMC is likely the more advantageous scenario, Foxconn does have multiple options for expanding its production lines into the Indian market. 

In a statement, the company said, “We welcome a diverse set of stakeholders, both inside India and abroad, who also want to see India get to the next level and can complement Foxconn’s world-class supply chain management and manufacturing efficiency.” 

Regardless of which chipmaker Foxconn eventually choses, bringing a semiconductor manufacturing technology partner on board should qualify the project for lucrative incentives from the Indian government.

Since Foxconn’s deal with Vedanta has fallen through, the firm can now be even more ambitious with its fabrication goals in India. Previously, it appeared the two planned to set up manufacturing sites for legacy nodes, including both 40nm and 28nm. Of course, there is still plenty of global demand for chips fabricated with older process tech. 

But partnering with leaders in advanced chip design and production like TSMC would allow Foxconn to produce cutting-edge silicon to meet the needs of today’s advanced users. As demand for AI chips and powerful new CPUs and GPUs soars, Foxconn could be well-positioned to help fill unmet orders and diversify its production in India. 

The company’s desire to expand in India is hardly surprising given the immense government support being offered. Previously, the Indian government offered Foxconn and Vedanta a hefty incentive package, which included paying for 40% of capital expenditures, 50% of costs for a desalination plant, subsidies for electricity and water, discounted land, and registration fee reimbursements. Moreover, states were willing to add additional subsidies of 15-25%, further decreasing the venture’s financial impact. 

As India seeks to improve its position within the global semiconductor industry, losing the Foxconn-Vedanta project was a blow. The highly celebrated project would have created a significant number of jobs and been a boost for the economy. However, a new deal between Foxconn, TSMC, and TMH would almost certainly eclipse the previous arrangement, making this an interesting situation to monitor over the next few months.

Chip Execs, Lawmakers Meet to Discuss Potential for Tightened Chinese Trade Restrictions

Amid ongoing tensions between the U.S. and China, the chip industry is often caught in the crossfire. Recent talks from the Biden administration include possible tightening of export rules for high-performance chips. 

In response, leading chip executives and organizations have spoken out, calling for fewer restrictions from the U.S. government. The likes of Intel, Qualcomm, Nvidia, and the Semiconductor Industry Association all chimed in, noting that further restrictions could harm U.S. chip plans. 

Intel’s Pat Gelsinger, Nvidia’s Jensen Huang, and Qualcomm’s Cristiano Amon arrived in Washington, D.C., to meet with U.S. lawmakers and Biden officials. According to unnamed sources present for the discussions, the trio told lawmakers that further export controls could harm American chip leadership ambitions. The semiconductor executives reportedly wanted to ensure government officials understood the full potential impact of further restrictions before taking action. 

This has been a tension point for years but escalated when the Biden administration issued a vast set of restrictions last October designed to halt China’s chip industry while the United States plays catch-up. Officials often cite national security concerns as justification for the restrictions. The U.S. aims to cut off Chinese access to key advanced chips and technologies, particularly artificial intelligence (AI) hardware

The proposed restrictions aim to further hobble China’s chip industry and restrict certain outside investments. Considering that numerous U.S. chip companies receive sizeable revenue from China, the impact is noteworthy.

To that point, critics claim even the existing policy hasn’t achieved its goal of hampering China’s AI progress—let alone new measures—all while hurting revenues. Even with manufacturers halting shipments of advanced chips, China appears to be buying lower-end alternatives to carry the computing load. 

Meanwhile, firms whose products fall under restriction are cut off from a significant segment of their market while their competitors take advantage. For Qualcomm, as much as 60% of its revenue comes from China. 

Intel’s Gelsinger said in an appearance at the Aspen Security Forum following the meeting, “Right now, China represents 25% to 30% of semiconductor exports. If I have 20% to 30% less market, I need to build less factories.” 

Of course, as the U.S. works to bolster its domestic semiconductor industry, quotes like these are frightening. Should new restrictions further decrease revenues, companies like Intel may backtrack on plans to open new foundries and research facilities in the U.S. Losing these investments would all but crush U.S. hopes of reemerging as a dominant force in the semiconductor world. 

Gelsinger also argued that allowing U.S. companies to sell chips to China generates additional revenue which can be rolled back into research and development to help the U.S. continue innovating with cutting-edge technology. Quantum computing, which has generated significant traction over the past few years, is a key example. 

Despite repeated U.S. pledges to invest in and support the domestic chip industry, it’s unclear whether the Biden administration is willing to yield its stance against China. Reportedly, officials made no commitments following their meeting with the chip executives. 

U.S. National Security Adviser Jake Sullivan said in a recent press conference, “The vast majority of sales of chips designed by the United States to China has continued unabated.” This sentiment calls into question whether officials truly grasp the scope of current (or proposed) export controls. 

Sullivan agreed, however, that further action will need to be taken carefully with a “small yard, high fence” approach. Moreover, he noted that any additional restrictions will follow only after engaging in talks with the affected firms. 

“We are going to continue to look at very targeted, very specific restrictions on technology with national security and military applications and make judgments rigorously, carefully, methodically, and yes, in deep consultation with our private sector,” he said. 

At this point, it’s difficult to say whether additional restrictions will be put into place. However, it is certain to be a hot topic in the industry as executives, government officials, and experts weigh in. And for chip manufacturers who are affected, the result could be either a permanent loss of business or stable revenue from a more open market.

Apple Supplier Diving into Auto Industry - July 28, 2023

Many original component manufacturers (OCMs) are focusing on breaking into the artificial intelligence market, but others are targeting electric vehicles (EVs). Demand for EVs continues to rise, and Apple supplier Foxconn Technology is fortifying its position as the next go-to supplier for EV applications.  

After partnering with automaker Stellantis, Foxconn is establishing a Southeast Asia EV ecosystem with plants in India and Vietnam to produce various EV solutions. With the skill and support of Stellantis experts on hand, there is a high likelihood that Foxconn will be able to achieve its dreams of making parts and vehicles themselves for large auto brands like Tesla.  

Foxconn is Expanding EV Plans in Vietnam

Foxconn is investing $200 million in Vietnam, which will be used to construct a new facility to develop components utilized within EVs.

This investment by Foxconn comes right after it recently announced the formation of its 50:50 joint venture with Stellantis called SiliconAuto. The joint venture plans to design and supply semiconductors for the global automotive industry. Foxconn announced that it plans to use the new plant in northern Vietnam to focus on "the production of electric vehicle components, controllers and other products to meet future development needs."

The new plant is slated to begin production in January 2025, mainly producing EV chargers and other related components. Simultaneously, Foxconn announced it would spend $46 million establishing a second plant to manufacture electronics and telecommunication components. This plant is expected to begin production in October 2024.  

Foxconn’s been shifting slowly away from China and into neighboring countries such as India alongside Vietnam. Last month, Foxconn announced another factory in central Vietnam with a planned initial investment of $100 million. Foxconn is shifting focus to gain more influence within the EV sector. Foxconn has dealt with multiple companies to create different EV models, including e-buses, e-sedans, and e-pick-up trucks.  Foxconn launched its flagship luxury sedan, the Model E, jointly developed with Pininfarina, last year.  

The company has stressed that it doesn’t plan to sell its own vehicles but is using the Model E to display its commitment and development experience to future automotive partners.  

Auto Chips Unlikely to Reach Excess Levels  

The automotive chip shortage continues to linger in certain areas, but there have been noticeable improvements that have occurred since the beginning of 2023. Successful mitigation techniques by international IDM houses have significantly improved automotive IC supplies, one of the previously scarce market segments. Automotive IC production capacity continues to grow, supplying more automotive original equipment manufacturers (OEMs) than previously over the last few years.  

However, according to supply chain sources, the automotive semiconductor market will unlikely experience the same challenges with overproduction that consumer electronics is grappling with. One of the main reasons for this is that vehicle demand for electric and gasoline cars remains high.  

The number of semiconductors needed to produce a single car exceeds several thousand. Consumer electronics have different component requirements, making it easier for OEMs and contract manufacturers (CMs) to wind up with more than less. Similarly, most OCMs are in the process of aging out legacy nodes from their product lines. This refers to chips that exceed 28nm in size. Most chips used in automotive and industrial applications are between 28nm and 90nm, making the supply far scarcer than advanced nodes used primarily within consumer electronics.  

It’s a double-edged sword. While excess electronic component inventory is difficult to manage, it would help automakers reduce the current lead time for popular car models. Mitigation strategies have succeeded but haven’t eliminated the automotive chip shortage entirely. The auto chip shortage is still looking at 2024 as the earliest it will stabilize. Demand for EVs continues to rise, further complicating steps toward recovery.  

Hopefully, production capacity will continue to increase and feed the rising demand before it spins out of control, similar to 2021-2022

Chip demand might still be low, but the semiconductor industry is heating up this summer.

Thanks to the passage of the EU’s Chips Act, continued investments throughout Europe are stacking up. Each new facility announcement brings the EU closer to its goal of manufacturing 20% of the world’s supply of semiconductors. Likewise, as Europe’s semiconductor ecosystem flourishes, the less likely European countries are to rely on foreign supplies. The recent global chip shortage has made domestic semiconductor supply a matter of national security.

Meanwhile, volatility within the semiconductor supply chain is on the rise. New export restrictions by China on two vital elements in semiconductor manufacturing could further complicate the ongoing raw material shortages impacting some semiconductors.  

Or could these export controls lead to countries exploring other options for domestic and diverse supplies?  

Minerals up close

Critical Components Face Restrictions as Broadcom Runs with the Bulls - July 21, 2023

China Restricts Vital Semiconductor Materials

The chip war continues to heat up between countries.  

In a not wholly unexpected move, the Chinese Ministry of Commerce recently released a statement that Beijing will begin implementing export controls on gallium and germanium. These restrictions will include a list of compounds containing either element, including gallium arsenide, phosphorus germanium zinc, and silicon semiconductor building technology, known as Ge epitaxial growth substrate. All of these materials are critical within semiconductor manufacturing.  

Anyone wishing to export materials from China must first submit an application to the Ministry of Commerce for permission. In its statement, the Ministry of Commerce detailed the purpose of this latest restriction to safeguard national security and interests. The measures will officially begin to be enforced on August 1st.  

Like silicon, China holds the most significant global share for gallium and germanium. According to the Critical Raw Materials Alliance, China holds around 60% of the world’s germanium. The remaining 40% comes from Canada, Finland, Russia, and the United States. Regarding gallium, China holds a greater amount at 80%. Gallium arsenide, the second most common semiconductor utilized today, is only produced in a select number of plants, with only one in Europe.  

Such export restrictions would have drastic effects on a variety of industries within the electronic component supply chain. For example, germanium is crucial in fiber-optic systems, infrared optics, solar cells, and light-emitting diodes (LEDs). Gallium is an up-and-coming power semiconductor transistor giving silicon and silicon carbide (SiC) a run for its money.  

Alan Priestly, Gartner vice president analyst in its Emerging Technologies & Trends unit, said in a statement to The Register, "Both elements are used in various types of transistors – GaN used in most modern high-power converters (from small power bricks for phones to EV chargers), germanium in a wide range of analog applications – comms, signaling, sensing, etc.”

Priestly went on to say that manufacturing for some advanced chips, such as high-performance digital logic chips—like CPUs—will not be impacted. “Peripheral components” used in digital components could be.

According to IDC’s Senior Research Director for Europe, Andrew Buss, these latest export restrictions would not lead to an immediate shortage of gallium or germanium. These controls could just be China securing its supplies for future manufacturing use in domestic chip production. "There is no major global shortage of gallium or germanium, and both are quite widely produced in a multitude of countries and regions, so there is unlikely to be a major external impact of this outside China, but it could well be a strategy to ensure China has enough internal supplies for its own growth ambitions for semiconductor or technology manufacturing.”

Buss argues that should supply constraints occur; it would only make it more attractive for countries impacted by the ban to mine elsewhere. It’s a simple matter of cost economics.  

Buss says the benefit of having politicians and industry executives working together for the importance of the supply chain shouldn’t be overlooked. With these new export restrictions, there is a strong possibility it will lead to the formation of more alliances between government bodies and companies.  

The U.S. and EU convened earlier this year to discuss the formation of a “critical minerals club” to diversify supplies of critical minerals. This would be highly beneficial in the long run due to geopolitical dominance and its negative impacts on the global supply chain. This goes beyond China’s control of gallium and germanium but can even be equated to Ukraine’s dominance within neon gas, another critical component in semiconductor manufacturing. The war in Ukraine has heavily impacted the world’s supply of neon gas, which has led to increased attempts to diversify sources.  

Further supply diversification is necessary for a more resilient semiconductor supply chain. While these export restrictions could complicate sourcing for original component manufacturers (OCMs) in the near future, new strategies to improve critical material availability in the long term could rise from the ashes.  

Broadcom Looks to Spain

France, Germany, Italy, Poland, and Ireland, among other EU members, have been courting semiconductor giants ever since, and even before, the passage of the EU’s Chips Act. Spain is joining those ranks as chipmaker Broadcom announces its decision to invest and develop a semiconductor ecosystem within Spain.  

Broadcom’s chief executive, Charlie Kawwas, recently tweeted, “Excited to announce our decision to invest in Spain’s semiconductor ecosystem under their semiconductor support program.”

While Broadcom has been tight-lipped over how much it plans to invest, it could be around $1 billion, according to the Spanish Economy Ministry. The hefty investment will be used to construct “large-scale back-end semiconductors facilities unique in Europe.” No clue as to where the possible location for this facility will be quite yet.  

The Spanish government will allocate around $13 billion from the EU’s pandemic relief funds to subsidize the development of its growing semiconductor ecosystem. Previously, tech giant Cisco Systems Inc. planned to open a new chip design center in Barcelona. It will be interesting to see if Broadcom seeks out the location for its own means.

Broadcom’s recent announcement continues an ongoing line of good news for the EU’s growing semiconductor industry. With growing investments and interest from larger-than-life chipmakers, the EU can reduce its dependence on U.S. and Asian chip supplies. After the 2020-2022 global chip shortage, domestic resiliency has become a national security goal for many countries.

In the meantime, for those that need access to semiconductors long before these facilities are built, Sourcengine, the leading e-commerce site for electronic components, can help users find offers for the necessary components 24/7. For those struggling with excess electronic component inventory, try Sourcengine’s new Excess Estimator to see what your excess is worth!

Construction workers in shadow at sunset

India’s Semiconductor Dreams Recover with Micron - July 14, 2023

The world continues to push toward domestic semiconductor resiliency and global diversification. While unforeseen hiccups have stalled some plans, it hasn’t slowed the world’s pace.  

Thanks to new tech developments in consumer electronics and artificial intelligence (AI), many original component manufacturers (OCMs) are picking up the pace in fabrication facility construction. The faster these new fabs come online, the faster they can help meet the rising demand for advanced nodes that power many emerging technologies.  

Others are increasing their global footprint to diversify supplies and enter growing markets as electronics use spreads.  

Micron Moving Ahead in India as Foxconn Pulls Back  

Unforeseen stumbling blocks might have delayed the Indian government’s semiconductor plans a few weeks ago, but its forward momentum never ceased. Micron Technology has stepped in as India’s new semiconductor savior with new plans to boost the country’s semiconductor manufacturing goals.  

Micron Technology and the Gujarat government in India recently signed a memorandum of understanding (MoU) for a $2.75 billion semiconductor assembly and test facility within Sanand in the Ahmedabad district.  

According to Ashwini Vaishnaw, the Minister of Union Electronics and Information Technology, the planned facility will be India's first semiconductor manufacturing facility. Vaishnaw explained how important this step will be in achieving India’s semiconductor goals.  

"There were attempts to bring semiconductor manufacturing facility to India for a long. Now it will be a reality," said Vaishnaw. “Generally, a semiconductor facility takes 36 to 48 months to start manufacturing. The first chips will likely be manufactured in India in 18 months.”

The Gujarat Micron plant specifically will be converting silicon wafers into semiconductor chips and is the first in the pipeline of companies expected to begin manufacturing within India. Micron isn’t expected to face the same challenges as other companies in receiving government funding, with 50% financial support for the total project costs and 20% from incentives.  

Phase 1 of the plant will begin with the construction of a 500,000 ft cleanroom space, which will be operational in late 2024. The plant will assemble and test DRAM and NAND products that will go to domestic and international markets. This will be key to meeting India’s “made-in-India” semiconductor goals. With India’s rising electronics market, the domestic supply of memory components will help feed into it. Especially now that the semiconductor demand slump may not last as long as initially forecast.  

With good news comes bad news. On Monday, July 10th, news broke that Apple supplier, Foxconn had pulled out of its joint venture alongside mining conglomerate Vedanta. This announcement comes after recent struggles as the joint venture struggled to secure STMicroelectronics as a tech partner, which is required to receive funding under India’s semiconductor incentive policy.

Indian Prime Minister, Narendra Modi, said in a statement that the break between Foxconn and Vedanta will not make or break India’s semiconductor goals. Modi stressed that both countries had significant investments within India’s semiconductor sector and now they will be able to further pursue their goals independently.  

Vedanta is still dedicated to the previously planned $19.5 billion plant. The company stated, “Vedanta reiterates that it is fully committed to its semiconductor fab project, and we have lined up other partners to set up India’s first foundry. We will continue to grow our semiconductor team, and we have the license for production-grade technology for 40nm from a prominent Integrated Device Manufacturer (IDM). We will shortly acquire a license for production-grade 28 nm as well.”

While Modi alongside Vedanta stressed Foxconn’s withdrawal will not have a major impact on India’s or Vedanta’s goals, the move is still a serious setback considering Foxconn’s role of supplying technology for the joint venture. Vedanta stressed that it still had other options and partners to move forward with. Time will tell if that’s enough.  

TSMC Speeds Up Arizona Plant Plans

TSMC is ramping up construction efforts in Arizona to bring its massive $40 billion facility online quickly. In late June, TSMC announced it would send more staff from Taiwan to the U.S. to help meet its planned deadline of 2024. This includes TSMC’s nearby second facility, which will produce 3nm chips, which should be operational in 2026.  

Both facilities involve the production of advanced nodes, chips beneath 7nm in size. TSMC’s second facility specifically manufactures 3nm chips, currently the most sophisticated chips produced. Due to the requirements of producing these ultra-fine chips, TSMC is providing additional skilled workers to help build out the manufacturing lines. This is especially critical, considering the lack of a skilled U.S. talent pool to draw from.  

"Given we are now in a critical phase handling all of the most advanced and dedicated equipment in a sophisticated facility, we require skilled expertise,” TSMC said in a statement.  

The Arizona plant is expected to be a significant step in the Biden Administration’s aim to boost domestic production post-global semiconductor shortage. TSMC’s facilities are expected to meet the demand for both Apple and Nvidia–Apple currently has booked 90% of TSMC’s 3nm production capacity. When they begin production, Nvidia is expected to book most of TSMC’s coming 2nm chips.  

With the current popularity of generative AI, it’s not unexpected that TSMC is working overtime to ensure its Arizona plant comes online quickly to meet the ravenous demand. If not, there could be another shortage due to a lack of supply without the additional fabs to back it up. With new staff coming in to pick up the slack, that possibility decreases.

However, should another semiconductor shortage begin as a result of AI popularity driving demand, there are ways to obtain needed components. Sourcengine, the leading e-commerce site for electronic components, will help keep your needed stock in supply with over 1 billion part offers from more than 3,500 suppliers.  

Like the global semiconductor shortage, the automotive chip shortage is slowly fading in our rear window as chip scarcity is mitigated. With chips becoming more available, automakers are working with original component manufacturers (OCMs) to create new solutions for automotive applications.

As electric vehicles (EVs) become more popular, competition within the automotive component market is heating up! Non-traditional automotive chipmakers are venturing into the world of auto chips to expand their product ranges to now include smarter driving solutions. One of these chipmakers is dazzling the world with their AI-capable GPUs, Nvidia.  

Meanwhile, Japan is taking a major step in continuing to fortify its domestic semiconductor capabilities for the future.  

Illustration of a chip on a circuit board pattern

Automotive Chip Market Heats Up as Japan Fortifies Semiconductor Position - July 7, 2023

Auto System-on-Chip Industry Heats Up

The automotive market component market is getting competitive! The automotive chip shortage hasn’t been completely rectified but has seen significant improvements over 2023. According to DigiTimes, the automotive shortage saw great strides in automotive IC availability in April. This trend has continued chiefly over May and June, with only some areas continuing to suffer from component scarcity. This is likely due to lasting raw material shortages and logistics challenges.  

Now that the auto chip shortage is on the way out, automakers are adapting to a new normal. Susan Golicic, professor of supply chain management at Colorado State University, addressed this new normal at FreightWaves’ Future of Supply Chain event in Cleveland last week. Golicic said that during the semiconductor shortage, many automakers were limited due to the lack of necessary stock. To overcome the lack of chips, many automakers had to adapt, for some it meant focusing on specific product lineups over others. “The auto companies were focusing on their more profitable vehicles and not building as many … less profitable vehicles because of the parts shortages, especially in chips.”

To avoid another global chip shortage, Golicic said the auto industry has been working to develop relationships with chip suppliers, build new plants, and diversify their supply sources to get those parts when needed. This can be seen with automakers forming joint ventures with chipmakers, such as GlobalFoundries and General Motors. Golicic stressed the importance of needing greater supply chain visibility and making more informed decisions supplier diversity in the future.

Many automakers are being far more selective in choosing which components they use to power the next generation of intelligent vehicles. As a result, many OCMs are evolving alongside the automotive industry.  

Right now, there is a storm of innovation brewing within the automotive system-on-chip (SoC) market as traditional automotive chip suppliers, including NXP Semiconductor, Infineon, and Renesas, shift from SoC to MCUs to capture their share of the advanced driver assistance systems (ADAS) market. With their absence, new players, including Nvidia, aim for the positions these traditional auto chipmakers held.  

Specifically, Nvidia is working on its own software development kits (SDKs) to better cater to the growing requirements of automakers. Many non-conventional automotive chip companies are expanding their product lines by entering through SDK products. According to DigiTimes research analyst Evan Chen, many Chinese EV brands are expediting their adoption of ADAS/self-driving SoCs from non-traditional automakers. This can be seen in the recent incorporation of Nvidia’s Orion SoC, called Nvidia Drive, by NIO, Xiaopeng Motors, Li Auto, and SAIC. European carmakers are expected to follow suit by 2024, but China’s highly competitive EV market is making many chipmakers beef up their intelligent automotive product lines far in advance.  

Besides, many automakers are partnering with chipmakers to get customized solutions for their vehicle line-ups. Volkswagen is working with Qualcomm, Horizon Robotics, and Mobileye for their ADAS/self-driving systems developments. At the same time, BYD and Li Auto have teamed up with Nvidia and Horizon Robotics for more intelligent systems.

We will likely see similar partnerships with how competitive the EV market is rapidly becoming. As more incentives and measures are passed to promote EV adoption, the automotive chip market will likely fill with dozens more chipmakers manufacturing new solutions.  

Japan Takes Another Step Toward Domestic Chip Resiliency  

A government-backed fund within Japan has agreed to acquire semiconductor materials maker JSR Corp for $6.4 billion in another big step to bolster its chip industry. Overseen by the trade ministry, the move by Japan Investment Corp (JIC) is the latest in a series of recent steps by the Japanese government to regain leadership in global advanced chip production, specifically front-end and back-end semiconductor production.  

JSR CEO, Eric Johnson, said about the deal, "Capabilities here are superb, but there are a lot of us, and all of us are spending money redundantly, so we feel the opportunities for efficiency gains are significant.”

JSR Corp is a leader in the supply of photoresists or light-sensitive chemicals used to etch patterns on wafers. Amid deepening tensions between the United States and China, JSR needed to invest more funding into production capabilities and developing materials for advanced chip manufacturing to keep its leadership role. In response, JSR approached JIC about the potential backing.  

Shogo Ikeuchi, the chief executive of JIC’s private equity fund, spoke to Reuters about the purchase. "We felt a strong sense of crisis from JSR management that the Japanese chip materials industry would eventually lose to overseas rivals," Ikeuchi said. "Their thinking was perfectly aligned with our fund's purpose, which is to promote industry consolidation."

JSR supplies major chip manufacturers with the necessary materials for advanced chip production. These clients include Samsung Electronics, TSMC, and Micron Technology, making the purchase by JIC beneficial for Japan’s chip strategy in maintaining and growing its influence.  

“Japan wants to double down on its comparative advantage in materials ... needed for semiconductor manufacturing,” Pranay Kotasthane, chairperson of the high-tech geopolitics program at the Takshashila Institution, told CNBC. “JIC’s investment in JSR means the government might have a higher say over its decisions. Geopolitically, this would make China uncomfortable. Especially since Japan has gone along with its own version of export controls against the Chinese semiconductor industry.”

With the recent announcement by the U.S. not seeking reprisals against Taiwan and South Korea for continuing to work with China, Japan’s growing partnership with South Korean manufacturer Samsung Electronics, JSR and Japan could become the main supplier for the Asian semiconductor supply chain.  

A park in Xi'an, China at dusk

Intel Continues Investment Spree - June 30, 2023

The semiconductor market is still in a slump, but chipmakers aren’t slowing down. Chip giant Intel is leading the charge in global expansion, despite hitting some snags a week ago on funding. Original component manufacturers (OCMs) are continuing to shell out billions for new chip-making facilities across the globe, eager to diversify after the complications from the pandemic and subsequent shortage.  

For one chipmaker, that includes investing in a country that just recently banned the sale of its chips!

Intel Sets Sights on Israel  

This year, Intel planned to slash $10 billion in capital spending, causing some concern over whether Intel could fund some of its upcoming facilities. Earlier this month, the fate of Intel’s Magdeburg plant in Germany grappled with the possibility of failure when the German government refused to pay the additional €4-5 billion on top of their previous €6.8 billion. With negotiations between Berlin and Intel, the German government offered €10 billion in subsidies while Intel agreed to invest $33 billion.  

While capital spending reductions and tense negotiations with Berlin might trip up some chipmakers, Intel hasn’t slowed down in expanding its global footprint. Intel recently announced a new preliminary deal with Israel for a new manufacturing plant. The deal was announced Sunday by Israel’s finance ministry and Prime Minister Benjamin Netanyahu.  

The decision is partly due to the desire to continue diversifying production sources as well as further expanding Intel’s manufacturing capacity within Israel. According to a source familiar with the situation, the facility will be for wafer production, as Israel is one of Intel’s four major providers for wafers currently.

Netanyahu said the deal would be around $25 billion and the largest foreign investment in Isreal to date. The new plant will join Intel’s existing plant in Kiryat Gat, with operations slated to begin in 2027. This announcement comes days after news broke that Intel plans to invest $4.6 billion toward a facility in Wroclaw, Poland. Likewise, Intel plans to spend an additional $13 billion to expand its other plant in Leixlip, Ireland.  

Part of Intel’s massive expansion is to double the manufacturing space so the company can integrate the rumored Intel 4 process technology into the EU chip ecosystem. This is aligned with Intel’s decision to return to the foundry business and catch up with leaders Samsung Electronics and TSMC.  

This strategy differs from other OCMs targeting artificial intelligence (AI) after Nvidia’s success earlier this year. However, Intel's focus on the foundry segment of the industry might be the key to setting it apart. Though, it should be noted that Intel is not completely ignoring AI applications. Intel’s latest Falcon Shores chip is a next-generation discrete GPU targeted at both high-performance computing and AI.

Micron Pitches in for China Plant Despite Ban

The Cyberspace Administration of China (CAC) said Micron’s products failed to pass a cybersecurity review in late May. Due to the failure, Micron’s chips faced sales bans in areas with “critical information infrastructure.” The nature of the ban has been hotly contested by U.S. officials who believe the ban is nothing than retaliation for U.S. sanctions on China.  

Since the ban, Samsung Electronics and SK Hynix are expected to take over the market share Micron previously held. However, there’s a new twist in this story.

Micron is expected to invest just over $600 million to upgrade its chip packaging facility in memory capital Xi’an, China, over the next few years. In a statement by Micron, the company said this investment is to introduce new high-performance packaging and testing equipment for Chinese-based customers.  

Powercheng Semiconductor Ltd formerly operated the plant after an agreement in 2016. With the deal now expired, Micron agreed to acquire Powercheng Semiconductor’s assets to resume operations at its plant. With the additional $600 million investment, Micron plans to construct a new facility alongside the existing plant for another production line focusing on DRAM, NAND, and SSD products.  

Micron CEO Sanjay Mehrotra said, “This investment project demonstrates Micron's commitment to China's business and Chinese team members.”

While it isn’t confirmed whether the blacklisting by CAC will be short-term or long-term, the investment suggests the former. However, compared to other current projects, this investment is smaller for Micron. Since the passage of the CHIPS Act in the U.S., Micron has committed $100 billion for a memory chip fabrication plant in New York and was recently approved for a $1 billion facility in India.  

Of course, by further investing in China, Micron could put its funding under the CHIPS Act at risk. According to Secretary of Commerce Gina Raimondo, when the funding rules were introduced, “Companies who receive CHIPS funds can't build leading-edge or advanced technology facilities in China for ten years. Companies who receive the money can only expand their mature node factories in China to serve the Chinese market.”

It will be interesting to see how this pans out. Washington recently gave South Korea and Taiwan the okay to continue working with China on semiconductors. Whether this applies to Micron as well is debatable. South Korea and Taiwan have a lot to lose if access to China’s market and talent is suddenly cut off. It’s uncertain if Micron can claim the same.  

Two people shaking hands

A Yes for South Korea and Taiwan, but a No for Germany - June 23, 2023

Semiconductor manufacturing fabs, research and development facilities, and processing plants from eastern Germany to southern Japan are beginning construction. The semiconductor shortage gave the world a quick history lesson on the importance of semiconductor accessibility in the modern economy. As a result, governments have increased funding and subsidies for chip-making worldwide.  

Beyond original component manufacturers (OCMs) working together, countries are cooperating on how to best collaborate trade on semiconductors. These discussions are warming up even the most frigid relationships between neighboring countries. South Korea is one of several countries coordinating semiconductor trade and progress with China, Japan, and Taiwan. As the previous Asia-centric supply chain could face decoupling by domestic endeavors worldwide, these talks could be the foundation of a more resilient and collaborative Asian supply chain.  

However, one of the significant snags in domestic incentive programs is becoming a big problem. There is only so much money that a country’s government can put behind a project. Germany might have hit their limit regarding one of Intel’s fabs.  

South Korea and Taiwan to Continue Production with China with U.S. Ok

In late 2022, a measure called the National Defense Authorization Act (NDAA) was passed. The NDAA prohibited U.S. government agencies from procuring products or services that contain semiconductors made by China's leading chip manufacturers.  

In October 2022, new restrictions were put in place to stop Chinese companies from buying advanced chips made in the U.S., and the kinds of equipment Chinese foundries need to design their own. U.S. talent that worked in China for Chinese companies were given quick warnings to cease aid or lose citizenship. The move was an unexpected blow but only partially due to the prioritization of domestic chip resiliency and national security post-global semiconductor shortage.  

Over the last several months, further sanctions have been reported by both the U.S. and China, along with other countries. Recently, China banned the sale of Micron Technology’s chips within the country due to “national security risks.” The U.S. believes the ban to be retaliatory in nature rather than Micron chips posing a true threat. Some industry leaders believe such a move might trigger a similar reaction by the U.S. government.  

However, this latest action came as a hopeful surprise.  

Despite recent sanctions, the U.S. government has agreed to allow South Korean and Taiwanese manufacturers to continue expanding their relationships with China. According to a senior Commerce Department official, the U.S. will not seek reprisals for South Korea and Taiwan’s OCMs partnering with China on future semiconductor manufacturing endeavors.  

This news comes after recent discussions between South Korea and China were reported by Reuters earlier this month. While South Korea made no official statements on the matter, China’s Minister of Commerce, Wang Wentao, said he and South Korea’s Trade Minister, Ahn Duk-Geun discussed strengthening bilateral cooperation around semiconductors between the two countries. With Micron’s recent ban, South Korean memory manufacturers Samsung Electronics and SK Hynix stand to gain the customer audience Micron lost.

Most of Samsung and SK Hynix’s semiconductor manufacturing equipment is provided by American manufacturers. With the U.S. administration giving the ok to South Korea to continue to pursue collaborative efforts with China, it's unlikely that Samsung and SK Hynix will be cut off from advanced semiconductor manufacturing materials.  

Likewise, TSMC and Samsung Electronics have numerous facilities vital to production efforts within China. Over 40% of Samsung’s NAND output is produced in Xi’an, China, which had a noticeable impact over 2022 before consumer demand dropped after Covid-19 lockdowns kept the city locked up. With how intertwined chip manufacturers are in neighboring countries and their existing semiconductor ecosystems, the U.S. government might have realized this level of decoupling would significantly impact the global supply chain far beyond recovery.  

Still, cooperation between the three countries and their manufacturers will likely bring new discoveries within the industry. For example, South Korea and Japan are increasing cooperation on chip-making leading, which could open the door to more positive talks between two previously frosty neighbors. Such a result would have immensely impactful benefits that could extend beyond South Korea, Taiwan, and China.  

Germany and Intel at Odds  

The EU Chips Act has unleashed a flurry of eager applications for facility funding. European-based OCMs, alongside foreign chipmakers, are teaming up on new facilities or striking out solo. Several new plants vital to establishing the European Union’s domestic semiconductor ecosystem have been breaking ground, and recently France pledged more funding toward the STMicroelectronics and GlobalFoundries facility under construction in Crolles.  

Unfortunately, the wells might already be running dry for country-specific funds.  

Germany’s finance minister, Christian Lindner, said there is no more money in the budget for higher subsidies, specifically toward Intel’s planned semiconductor plant. Intel plans to construct a €17 billion chip fabrication plant in Magdeburg. This plant was said to be the cornerstone of the EU’s Chips Act goal of producing 20% of the world’s semiconductors by 2030.  

These lofty goals have hit numerous snags along the way. The project mainly faced multiple cost overruns, leaving Intel and Germany debating over who will foot the plant’s €17 billion price tag, which has now reached €20 billion. Intel stated in March it wants the state to pay €4-5 billion more in subsidies on top of Germany’s previous €6.8 billion. That would be a total of €10 billion.

Lindner told the Financial Times the request could not be met. There is “no more available in the budget.” The debate over whether the German government should increase Intel’s subsidies has divided the cabinet. Intel hesitates to spend more due to revenue losses from the current semiconductor slump affecting sales. Intel CEO, Pat Gelsinger, said the company will cut as much as $10 billion in annual spending by 2025. With high energy prices and inflation following the war in Ukraine, Intel’s unwilling to simply “throw more money into the project.”

Intel’s German plant is part of a larger $88 billion investment drive across Europe, which included boosting a factory in Ireland, a packaging and assembly site in Italy, and setting up a design and research facility in France. Should the German plans fall through, achieving the EU’s semiconductor goals will face a considerable setback as Intel reassesses.  

German Chancellor Olaf Scholz is reportedly working with the Cabinet members, including fiscally conservative Lindner, to find a resolution. Scholz has previously welcomed the idea of increasing subsidies, while Lindner states the government is trying to consolidate its debt, not expand it. As it turns out, a resolution was just around the corner.

On Monday June 19th, after talks with Berlin, Intel agreed to spend $33 billion on two plants for the Magdeburg area with Germany pitching in as much as $11 billion. Now that an agreement has been reached, construction plans are expected to pick up speed as Germany awaits thousands of more jobs to be added to the country’s economy.  

Chancellor Scholz spoke highly of the agreement during Monday’s signing. "Today's agreement is an important step for Germany as a high-tech production location – and for our resilience. With this investment, we are catching up technologically with the world's best and expanding our own capacities for the ecosystem development and production of microchips."

EV charger plugged into a car port

India Stumbles as Tesla Opens its “Walled Garden” to the Market - June 16, 2023

Demand for semiconductors in personal electronics such as computers, smartphones, and notebooks continues to drop. As the weather warms, the desire to stay inside, in front of a screen fades with the cold. Now that school is out for the summer, the need for PCs and other electronics will continue to decrease, especially with no large holiday shopping sales in the coming months to pick up the slack.

On the other hand, electric vehicles (EVs) continue to grow.  

The EV market is rife with competition as sales spike. To gain the EV market leader crown, new and innovative ways to gain consumer favor are being announced annually, if not every few months. Tesla is no different. This year, Tesla announced its plan to open its Supercharger network to other brands of EVs.  

As the EV manufacturers race ahead, up-and-coming semiconductor giant, India, is stalling out as its federal incentive plan hits major snags.

India’s Semiconductor Goals Stumble  

Despite a line of suitors eager to make India a new global semiconductor power, plans are falling apart before they even get off the ground. As large companies bid for $10 billion in federal incentives, the lack of a technology partner could lead to their applications being rejected. Even mega-conglomerate Vedanta, and Apple-supplier Foxconn’s joint venture is under siege as they try to bring on European chipmaker STMicroelectronics as their third partner.  

A smaller project, compared to Vedanta and Foxconn’s $19.5 billion, by chip consortium ISMC is facing similar stalls as their tech partner, Tower Semiconductor, is being acquired by Intel. Without a tech partner, approval for semiconductor funding will most likely be denied.  

India’s prime minister, Narendra Modi, continues to stress the importance of semiconductor manufacturing for India’s economic strategy. India’s semiconductor market is expected to be worth $63 million by 2026, and with many original component manufacturers (OCMs) leaving China, India is poised to become the new semiconductor foothold in Southeast Asia. As of last year, India received three applications from Vedanta-Foxconn JV, global consortium ISMC with Tower Semiconductor as its tech partner, and Singapore-based IGSS Ventures.

ISMC’s facility plans are on hold due to Intel’s takeover and will only pass after regulatory approvals finish. India’s deputy IT minister Rajeev Chandrasekhar told Reuters in an interview that ISMC "could not proceed" due to Intel acquiring Tower, and IGSS "wanted to re-submit (the application)" for incentives. The "two of them had to drop out," he said without elaborating.

Meanwhile, Vedanta and Foxconn’s $19.5 billion joint venture was set to be a significant first step in India's chipmaking ambitions. Unfortunately, finding a tech partner has not been an easy task. According to Reuters, sources say that Vedanta-Foxconn sought out STMicroelectronics to join.

Unfortunately, India’s government said STMicroelectronics needed “more skin in the game” to be considered a true “tech partner,” such as a stake in the partnership. STMicroelectronics isn’t too keen on the Indian government’s position as they want the Indian market to become more mature first.  

With two of the three out of the running entirely, Vedanta-Foxconn is struggling to become the first successful recipient of India’s incentive plan. India’s IT ministry is working to revive interest by re-inviting applications for chipmaking incentives with a much longer application window. The hope is that current applicants will reapply after meeting the incentive plan’s requirements alongside new parties.  

India’s not giving up on its plans to become a global semiconductor power yet, but things aren’t as simple as they initially seemed. These setbacks will give other countries, such as Vietnam, more time to work on their semiconductor strategies. If further delays occur, India might lose its chance to another, more competitive country. That said, India is the second largest country in economy and population compared to China, something many companies are eager to cultivate.

If sanctions continue, India will be the only alternative with a market share that large. OCMs are unlikely to rule out India yet for those benefits alone. However, many may wait until semiconductor manufacturing has a stronger foothold within the Indian market before, they commit, like STMicroelectronics.  

Tesla Charging Expansion Could Solve U.S. Problem  

Tesla’s Supercharger network within the U.S. helped pave the way for Tesla to become the country’s dominant EV. This charging network fortified Tesla’s position due to its ease-of-use and fast recharging times. The network is unlike other charging stations, due to the fact it was designed for Tesla EVs only and could not be utilized by other EVs. That said, as efforts by carmakers and civic leaders continue to push for a more electric future, Tesla is opening its “walled garden” to rival EV manufacturers.  

Ford cars will be able to plug into 12,000 Tesla charging stations by next spring. By the end of 2024, Tesla plans to invite other EV brands to use 7,500 charging locations. Opening its “walled garden” could alter the EV ecosystem that has blossomed outside its gates.  

Chargepoint, EVgo Services, and Electrify America are three competitors that have been working to create charging stations to serve a variety of EVs outside of Tesla’s line-up. Opening its garden is a strategic move by Tesla and indicative of the changing market within EVs. Nick Nigro, the founder of Atlas Public Policy, a research group, says, “Everyone will get affected in some shape or form if Tesla’s charging network continues to grow and reach more types of vehicles.”  

Nigro continued, “[Tesla is] seeing the opportunity of where the market is going, and they know they have a good charging service...They think they’re ready to do that for all vehicles now.”

Within the U.S., there are about 139,000 individual charging ports. According to Atlas’s research, only 32,000 offer fast charging, which means the capability to replenish a battery in under 30 minutes. Tesla owns the bulk of the “fast chargers,” 19,000, again contributing to its dominance in the U.S. EV market. Part of Tesla’s decision to open its charging ports could be attributed to President Biden’s desire to see the U.S. adopt EVs faster. Doing so would require the U.S. to have 500,000 public chargers by 2030.  

Jonathan Levy, CCO at EVgo, said this about Tesla’s decision and its impact on the EV charging market. “Getting to EV ubiquity means having more fast charging, and so Tesla will have more, we will have more, our competitors will have more, and we’ll continue to grow...”  

In the U.S., most vehicle charging is done at home. Lower electricity prices and charging time can take up to 12 hours without drawbacks. Unfortunately, as EV use increases, the more overstressed electric grids become if the population relies on home charging. Public charging stations are essential to both help ease the burden on old power grids and allying range anxiety fears.  

Range anxiety is common within the U.S. compared to other countries where public charging stations are far more accessible. For example, in a comparison between New York and Québec, despite not having the same land mass or population as New York, Québec had twice as many fast chargers as New York. Hydro-Québec, the public utility and electricity corporation that services the province, plans to have 2,500 fast chargers in operation by 2030. And these were not part of Tesla’s “walled garden” of superchargers.  

Another concern that plagues drivers is the constant frustration of going to charging stations only to find them unusable. Nigro said that outside of Tesla, the charging experience is lackluster. In 2021, Ford started a program called “Charge Angels,” where workers were sent to test charging points available to customers. Should maintenance efforts continue to improve, EV adoption and the variety of EVs within the U.S. could rise faster.

Tesla will be challenged by its “walled garden” Supercharger locations due to being outfitted specifically for Tesla's EVs. They will have to be changed and possibly equipped to provide the same seamless charging experience Tesla users enjoy to Ford drivers and others. One of the most common issues with public charging stations is communication timeouts between the charger and vehicle or payment processing systems and the cloud.  

That is a difficulty Tesla hasn’t had to deal with yet.  

“Nissan Leaf’s [charging port] is in the front...Volvo is the back left — the cable needs to be able to reach all those folks, as well as serve multiple voltages,” Levy said. “So, there are a lot of questions.”

However, Tesla isn’t sitting idly and waiting for these problems to arise. Recently, Tesla has started forging a relationship with China. Specifically, Tesla’s partnership with Chinese battery manufacturer CATL could help improve its future charging endeavors. Should battery swapping become more standardized between EV manufacturers, it could bring a new era of EV charging within the U.S. This cooperation could breathe life into Tesla’s old endeavor of implementing battery swapping technology into their vehicle models.  

For those embarking on new EV charging projects, you can find the components you need to bring your innovative projects to life with Sourcengine. Our team of engineers can help get your charging station designs to market faster with our decades of expertise and franchise partners.  

View of a microchip on a circuit board

Stop, Collaborate and Listen, Chipmakers and Countries Work Together - June 9, 2023

Cooperation, collaboration, and coordination are on the minds of countries and companies alike. With the electronic component shortage quickly fading in our rearview mirror, chipmakers and government bodies are working together to build the semiconductor supply chain 2.0.  

Geopolitical dominance is a recipe for disaster, and it took a global pandemic to show everyone just how vulnerable having the world’s semiconductor supply come from one place is. As a result, countries are passing incentive plans to draw original component manufacturers (OCMs) home. These federal funding plans, like the U.S. CHIPS Act, aren’t endless. $52 billion sounds like a lot, but TSMC pledged over $40 billion for a second semiconductor fabrication plant in Arizona. So, for the dozens of other OCMs looking to benefit from federal funding, how are they supposed to ensure the likelihood of getting selected?

By sharing the financial burden with a partner. For organizations, collaborating is a mutually beneficial relationship with more to gain than just capital. Allying semiconductor manufacturing isn’t solely for OCMs and original equipment manufacturers (OEMs) either. Countries working together to define trade agreements around semiconductors can positively affect more than simply their respective economies.  

Apple Strikes Deal for US-Made Chips

Made in the U.S. and India, Apple is changing where it gets its products. Over late 2022 and 2023, Apple supplier Foxconn has been transitioning manufacturing to India. With new semiconductor fabs planned to enter construction, Apple launched its first retail store in India in April.

Last week, Apple announced a multimillion-dollar deal with the U.S. chipmaker Broadcom. Like in India, this deal aims to use chips manufactured in the United States as part of its 2021 plan to invest $430 billion in the U.S. economy over five years. The move comes as the U.S. seeks to reduce its reliance on foreign chip manufacturers.

In an article from the BBC, Broadcom stated it would collaborate with Apple to develop 5G radio frequency and wireless connectivity components. This technology will be designed and built nationwide, including in Fort Collins, Colorado. The announcement follows many similar statements across the U.S. as companies shift gears to prioritize domestic semiconductor production. The goal is to reduce American companies’ reliance on foreign chipmakers.

Increasing American domestic semiconductor manufacturing will help reduce future supply-chain disruptions to the exceedingly vulnerable global semiconductor industry. The 2020-2022 shortage showed just how dangerous to production it is to have most semiconductors produced in one geopolitical area, such as China and Taiwan. Further investments in boosting American semiconductor capabilities, like the CHIPS Act, should fortify American companies' semiconductor supplies.  

Furthermore, forming partnerships with OCMs will help ease financial burdens and ensure that pre-determined stock is kept in capacity for OEMs. This can be seen with Apple and Broadcom’s deal.  

In a statement by Apple, “[Apple] already helps support more than 1,100 jobs in Broadcom’s Fort Collins FBAR filter manufacturing facility, and the partnership will enable Broadcom to continue to invest in critical automation projects and upskilling with technicians and engineers.”

Apple CEO, Tim Cook, continued, “All of Apple’s products depend on technology engineered and built here in the United States, and we’ll continue to deepen our investments in the U.S. economy because we have an unshakable belief in America’s future.”

The Semiconductor Industry Association (SIA) also stated how to further U.S. semiconductor resilience, “Funding for critical research and education is an investment in our future competitiveness. Our country will reap the benefits of this investment for generations to come … Innovation has driven significant growth over the last 50 years, with America’s GDP growing from $550 billion to more than $23 trillion. Federal research funding is a down payment on our nation’s future success.”

This is something that the CHIPS and Science Act, the $52 billion government incentive plan, is helping achieve. It’s why there was a deal between Apple and Broadcom in the first place.  The CHIPS Act has assisted many companies in pulling the trigger for planned facilities within the U.S. The SIA believes that as other governments invest in their own semiconductor incentive measures, the U.S. will fall behind if further steps aren’t taken. The U.S. has already received over $200 billion toward domestic semiconductor projects. Apple and Broadcom’s collaboration is just one of many.  

However, it will take more future funding programs to make “Made-in-the-USA” a reality and not just accessible to tech giants like Apple.  

China and South Korea Work Together for Chips

Last week, the Cyberspace Administration of China (CAC) announced that Micron Technology had failed a network security review. Going forward, Beijing made a statement regarding the findings, issuing a ban on Micron products being used in crucial infrastructure due to its “national security risk.” While the U.S. believes the ban on Micron is simply retaliation for its limitations on China’s access to advanced chips, Micron is on the out for now.  

In the meantime, Samsung Electronics and SK Hynix, Micron’s largest competitors in the DRAM, NAND flash, and memory component market are set to gain the market share Micron lost. With this opening, China and South Korea recently began talks to strengthen dialogue and cooperation regarding the semiconductor industry supply chain. With geopolitics, sanctions, and national security, fortifying trade corridors with neighboring countries is vital–as seen with the U.S. and Canada.

During the Asia-Pacific Economic Cooperation (APEC) conference in Detroit, China’s Minister of Commerce, Wang Wentao, met with South Korean Trade Minister Ahn Duk-Geun. They exchanged views on “maintaining the stability of the industrial supply chain and strengthening cooperation in bilateral, regional, and multilateral fields,” according to Wang.

Reuters reported that Wang also said that “China is willing to work with South Korea to deepen trade ties and investment cooperation.” Considering the recent ban on Micron chips, South Korean chip exports in China could increase by 11%, as was Micron’s former output, should Samsung and SK Hynix take their place. According to data from the trade ministry, about 40% of all South Korean chip exports go to China.  

Further collaboration through future trade agreements could make this transition smoother.  

However, the water may still be a little murky. South Korea’s official statement at the same meeting did not mention chips. According to Reuters, the statement said the South Korean trade minister had asked China to stabilize the supply of critical raw materials and asked for a predictable business environment for South Korean companies in China.

"The South Korean side expressed that communication is needed between working-level officials over all industries," not just for semiconductors, an unidentified source told Reuters. The unalignment in statements between China and South Korea’s commerce ministers is likely due to South Korea’s precarious standing between both countries. South Korea’s main export is memory chips, specifically DRAM and NAND, making them highly valuable to China and the U.S.  

Likewise, most of the advanced chip-making equipment used by Samsung and SK Hynix is supplied by American manufacturers. Should South Korea outwardly claim allegiance with either country, it would lose a leading client for its chip exports and its advanced semiconductor manufacturing equipment supplier.  

South Korea will most likely continue talks with China to further cooperation between the two countries regarding semiconductors, especially after Micron’s ban. Should upcoming discussions between Beijing and Micron go well and the ban lifts, South Korea would do well continuing talks considering the current reorganization of the global semiconductor supply chain. Both countries would benefit immensely from closer ties.

Bridge illuminated at desk by streetlights

New Applied Materials Plant Coming to California’s Silicon Valley - June 2, 2023

New semiconductor fabrication plants are sprouting up like mushrooms! The United States CHIPS Act continues to draw in chipmakers looking to expand global operations. California, home to the famous Silicon Valley named after the silicon chips, has attracted the attention of semiconductor equipment manufacturer Applied Materials.

Unlike other construction projects around the U.S., the new facility will be slightly different. According to those familiar with the project, it will be the first of its kind as the largest semiconductor research facility in the world. The facility’s aim is two-fold: to train a new workforce of semiconductor talent and aid chipmakers in getting their products to market faster.  

As incentive projects aid companies in expanding their global reach, new sanctions are keeping some out. China has recently decided to ban the sale of Micron Technology chips for vital infrastructure projects. The reason for these sanctions remains murky.  

Silicon Valley’s Newest Semiconductor Fab

California is getting a new semiconductor manufacturing plant. It shouldn’t come as a surprise; California’s semiconductor manufacturing history is long and vast. Beginning in the 1970s, California’s Silicon Valley has had numerous leading-edge chipmakers, such as Intel, AMD, and Qualcomm, call its sunny hills home. Silicon Valley was, after all, named after those special chips.  

Now it’s about to get another resident.  

Applied Materials has planned to invest up to $4 billion toward a semiconductor research facility with help from the CHIPS Act. Reuters reported that the facility would “allow chip makers and universities to collaborate on advances to make more powerful chips. Silicon Valley hasn’t seen a comparable semiconductor construction project in over 30 years.”

The facility plans will take seven years to complete and are expected to create another 2,000 engineering jobs, adding to the employment opportunities springing up around the nation due to expanded domestic semiconductor manufacturing. Unlike the other facilities, Applied Materials will focus on research more than manufacturing, and the company believes the local tech talent from nearby universities will provide many innovative ideas.  

During a press conference on Monday, May 22nd, Vice President Kamala Harris spoke highly of Applied Materials’s proposed project called “Epic.”  

"When completed, it will be the largest such facility in the world," Harris said, "Of course, it will contain some of the most cutting-edge technology, including machines that can build semiconductor components as thin as a single atom."

The center will have an ultraclean production space bigger than three football fields. It is designed to give university researchers and engineers comparable resources to experiment with new materials and techniques for creating advanced chips. With Applied Materials’s history as a semiconductor manufacturing equipment maker, the goal of the project is to hopefully reduce the time it takes for ideas to flow from research labs to companies designing new manufacturing gear, information that is now often delayed as it is filtered through the chip makers.

H.-S. Philip Wong, a Stanford professor of electrical engineering who was briefed on the company’s plans, told Reuters slow communication frequently causes processes to lag. “The trouble is those customers need time to figure out what they need. There is a big hole in there.”

Luckily, Applied Materials also said chip makers could reserve space in the center and try out new tools before they were commercially available. There will be further collaborative efforts with other research centers to improve cooperation to get projects to market faster. Ultimately, it depends on how much the government is willing to fund under the CHIPS Act. Currently, 300 companies have expressed interest in utilizing CHIPS Act subsidies.  

"Applied Materials is the company that builds the machines used by Intel and Samsung and Nvidia, so they can make chips," said Ahmed Banafa, tech expert and San Jose State engineering professor. "If we want to be a leader in the AI, even a leader of the technology, we have to have the hardware that's going to run all these technologies.”

For those looking to get their hands on the latest and greatest in semiconductor technology, Sourcengine’s got hundreds of offers on thousands of components daily.  

No More Micron in China?

As Applied Materials races forward, Micron Technology has suddenly found itself sliding back. On Sunday, May 21st, Beijing’s Cyberspace Administration of China (CAC) said the company failed to pass a cybersecurity review and, as a result, was now facing sanctions.  

The CAC issued a statement that warned operators against purchasing Micron’s components, saying they caused “significant security risks to our critical information infrastructure supply chain, which would affect national security.” It didn’t detail the security risks or identify specific Micron products that are now barred.

Micron said in a statement on Sunday that it will be evaluating the review's conclusion and is looking forward to “continuing to engage in discussions with Chinese authorities.” Outside of China, many believe the sanctions and findings to be retaliatory. As of late 2022 and early 2023, Washington has already blacklisted Chinese tech firms, cut off the flow of sophisticated processors, and banned its citizens from providing certain help to the Chinese chip industry.  

Holden Triplett, founder of Trenchcoat Advisors and a former FBI counterintelligence official in Beijing, told Bloomberg the decision is political “pure and simple.” The fact is that most memory chips also aren’t usually considered a cybersecurity risk because they don’t require any specific software or run code. They’re primarily basic grids of transistors used for storing data and, as such, haven’t typically been a vector of attack for hackers.

After the decision, Samsung Electronics and SK Hynix, Micron’s biggest industry rivals within the memory market, could stand to gain Micron’s Chinese market share. Since Micron makes its chips to industry standard, manufacturers could easily replace Micron’s components with any of Samsung or SK Hynix’s products. Chip stocks climbed more than 3% in Hong Kong after the decision.  

However, analysts at Jefferies, including Edison Lee, said in a research report that the CAC’s decision will likely have a small impact on Micron because it focuses on “critical information infrastructure.” Most of Micron’s memory chips sold in China are used in consumer electronics, like smartphones and notebooks, which are not really threats to national security.  

“We believe this ban is narrowly focused as it applies to only CII operators,” they wrote. “Therefore, the ultimate impact on Micron will be quite limited.”

Unfortunately, the problem doesn’t inherently lie with lost capital. Micron has weathered the recent drops in the memory market reasonably well, coming out better than compatriots like Texas Instruments and Intel. The danger is that buyers in China will decide to move away from U.S. products, favoring rivals like Samsung and SK Hynix instead. The recent decision can potentially harm Micron’s customer relationships more than the bottom line.  

It is unlikely that Micron products pose a security risk. Still, Micron will assess its memory chips going forward to give clients confidence after such a statement. Sourcengine will continue offering Micron’s impressive product catalog on our e-commerce site.

scenic view of a garden in South Korea

Legacy Chips Are on Everyone’s Mind - May 26, 2023

The semiconductor supply chain is currently in-between states. Raw material shortages and logistics challenges are impacting component deliveries resulting in higher lead times and chip scarcity. In other areas, consumer demand has dropped quickly enough to cause a rise of excess stock, and mounting inflation is fanning the flames of recession concerns.  

Delicately balancing between two extremes, the semiconductor industry is chipping away at remaining obstacles to attain equilibrium. It will take time for the results of correction efforts to be seen, but in the meantime, all we can do is wait.  

As original component manufacturers (OCMs) wait for the consumer demand slump to bottom out, legacy nodes are taking the spotlight. As advanced node demand remains relatively low, OCMs are re-evaluating the market climate and geopolitics by diving into legacy node production feet first.  

Legacy nodes, often needed for automotive and industrial use, are experiencing a shortage, lacking the capacity to meet demand. Organizations are ramping up production for some of these legacy parts, but that could contribute to excess inventory challenges in the long run.

SK Hynix and Samsung Electronics Play the Waiting Game  

The South Korean semiconductor market has been in a downward spiral. Its main export, memory chips, has continued to bear the brunt of the slump in demand. Over the last few months, manufacturers SK Hynix and Samsung Electronics have been beginning production cuts to prevent further sales losses and excess inventory. Both memory OCMs have different strategies to combat the demand slump, as Samsung Electronics is far more resistant to production cuts than SK Hynix.  

The South Korean market favors production-cut strategies for semiconductor suppliers, as reported by DigiTimes. SK Hynix was the first out of the two to initiate production cuts during the growing chip glut. Traditionally, Samsung reduces capital spending, waiting until the market demand returns and takes advantage with its fully operational production lines. This current slump has forced Samsung to make strategic cuts alongside its contemporaries. SK Hynix was also the first semiconductor supplier to release the “2Q23 is the bottom theory.”  

Due to production cuts and customer demand, it’s expected that Q2 2023 will see double-digit shipments in comparison to the poor performance in Q1. The theory predicts that after the Q2 of 2023, the inventory of most memory suppliers will start to decrease, and the market environment will be given the opportunity to improve. Memory prices will only bounce back slowly if the theory is true.  

Samsung has made similar predictions since SK Hynix’s theory. As Samsung reduces production capacity, its inventory level will decrease over Q2. As it decreases, customer inventory will also fall in the second half of 2023, leading to demand recovery as clients work to replenish stock.  

Both agree that the lower point for the semiconductor market will be Q2 of 2023. Samsung has cut production per its predictions by 20%-25%. The price will likely rebound if consumer demand recovers in the latter half of 2023.  

During this period of production cuts and waiting for recovery, SK Hynix is increasing production for its legacy components, 21 nm, DDR3 and DDR4 4Gb lines at its Wuxi fab in China. Since the U.S. restrictions on Chinese imports of equipment processes for 18nm and below, SK Hynix was granted a one-year production license to continue to produce. However, thanks to the weak demand and geopolitical tension, SK Hynix has opted to forgo its previous strategy of shifting the Wuxi fab’s production--for mainstream process from 1Y nm to 1Z nm--by continuing to produce legacy components for China and the legacy-process consumer DRAM market.  

Unfortunately, the added output could pressure suppliers as oversupply still runs amok within the industry. The consumer price for DRAM is expected to drop over Q2 by 10%-15%, right after Samsung’s price increase within the same range in December 2022. This might further complicate recovery, especially within the low-density consumer DRAM.

The worst part about working toward recovery is the waiting period. Eventually, demand will return when the current oversupply is digested, but until then, OCMs must be mindful of production efforts. Hopefully, should the theory persist in its accuracy, there will be a recovery at the end of 2023 that shouldn’t greatly impact the recovery of DRAM prices.  

Until then, all the semiconductor supply chain can do is wait.  

Vedanta’s Venture into Chips and India  

Leading Indian mining conglomerate, Vedanta, is evolving. As one of the world’s foremost natural resources conglomerates, Vedanta’s primary interests are aluminum, zinc-lead-silver, oil and gas, iron ore, steel, copper, power ferroalloys, and nickel. Since its founding, Vedanta has acquired numerous companies to become one of the largest conglomerates in India. In 2017, that expanded to include AvanStrate Inc, a struggling Japanese manufacturer of LCD glass substrates.  

The acquisition was the first step in what would become a new avenue for Vedanta’s future. After acquiring AvanStrate, Vedanta believed it would be the perfect steppingstone to establish India’s first plant to make flat panel displays for televisions via its subsidiary Twin Star Display Technologies. That purchase allowed Vedanta to pursue building India’s first semiconductor and glass manufacturing facility alongside Apple supplier Foxconn.  

In September 2022, Vedanta and Foxconn signed a pack to invest $19 billion in semiconductor and display production plants in Gujarat, India. The pact established two subsidiaries to operate the facilities. Vedanta Foxconn Semiconductors Limited (VFSL) will operate the fab foundry manufacturing 28nm and 40nm wafers, and Vedanta Displays Limited (VDL) will manufacture glass panels for TV, IT, automobiles, and smartphones. The investment was made possible by India's government's expanded $10 billion incentive plan for semiconductor manufacturing.

Akarsh Hebbar, Vedanta’s global managing director for the semiconductor and displays business, said the company seeks to become the “nucleus” for electronics manufacturing within India. Vedanta currently holds a 63% stake in the semiconductor project with Foxconn. Foxconn has the remaining stake and plans to allow Vedanta to lead the charge while providing support and experience from the technology side of the joint venture.  

Foxconn has recently brought in a technology partner to support the project with a production-grade license and expertise in manufacturing that fits the Indian government’s requirements. Though there has been no official word on who Foxconn has selected, it is believed it could be STMicroelectronics.  

VFSL’s integrated semiconductor fab foundry should be able to manufacture 40,000 wafers per month within two years, as the contract states. The wafers will cater to mobiles, consumer electronics, automobiles, and network equipment. Meanwhile, VDL has partnered with InnoLux Corp, a Taiwanese manufacturer that had been a previous client of AvanStrate, for glass displays. VDL plans to focus on Gen 8.6 A-Si IPS fabs, generating 60,000 sheets and 10nm modules for TV, IT, automobiles, and smartphones.  

After the semiconductor shortage, more attention is paid to VFSL’s endeavors. Recently, Vedanta has signed several memorandums of understanding (MoUs) with Japanese and South Korean companies. Vedanta is forecasted to establish an $80 billion semiconductor and display ecosystem within India.  

Vedanta’s global managing director for semiconductors and displays, Akarsh Hebbar, told Forbes India that India does not require chips lower than 22nm and will aim to contribute older nodes to the market, precisely 40nm and 28nm, to support the growing electric vehicle (EV) market. Likewise, 66% of the global semiconductor demand is for these mature nodes. While other countries focus on more advanced chips, 3nm to 4nm, India and Vedanta will do well to swoop in on that demand.  

These efforts have gained the attention of talent worldwide, with many companies keen to help establish India’s growing ecosystem alongside Vedanta. Hebbar believes a project of this magnitude will not be accomplished within five years but a twenty-year marathon of evolution and stabilization of India’s semiconductor industry. With the focus on domestic manufacturing capabilities and self-reliance, should India only manufacture for itself, owning the second largest population and economy bodes well for India’s future.  

The German flag flying over a building

DRAM in 3D, Coming Soon to a Supply Chain Near You - May 19, 2023

New technology and new semiconductor fabrication plants continue to make waves in the electronic component industry. The semiconductor supply chain might be experiencing one of the worst slumps since the 2008 crash, but innovation is what will pull us out.  

The EU’s Chips Act continues to draw in chip giants, eager to form joint ventures for new fabrication plants they might have never considered previously. As construction for new facilities kicks off, creative chip designs using new technologies are blossoming.

Meanwhile, a new manufacturing process has been filed with the United States Patent Application Publication that could change the DRAM market.  

3D is Coming to DRAM Chips  

DRAM chips just got a brand-new look. The California-based chipmaker, NEO Semiconductor, has launched ground-breaking technology to increase DRAM chip density from 3D stacking technology. In a statement, NEO Semiconductor explained that the new memory chips “greatly improve DRAM capacity while still requiring low-cost, low-maintenance manufacturing efforts.”

NEO Semiconductor’s 3D X-DRAM technology is the world’s first 3D NAND-like technology based on the latter.  

3D NAND is also known as vertical NAND or V-NAND. It is a type of non-volatile flash memory where the flash memory cells in a transistor die are “stacked” vertically to increase storage density. Manufacturers can stack multiple layers of cells on a single transistor die without sacrificing data integrity. NEO Semiconductor has applied the same process to DRAM chips by creating a DRAM cell array structure based on capacitor-less floating body cell technology. These 3D DRAM chips can be manufactured using the same process as 3D NAND.  

NEO Semiconductor states the “cell structure simplifies the number of steps in the process, providing a high-speed, low-cost, and high-yield solution.” The company says the new 3D X-DRAM chip can achieve a “128 GB density with 230 layers, eight times larger than today’s DRAM density.”

The capabilities of 3D DRAM chips are expected to help power the next wave of artificial intelligence applications such as ChatGPT. Andrew Hsu, founder, and CEO of NEO Semiconductor, believes this could be a leading solution in the rising 3D DRAM market for its cheap solution to manufacture and scale within the server market due to the pressing demand for high-density DIMM modules. NEO Semiconductor’s current production roadmap could see 1Tb memory ICs by 2030, utilizing the 3D X-DRAM.  

In contrast, Samsung Electronics, the leading manufacturer of NAND and DRAM products, offers the highest density for DDR5 DRAM ICs in 16Gb capacity. It should be launching 32 Gb ICs soon. Should it combine chip stacking with these modules, it could bring 1Tb memory modules by late 2023 or early 2024. This is long before NEO Semiconductor’s expected production date.  

Of course, NEO’s production would help ease the 2D DRAM bottleneck that currently exists, which would be incredibly beneficial in future shortages.  

Chip Giants May Fund New German Fab

With the passage of the EU’s Chips Act, new chipmaking facilities are spreading like wildfire. Germany is quickly becoming a favorite within the EU for chipmakers.

TSMC has been in talks with the government of Saxony, Germany, as civic and company leaders plan the location of the large plant. Government subsidies will support the investment, which will hit $11.04 billion. This comes after TSMC consulted with partners that planned to go in on the investment. The joint venture comprises NXP Semiconductors, Infineon Technologies, and Robert Bosch GmbH.

No agreement has been reached regarding the discussed $11 billion facility, but TSMC is still evaluating it. Should plans go through, the fabrication plant will likely focus on manufacturing mature 28nm parts.  

When the discussion between the Saxony government and TSMC leaders first broke in March, many were concerned over the disconnect having a 28nm fab within Germany rather than advanced nodes. According to The Register, early last year, TSMC CEO C.C. Wei admitted that 28nm was problematic, even before the pandemic.

EETimes addressed the concern in an article when it was reported TSMC might partner with Bosch on the fab. “While targeting 28nm could go some way to addressing the security of automotive chip supply – an issue that got Germany’s attention during the pandemic crisis – it would do nothing for European strategic security and the region’s ability to manufacture at the leading-edge,” the article stated.  

However, considering the continued use of mature nodes within vehicles for more years to come, it might be beneficial to have the 28nm fab. At the same time, the automotive industry still struggles with allocation. For those having trouble sourcing 28nm chips as TSMC discusses the opportunity with its partners, you can find them on Sourcengine. Send our team an RFQ today for your own personal offer.  

An engineer on the phone at a construction site

Semiconductor Facilities Continue to Flourish Worldwide - May 12, 2023

The semiconductor slump has had a rippling effect on the industry at large. Original component manufacturers (OCMs) and original equipment manufacturers (OEMs) are cutting back production. After the significant decline in consumer demand, OCMs and OEMs are doing what they can to prevent further losses in revenue.  

As production slows, OCMs are picking up speed in other areas while they have the time. Many chip manufacturers are building their global reach, constructing fabs in new locations worldwide thanks to new incentive programs. The EU recently joined the ranks among the U.S. and Asia to pass its incentive program to fund chipmakers looking to build facilities within the EU.

Will it be enough?  

Bosch’s Big Plans for California  

California, home to Silicon Valley and other major semiconductor industry players, is about to get a major investment in semiconductors and EVs. Germany’s Bosch Group has recently acquired California chip manufacturer TSI Semiconductors and will invest $1.5 billion to expand the U.S. production of silicon carbide (SiC) chips used in EVs.  

Part of the investment will be converting TSI Semiconductors' manufacturing facilities to state-of-the-art processes. Dr. Stefan Harting, Bosch chairman, said this planned investment within the U.S. will help Bosch increase its global semiconductor manufacturing capabilities. The full scope of the investment to the Roseville location depends on federal funding opportunities thanks to the CHIPS and Science Act.  

Civic leaders praised the acquisition's impact on California's automotive and electric mobility industries.  

TSI Semiconductors is a foundry known for its application-specific integrated circuits (ASICs) and currently develops and produces 200nm silicon wafers for mobility, telecommunications, energy, and life sciences industries. With Bosch’s acquisition and investment, TSI Semiconductors should start producing 200nm wafers based on SiC. By the end of 2030, Bosch hopes to significantly expand its global portfolio of SiC chips, beginning with this investment.  

Demand for these EV chips will likely increase in the coming years. By 2025, Bosch expects to have at least 25 of its chips integrated into every new vehicle. This is aided by the fact that the SiC market is growing at a rate of 30% per year on average, despite Tesla’s recent move to cut 75% of SiC chips from new vehicle models.  

Bosch’s new endeavor will help support the burgeoning EV industry moving forward. SiC chips offer a greater range, more efficient charging, and use up to 50% less energy than traditional silicon chips in EV applications. These are a few reasons that SiC chips will continue to be popular within the EV industry, even if Tesla’s move did raise some eyebrows.  

Europe Sees Growing Number of Fabs

The EU Chips Act has OCMs flocking to Europe. STMicroelectronics and GlobalFoundries were recently approved by the EU to construct a new, state-aided semiconductor factory in France, with aid from the Chips Act.

While the project was announced in 2022, like many other OCM facility plans, it hinged on the passage of the awaited Chips Act. Now that it has been approved by the EU’s governing body, STMicro and GlobalFoundries will receive direct grants to support their investments for the new facility in Crolles. The factory should attain full capacity by 2026.  

This new facility is a significant step in achieving the Chips Act’s goal to manufacture 20% of the world’s chips by 2030.

Infineon’s new plant in Dresden will hopefully help in accomplishing this feat as well. The project recently commenced its groundbreaking ceremony with German Chancellor Olaf Scholz and EU President Ursla von der Leyen in attendance. Infineon’s semiconductor fab will be the first plant within the EU to receive funding from the newly approved Chips Act.

Currently, Infineon already has a facility in Dresden. This new fab will be more of an expansion of the existing facility. However, unlike other expansion projects, Infineon’s is more of a “virtual fab,” as the Dresden Smart Power fab will merge with Infineon’s power fab in Villach, Austria, to form a virtual fab. The expansion to Dresden’s plant will be part of a cleanroom space where mostly automated production will operate the newly established lines. The new 300mm fab will manufacture Infineon’s analog/mixed-signal products and power electronic components.  

These products' main applications are power supplies, small motor controllers for automobiles, data centers, and the Internet of Things (IoT).  

TSMC’s latest investment in Arizona is far larger than Infineon, STMicro, and GlobalFoundries investments. McKinsey & Company’s semiconductor expert, Ondrej Burkacky, believes that while these new facilities are a great start to obtaining the Chips Act’s goal, 30 additional chip factories are needed to reach 20% market share by 2030. In addition, the EU is currently competing with the U.S. and India to attract chip-manufacturing talent.  

It might take the EU more time to achieve 20% than its original timeline since it must compete with Asia and the U.S. Without the extensive red tape the EU government possesses, the U.S. and Asia might remain as more attractive options for OCMs in the future.  

A gloved hand holding a circuit board

Chip Industry’s “Switzerland” Might Not Be Neutral Anymore - May 5, 2023

The chip boom might have cooled off, but innovative designs are only taking off.  

Over the last few months, the tech industry’s been buzzing with new developments. The word of the day usually winds up being artificial intelligence (AI) as new products and solutions utilizing AI make headlines. While AI takes center stage in the news, often discussing its advantages and possible dangers, the components that power AI are starting to push the envelope.  

Well-known chip designer, Arm Ltd, is behind many of the components found in most smartphones. Arm is popular not only for its impressive chip designs, but for its business model within the semiconductor industry. Its neutral stance allows Arm to sell to numerous manufacturers, including their competitors. Now, Arm is venturing down a new path that might put that stance at risk.  

Chipmaker Arm Making its Own Semiconductors  

British chipmaker Arm Ltd is building its own semiconductor. According to Reuters and the Finacial Times, Arm is developing its own chip to showcase its design capability to attract new customers and fuel growth following a blockbuster IPO later this year. Arm will be teaming up with its manufacturing partners to develop the new chip.  

According to sources briefed on the move, they’ve described it as the most advanced chipmaking effort Arm has ever embarked on. This could, however, mean a shakeup in the semiconductor industry and trouble for some of Arm’s clients.  

Traditionally, Arm made its name on selling blueprint designs to chip manufacturers rather than having a direct role in developing and producing semiconductors. This change in building an actual prototype is SoftBank’s goal to drive up Arm’s profits and attract investors.  

According to the Financial Times, the latest chip is far more advanced and built by a larger team to execute the effort and target chip manufacturers successfully. Previously, Arm has partnered with Samsung and TSMC to develop test chips. These test chips are unlike the current project, as those previous projects aimed to enable software developers to gain familiarity with new products.  

Arm’s exploration into chip manufacturing is worrying some large original component manufacturers (OCMs). Should Arm make a good chip, it could become a competitor to its largest customers, such as MediaTek and Qualcomm. Arm has been known as the “Switzerland” of the semiconductor industry. Arm sells designs to almost every mobile device OCM without competition. This neutrality has allowed Arm to sell its products to competitors such as Apple, Qualcomm, and MediaTek.

Arm products can be found within over 95% of smartphones. This decision could lead to significant long-term financial risk if it comprises its business model. Brady Wang, a semiconductor analyst at Counterpoint Research, believes there are a lot of gray areas that SoftBanks and Arm aren’t considering.  

“Google thought it could demonstrate the world’s best Android OS, so it built the Pixel phone. Microsoft thought it was the master of Windows, so it built Surface laptops. So, naturally, Arm thinks it can build best-in-class Arm-based chips, better than chip developers,” Brady Wang said. “But making chips is even more challenging than building devices. It will need generation after generation of development efforts.”

As of now, Arm has declined plans to sell or license the prototype semiconductor. The chip will only work as a prototype and showcase Arm’s development and manufacturing capabilities, based on Arm’s company statement. Arm’s current legal battle with Qualcomm over licensing could be mudding the waters.  

It’s expected. However, should Arm only provide licenses to chipmakers under its newest licensing model for 2024, the change won’t significantly impact OEMs, such as Apple, Samsung, and Google. Over time the new licensing model could shift power away from OEMs that often use their popularity to negotiate better prices from chip suppliers.  

Arm’s popularity in high-performance applications, such as artificial intelligence and cloud computing, could offset that. All-in-all, most will have to wait until the model’s launch before any significant disruptions in the current dynamic arise.  

Low Number of Engineers in the U.S.  

Arizona is quickly becoming a “Silicon Desert,” as its vast open sand fields are being developed for a new U.S. domestic semiconductor manufacturing era. TSMC, Intel, NXP Semiconductor, ON Semiconductor, Microchip Technology, and other semiconductor industry giants call the long expanse of Arizona desert home.  

There’s just one problem–and it’s not the wayward scorpions stumbling onto factory floors.  

Dr. Mehmet Balaban, a graduate of Arizona State University, is one of many recent graduates from ASU working for one of the many chip makers in Arizona. Dr. Balaban is currently working at Intel’s Chandler semiconductor facility. ASU Engineering Professor Michael Kozicki said ASU is one of the most prominent engineering schools in the country.

But it doesn’t have enough graduates to fill the semiconductor workforce gap.  

The U.S. Bureau of Labor Statistics reported that from 2016-2024 there will be a shortfall of six million engineers. Many of these roles are highly specific. Kozicki hopes the CHIPS and Science Act has helped renew interest in the field, as the Covid-19 pandemic exposed the vulnerable position the U.S. was in thanks to an overwhelming reliance on foreign semiconductor supplies.  

Across the country, OCMs are struggling with similar labor shortages. Arizona isn’t the only state working overtime to become the new semiconductor hub of the U.S. States like New York, Oregon, Ohio, and Texas are passing measure upon measure to convince OCMs to settle within their borders over others. Despite Arizona’s prominence with ASU, the lack of a significant candidate pool challenges every state’s semiconductor dreams.  

Recently, Micron and civic leaders in New York joined forces to build up a sufficient workforce in under three years. Micron pledged to invest several million in schools from K-12, alongside colleges and universities, dedicated to science, technology, engineering, and mathematics. Micron hopes to prepare many of these future graduates to be ready to work at its Syracuse mega-complex. Though it’s a limited solution, it specifically aids Micron’s shortage within New York.

Purdue University in Indiana recently launched an undergraduate and graduate-level Semiconductor Degree Program to address this challenge. Purdue’s new president, Mung Chiang, a former science and technology advisor to the Secretary of State, knows how important solving this problem is.  

“These semiconductor products are the foundation of our national security, economic security, and job security across many digital economy industries,” Chiang told a staff writer at the Fast Company Most Innovative Companies Summit. “By one estimate, we’re going to need 50,000 more semiconductor-related engineers in our country in this decade alone.”

With twenty executives from chip companies sitting on the advisory board for the Semiconductor Degree Program, Purdue aims to help develop a curriculum to help recruit future employees. Purdue teamed up with the Ivy Tech network of community colleges to help provide related associate degrees in this field. Purdue will also work alongside MediaTek to open a chip design center on its campus. SkyWater Technology will also be working alongside Purdue with plans to build a $1.8 billion manufacturing facility nearby.  

After decades of outsourcing semiconductor talent and manufacturing capabilities, it will take some time to rebuild a flourishing candidate pool. OCMs partnering with colleges, universities, and other civic leaders will help establish the best steps to accomplish these goals. In the meantime, for OEMs struggling to source much needed supply as domestic facilities enter construction you can always find what you need with Sourcengine.

Brazil and China flags

Will 28nm Nodes Help Germany’s Chip Plans? Brazil and China Team Up - April 28, 2023

Collaboration and cooperation are quickly becoming the themes of the semiconductor supply chain for 2023. Thanks to geopolitical tension and contributing macroeconomic factors, the world is still struggling with volatility in some areas. Despite the challenges, countries and companies are forming partnerships where they can after miscommunication and a lack of teamwork exacerbated the chip shortage.  

The last several months have been a series of announcements between numerous original equipment manufacturers (OEMs) and original component manufacturers (OCMs). Beyond company agreements, countries have been forming partnerships around the world’s favorite kind of chip. During this period of semiconductor fabrication plant construction, some industry experts are noticing what might be a disconnect between national security and chip policies.  

Brazil and China to Join Forces on Chips

The world’s semiconductor supply chain is evolving. Countries and companies are doing their best to form strategic partnerships to create more resilient supply chains. Over the last few months, we’ve seen these actions in government incentive programs, automotive OEM and OCM agreements, chip corridors between countries, and sanctions.

Over the last few weeks, there has been a flurry of activity between the European Union, North America, and Southeast Asia. The U.S. is amid two partnerships with India and Canada to decide on collaborative strategies around the research, development, and manufacturing of semiconductors. Last week, European Union officials agreed to pass the $47 billion Chips Act, which has already attracted $100 billion in private and public investments since its announcement last year. South Korea’s new representative to Taiwan attempts to facilitate bilateral semiconductor cooperation between the two tech leaders.

Now, China and Brazil are working jointly on semiconductors.  

Brazilian President Luiz Inacio Lula da Silva recently met with Chinese leader Xi Jinping alongside their respective governments to sign 15 agreements or memorandums of understanding (MoUs). These agreements include building a sixth satellite to monitor the Amazon and the development of technology for 5G telecommunications, the Internet, and cybersecurity. China has recently had difficulty expanding its influence in information technology due to sanctions and bans in late 2022 and 2023. Last year, Germany and the United Kingdom prohibited the purchase of semiconductor facilities within their countries by Chinese-owned OCMs citing national security concerns.  

The MoUs were stated to “explore the mechanisms to promote bilateral cooperation in scientific and technological research and industrial innovation.” The agreements promote joint research and development around semiconductors. Brazil is interested in developing information technology with China’s cooperation and will not veto the installation of a Chinese semiconductor factory.

As one of South America's largest and wealthiest countries, Brazil, like India, is an attractive new location for expanding semiconductor facilities. Brazil has been interested in attracting Chinese tech investments, especially in semiconductor manufacturing and packaging. This contrasts Brazil’s previous administration, which considered banning Chinese telecommunications equipment.

Brazil’s tech workforce is less significant than other burgeoning semiconductor hubs such as India and Vietnam. Labor shortages for skilled talent are a challenge many countries are running into after enticing OCMs to manufacture domestically. Chinese OCMs could help train a new Brazilian-based workforce, but it will take time.  

TSMC’s 28nm Good for Auto Industry, but Not for Germany’s Chip Plans

North of Grossenhain, Saxony, a vast stretch of land with significant contributions to Germany’s military history will again be utilized for national security--but this time for semiconductors. The Saxony state government seeks to convert the area into a 145-hectare industrial park for TSMC. State Minister of Saxony, Oliver Schenk, told journalists that past investments and settlement decisions revealed how important space provisions for large-scale projects were. The lack of available land earlier drove Intel to select Magdeburg in Saxony-Anhalt over Grossenhain.  

Now, TSMC is partnering with Bosch and two other European manufacturers in the automotive industry to finance the new fab. While no official statement has been made, it is assumed the fab will target special process technology for 28nm nodes. The new 28nm fab will help nullify the supply-demand imbalance within the automotive industry, especially considering Germany’s flourishing automotive sector. However, constructing a 28nm plant could hurt Berlin’s national security strategy.  

Most countries' semiconductor policies include national security. One of the reasons Germany denied the purchase of Elmos Semiconductor’s wafer plant by Chinese-owned Silex in November was due to national security concerns. Germany’s chancellor Olaf Scholz stated, "Germany needs to lower its reliance on China in areas that are risky and one-sided.” Despite these moves and the EU Chips Act supporting further semiconductor development within the Union, Germany lacks a clear semiconductor strategy. A leading German scholar who remained anonymous said, “There’s almost no connection on the policy side between German semiconductor policy and German military and national security policy.”  

A point that is underscored by accepting TSMC’s 28nm fab decision. GlobalFoundries’ Dresden plant, which produces 12nm nodes, is the most advanced node in Germany domestically. Chips made using 28nm processes or larger are considered legacy chips and are utilized mainly by the automotive industry, not national security. According to auto industry skeptics, 90% of vehicles do not need advanced chips, and automotive OEMs are unwilling to redesign existing systems to implement high-performing chips with short lifespans. Continued pursuits of advanced technologies by TSMC, Intel, and Samsung Electronics might not lead to tangible benefits for the supply of mature-process chips.  

Advanced chips are what defense industries need. Mature processors would aid the automotive industry but would likely not be helpful for long-term strategic chip policies. Due to the automotive chip shortage, Berlin will probably accept the 28nm fab. Once the automotive shortage is resolved, renegotiations could take place.  

That said, if two of the partners jointly investing in TSMC’s fab are automotive companies, there might be pushback on eventually changing the fab to produce more advanced nodes. Should the 28nm plant remain, hope is not lost. The global supply chain stretches worldwide and defense contractors within Germany can easily purchase advanced components from a diversified supplier with a large e-commerce platform.

European Union flags waving in the wind
European Union flags

A New Discovery Could Change Electronics Industry - April 21, 2023

The semiconductor supply chain might have hit a slump in customer orders, but that isn’t slowing the industry down. As customer demand remains relatively low, lawmakers and researchers are making the most of the industry’s calm. The EU is on its way to passing its long-awaited Chips Act, which might spark a series of country-wide measures to attract chipmakers to their nation specifically. Something that the U.S. is experiencing on a state level after passing the CHIPS and Science Act.  

Beyond funding, semiconductor industry research has been splashing throughout Q1 2023. A breakthrough in spintronic devices could unlock the potential for more memory and computing efficiency. Researchers believe this new material can also be easily integrated into processes by semiconductor manufacturers so they can quickly design more powerful components relatively soon.

EU Chips Act to Pass and Oregon Pushes for Further Industry Support  

Laws promoting domestic semiconductor manufacturing are receiving tremendous support. The European Union’s Chips Act, like the U.S. CHIPS and Science Act, will be passed. The $47 billion plan to boost Europe’s semiconductor industry prowess so it can join the ranks among the United States and Asia will be signed into law on April 18th. The private and publicly funded plan aims to increase the EU’s competitiveness in the semiconductor supply chain, ensure resiliency during future shortages, and regain manufacturing capabilities lost over the last few decades.  

The Chips Act will bring EU semiconductor production capacity to 20% of the total market share by 2030. The Act will also address the lack of a skilled workforce within the EU by attracting top talent and supporting the growth of a domestic candidate pool. This challenge is something the U.S. is currently dealing with. The passage of the CHIPS and Science Act has led to an increase in original component manufacturers (OCMs) constructing new facilities within the country, but there isn’t enough labor to power them. The EU will likely work with chipmakers to help train its emerging workforce to prevent similar problems.

Passing the EU Chips Act should also result in an additional $16.2 billion in private and public investments. That investment will aid digitalization and partnerships between incoming businesses ready to utilize the Chips Act’s funding. It’s also expected that countries within the EU will pass further laws following the Chips Act to make their locations more attractive to prospective OCMs.  

The U.S. has seen many of its states pass similar funding plans after the approval of the CHIPS and Science Act. In late March, Oregon’s Senate passed Senate Bill 4, a $210 million measure that will aid businesses that apply for money from the CHIPS Act. Recently, Secretary of Commerce Gina Raimondo met with two of Oregon’s congressional representatives and Oregon’s governor Tina Kotek to discuss the state’s semiconductor industry.  

Raimondo, who has spent most of 2023 making the semiconductor supply chain a top priority, praised Oregon’s industry and environment. Upon Senate Bill 4’s passing, lawmakers will consider another measure in giving potential tax breaks to semiconductor companies.  

Oregon has a notable history within the U.S. semiconductor industry, with nearly 15% of the national semiconductor workforce. The majority of these are centered around Intel’s large Hillsboro campus. However, it has lost its former title after sweeping success by Ohio, Texas, Arizona, and New York at attracting OCMs with semiconductor manufacturing-friendly bills. Senate Bill 4 is Oregon’s chance to regain lost ground.  

Despite mounting concerns about excess inventory, the world will likely see more of these laws going forward through 2023. As the shortage cools and companies mitigate excess during this quiet period of consumer demand, now is the time to build up and out before normal market conditions return.  

Breakthrough Developments for Semiconductors in Spintronics Manufacturing

The University of Minnesota, researchers and a team at the National Institute of Standards and Technology (NIST) have developed a breakthrough process in spintronic devices. According to the University’s press release, this process could become the new semiconductor chip industry standard. This process should allow faster, more efficient spintronics devices to be scaled down to new small sizes.

Jian-Ping Wang, the senior author of the paper and a professor at the College of Science and Engineering, said, “We believe we’ve found a material and a device that will allow the semiconductor industry to move forward with more opportunities in spintronics.” Spintronic devices leverage the spin of electronics rather than the electrical charge to store data. These devices provide a more efficient alternative to traditional transistor-based chips, Wang’s paper detailed. The materials have the potential to be non-volatile, making them more energy-efficient and better at storing memory and computing even after being removed from a power source.  

Researchers circumvented the previous industry standard spintronic material, cobalt iron boron, by introducing iron palladium as an alternative material. Iron palladium requires less energy and has the potential for more data storage. The best benefit of the material is that it can be scaled down to smaller sizes than cobalt iron boron. Wang says OCMs, including Honeywell, Skywater, GlobalFoundries, and Intel, can integrate it into their processes and products. It allows them to design even more powerful systems with this powerful alternative.

The University of Minnesota’s team has been working on this project for over ten years with support from the Semiconductor Research Corporation (SRC), Defense Advanced Research Projects Agency (DARPA), and the National Science Foundation (NSF). All of which have contributed to the program’s funding over the years. Daniel Gopman, a staff scientist at NIST, spoke highly of the research’s capabilities. “It will be exciting to see how this advance drives further growth of spintronics devices within the semiconductor chip technology landscape.”

Currently, the new spintronic device with iron palladium can be scaled down to smaller than five nanometers on top of a semiconductor industry-compatible substrate. Researchers recently grew iron palladium on a silicon wafer using an 8-inch wafer-capable multi-chamber ultrahigh vacuum sputtering system. The equipment utilized is currently only available at the University of Minnesota.  

Furthermore, outside of semiconductor manufacturing benefits, spintronic devices are beneficial in cybersecurity as digital locking circuits. Hardware keys are virtually impossible to break via software alongside real-time encryption of RAM, where it is encrypted and decrypted on-the-fly inside the CPU. Unfortunately, hardware circuits are often challenging to integrate.  

However, researchers have proposed that spintronics can be used to create digital locking circuits thanks to their non-volatile properties and tamper-proof design. Reverse-engineering designs would be impractical if spintronic devices (such as SpinFETs) were combined with Magnetic Tunneling Junctions (MTJ). Thereby eliminating the possibility of a manufacturer integrating trojan hardware or backdoor systems.  

While implementation is still complex, it may not be so troublesome with further research and scalability thanks to recent spintronic device breakthroughs. Likewise, the possibility of future cyberattacks is only set to increase the more integrated technology becomes with modern life and the importance of the semiconductor industry in world geopolitics. To make sure you are always getting the components you need, Sourcengine’s experts can help you source hard-to-find components when you submit an RFQ.  

Lots of unmarked batteries lined up

EV Battery Market on the Rise as More Chipmakers Move to India - April 14th, 2023

The shortage slump is easing, and excess might not be a challenge for long. As disruptions fade, the semiconductor industry is taking flight. Innovation in electric vehicle (EV) battery technology is ramping up, and India continues to grow as the leading destination hub for numerous original component manufacturers (OCMs).  

Recent sanctions may have thrown China, but EV battery dominance continues to climb within China’s electric sector. As the capital for battery development, thanks to the rising interest in battery swapping for EVs, the country is collecting patents like children collect candy on Halloween. As new battery technology enters mass production, two American giants are courting the current king of EV batteries for manufacturing partnerships.  

CATL Becoming the King of EV Battery Tech  

Battery-maker Contemporary Amperex Technology Co. Limited, or CATL, has been quickly climbing the ranks to become one of the top EV battery makers worldwide. Founded in 2011, CATL “specializes in the manufacturing of lithium-ion batteries for electric vehicles and energy storage systems, as well as battery management systems.” Currently, CATL dominates the market share with over 49% in China, the global market leader for EV battery technology, alone.

According to Nikkei Asia, over the last ten years, China has taken the lead in the country-by-country for patents related to post-lithium-ion batteries. The evolution has led to Chinese companies, CATL among them, to begin mass production of these batteries later this year. China currently ranks first in the number of companies and research institutes with active patents, owning 50% of the total existing patents with 5,486. Japan followed second, and the U.S. third. CATL is one of the seven institutions out of the top 10 for owned patents that China possesses.  

CATL is the world’s largest manufacturer of automotive batteries, with plans to mass-produce and supply sodium-ion batteries for EVs in 2023. CATL is quickly working to commercialize this technology, for which China has increased its patents over the past ten years. Once again, dominating the playing field with two to three times the patents held by Japan and the U.S. Likewise, China also ranks first in the most patents for zinc-ion batteries, another next-generation battery that is highly safe.  

As a result of CATL’s prominence, automakers are trying to form partnerships for future EV production. Despite recent U.S. sanctions on China, Ford allied with CATL to produce EV batteries in Michigan. Tesla followed suit and is attempting to form a similar arrangement with a planned factory in Texas. By moving quickly, the hope is that both companies will be able to secure manufacturing capabilities before other U.S. laws are finalized to prevent it. Due to CATL’s and, by extension China’s specialty in EV batteries, it will become impossible to manufacture batteries without China’s aid.  

CATL and China’s clean-technology dominance within the EV battery industry are not understated either. According to Bloomberg, the “Venn Diagram of “clean tech suppliers” and “China” is like a time, a flat circle. CATL dominates the supply of lithium-iron-phosphate (LFP) batteries that are safer and, more importantly, cheaper. Tesla’s more affordable Model 3 variant can thank CATL’s LFP cells in its batteries for the reduced costs. As the proverbial king of clean EV batteries, a partnership with CATL is unavoidable. For U.S. companies, the Inflation Reduction Act might cut off manufacturers from the number one supplier of cleantech as the administration tries to foster a U.S. cleantech boom.  

Outside of a planned U.S. manufacturing facility for CATL, the battery manufacturer is already a leading supplier for Tesla, Volkswagen, BMW, Ford, and more. CATL plans to start mass production and delivery of batteries based on one of its latest technologies. Production for the M3P battery began last week. The M3P is expected to perform better and cost less than nickel and cobalt-based batteries. The M3P battery has a much greater density, according to CATL, and performs better than lithium-ion phosphate batteries. CATL states the M3P technology enables EVs to run 430 miles per charge when combined with the company’s next-generation battery-pack tech.

Comes as no surprise that CATL is quickly becoming the go-to for EV manufacturers and even beyond!

NXP Semiconductor’s Chip Ecosystem Plans for India  

Netherlands-based chipmaker NXP Semiconductor is preparing to join Foxconn, Apple, the U.S., and others in India. According to Modi's latest tweets, India’s prime minister Narendra Modi recently met with NXP CEO Kurt Sievers to discuss the transformative landscape in semiconductors. During the meeting, Modi and Sievers discussed policy frameworks, emerging technologies, and enhancing India’s value creation alongside its manufacturing capabilities and aspirations.

Sievers has been vocal in supporting India’s goal, expressing support for a semiconductor manufacturing ecosystem in India, as quoted by the Economic Times. Sievers stated that NXP had started discussions among its manufacturing partners to consider India as a future partner and location strongly. Modi and the Indian government’s commitment to becoming one of the largest electronic manufacturing hubs “underscore India’s recognition of the electronics industry’s strategic importance and growth potential.”

NXP Semiconductor has been operating in India for over 50 years. India’s R&D engineers make up one-third of NXP’s total R&D workforce. NXP has the foundation for its semiconductor manufacturing ecosystem established in India. It will take less time to build up what is already there.  

India has the second largest population in the world, and the demand for electronics within it is only growing. Possessing a solid semiconductor ecosystem in the future is necessary to support its growing internal demand for electronics. According to Sievers, “in addition to India’s strengthening infrastructure and education for the manufacturing ecosystem, geopolitical factors are playing an increasingly important role in determining the location of semiconductor manufacturing.”  

India’s large population, growing demand, and overall market value make it an attractive location to chipmakers exiting China’s markets. Counterpoint Research estimates that India’s semiconductor market opportunity will increase from $27 billion in 2021 to $64 billion in 2026. Apple is already enjoying a booming market and demand despite weak global sales of smartphones. Thanks to India’s incentive schemes to promote local manufacturing and investments from Apple and other manufacturers, Indian smartphone production has grown by 65%. Indian iPhone shipments reached 162% in value over 2022 as Apple and its suppliers began investing.

Last month, the U.S. signed a memorandum of understanding (MoU) to align trade policies supporting the semiconductor industry. Throughout 2022 and into 2023, Foxconn signed several MoUs with different provinces within India to support semiconductor manufacturing facility projects. With NXP joining the ranks, India will remain a prominent player in the global semiconductor supply chain, especially as diversification becomes crucial in supporting supply chain resiliency.  

American and Canadian flags

Countries Creating Chip Corridors with Rebound Incoming - April 7th, 2023

Worldwide, countries have been working overtime to strengthen their semiconductor supply chains. These efforts have been seen through incentive packages and government funding to attract chip talent. A domestic supply of chips is significant progress toward a more robust supply chain, but it does not promise future shortage resistance.  

The next step is supply chain diversification. The U.S. has been diligently working alongside India, ironing out the details of a future partnership announced in early March. South Korea, a DRAM and NAND manufacturing giant, is exploring trade collaboration with its powerhouse neighbor, Taiwan. This is the best time to work out arrangements for future chip trade collaboration before demand picks back up at the end of this year.  

Global Semiconductor Equipment Market Showing Gains  

The global downturn in consumer demand has been affecting chip orders. The result has been the growth of excess inventory piling up in different chip markets, particularly DRAM and NAND flash. Many original component manufacturers (OCMs) have been working overtime to correct inventory. Successful mitigation should be seen in Q3 and Q4 of 2023. The chips may be down, but they’re not out.

Global spending on semiconductor equipment for front-end facilities is on track to recover by 2024. Over the last year, semiconductor equipment spending set a new record reaching $98 billion. This can be attributed to the high chip demand throughout the first half of 2022’s fiscal year. Due to weak chip demand and excess inventory, 2023 is forecasted to only result in an annual global revenue of $76 billion. That’s a 22% year-on-year (YoY) decrease.  

SEMI’s latest quarterly World Fab Forecast report believes it will rise to $92 billion in 2024. That’s an increase of 21% YoY after 2023’s decline. SEMI contributes this recovery to the “steady global expansion of fab capacity to support future semiconductor industry growth driven by the automotive and computing segments and a host of emerging applications.”  

The breakdown of global purchases reveals that Taiwan will remain in the lead with the largest expenditure on fab equipment, increasing 4.2% YoY. Taiwan is home to chip giant TSMC, which makes sense for its continual growth. South Korea will follow with a massive jump of $41.5% YoY in spending. With South Korea-based Samsung Electronics preparing for a five-cluster chip manufacturing ecosystem, the uptick likely reflects those preparations.  

The Americas will increase spending by 23.9% YoY thanks to domestic initiatives in North America. Finally, Europe, the Middle East, Asia, and Japan will see recording spending within each market sector as countries work to increase their domestic capabilities in chip manufacturing.  

SEMI forecasts the growth is partly due to the global semiconductor industry increasing capacity by 4.8% YoY in 2023 and 5.6% YoY in 2024. The growth is smaller in comparison to 2022’s 7.2%. It reflects the continued forward expansion of the semiconductor industry. Foundry segment growth thanks to 2023’s popular ChatGPT, are leading the charge. Nvidia recently announced its extensive artificial intelligence (AI) inference platforms, preparing for further implementation of generative AI in organizations.  

AI, 5G products, and the metaverse should keep chip demand alive until consumers recover in the latter half of the year.  

North American and Asian Chip Corridors in Progress

Domestic chip resiliency is only the beginning. While fortifying domestic chip production is the start of a stronger supply chain, it should not be the only source of semiconductors for OCMs and, to a larger extent, countries. Diversifying chip supply is a vital aspect of a healthy supply chain. Throughout the 2020-2022 shortage, the world saw what happens when one geopolitical area produces the most chips on the market.  

During the Covid-19 pandemic, China provinces went through extended lockdowns to contain the virus. Due to these measures, many chip fabrication plants were shut down as employees were forced to remain home. When it became clear that other accommodations would need to be made to resume production while adhering to pandemic lockdown protocols, companies put up staff within the fabs themselves.  

Logistics were likewise significantly impacted during the Covid-19 pandemic, elongating shipping times due to extreme seaport congestion. Those with no domestic semiconductor manufacturing plants had to source elsewhere, but options were limited with few plants outside of Asia’s geopolitical sphere. But those with domestic manufacturing plants weren’t out of the woods.  

A perfect example of why diverse supply chains are necessary can be found in the U.S. when bad weather impacts Texas chipmaking facilities. With domestic supply suffering and a lack of outside sources, the U.S. struggles to maintain a steady supply of chips early in the pandemic. It’s the reason that the current U.S. administration is working hard to both fortify domestic capabilities and diversify a new semiconductor supply chain.  

Last month, the U.S. and India signed a memorandum of understanding (MoU) on understanding which will aid both countries by aligning export control regimes for critical chip technologies. It came after weeks of dialogue between U.S. Secretary of Commerce Gina Raimondo speaking with numerous public and private-sector leaders throughout India. The U.S. plans to offset current geopolitical dominance within its supply chain through diversification. These efforts have continued this month, with the U.S. and Canada announcing on March 23rd they’re working on creating a bilateral semiconductor manufacturing corridor.  

U.S. President Joe Biden issued a joint pledge with Canadian Prime Minister Justin Trudeau to “reduce their dependence on other countries for critical minerals and semiconductors.” The Canadian government plans to spend $181.94 million on its domestic semiconductor industry to boost research, development, and manufacturing. In a joint statement by both leaders, the International Business Machines (IBM) would “provide a significant investment to develop new and expanded packaging and testing capabilities at its Bromont facility as part of the [MoU].” This announcement comes after last year’s announcement by IBM to invest $20 billion in New York to develop semiconductors, mainframe technology, artificial intelligence, and quantum computing.  

Several days later, South Korea’s new representative to Taiwan, Lee Eun-ho, announced plans to facilitate closer bilateral semiconductor cooperation to improve global supply chain resilience. With the recent interest after the unprecedented IC supply shortage, Lee believes Taiwan and Korea possess complementary strengths for one another. South Korea owns 70% of the global market share of high-performance DRAMs and 50% of the global NAND flash market.  

Bilateral trade between the two countries’ economies is equivalent to more than $54 billion in 2022. A majority of that total is related to semiconductor products. Through an agreement, both countries could stand to learn and advance their technologies from one another. Despite a rocky relationship, Lee, who has a Ph.D. in mechanical engineering, believes both countries could benefit immensely through bilateral cooperation.  

Skyline view of New York City

Excess Inventory Builds as Fab Construction Forges Ahead - March 31, 2023

The race to build up semiconductor fabrication plants has increased. Rising levels of excess inventory haven’t slowed fab construction, if anything work is speeding up. Incentive programs inspired by the results of the shortage have solved fabrication funding challenges, but one big hurdle remains. It’s the lack of specialized talent domestically to power these fabs.  

While current demand is in a slump, chipmakers are working overtime to establish a pipeline of new talent to operate these new facilities. With a small timeframe to grow a large candidate pool, original chip manufacturers (OCMs) are collaborating with local leaders to fund education efforts. Time will tell if these efforts pay off in the long run.  

Loss of an Industry Legend

On March 24, 2023, the electronics industry lost a giant. Co-founder of Intel whose observation of transistors within a computer chip was crucial to the development of Moore’s law, Gordon Moore has passed away. He was 94.  

Gordon Moore’s prominence in the development of the electronic component industry was as great as the law that possessed his namesake. Moore’s influence contributed to the rise of the personal computer (PC) era through its crucial component, the microprocessor. It was through computers and Moore’s observation that the number of transistors within a computer chip, which determines speed, memory, and other capabilities doubles yearly. This observation was later developed into a theory, Moore’s Law, by Craver Mead, an engineer at the California Institute of Technology.  

For decades Moore’s Law served as a yardstick for progress within the semiconductor industry and is still debated today. Whether or not the industry has surpassed Moore’s Law or reached the proverbial end of the theory’s possibilities remains contested by industry giants. All of which can be attributed to Moore thanks to his fundamental early work in the design and development of semiconductors.

He is survived by his wife, Betty Irene Moore, his two sons and four grandchildren alongside the foundation he began with his wife, the Gordon and Betty Moore Foundation.  

Operating Losses and a New Fab Cluster for South Korean Chipmakers

Memory chipmakers could be having a better year. DRAM and NAND markets have been experiencing a dramatic downturn. A downturn that might put the 2008 DRAM crash to shame. While many industry professionals are not ringing alarm bells, as the cyclical nature of the memory chip market is well-known, there is concern that the fragmented NAND market might consolidate in the face of continual sales drops.  

In February, South Korea posted a trade deficit for the 12th month in a row. South Korea’s main export is DRAM and NAND components, as it is home to the largest memory chip manufacturers, Samsung Electronics and SK Hynix. Excess inventory for memory chips continues to grow and is reaching high levels in South Korea thanks to the chip shortage easement from dropping consumer demand. South Korea-based suppliers will witness their memory business “turn into an operating loss.”  

That is a rare situation for Samsung Electronics and SK Hynix, two giants within the entire global supply chain of OCMs. This possible operating loss will be posted for Q1 2023, which again marks several months of suffering sales within the memory chip market sector. This possibility comes at the same time Samsung is focusing on investing over $230 billion within the next 20 years for a semiconductor fabrication plant cluster within South Korea. The cluster will call the Gyeonggi Province home, with five new chip plants expected to be constructed by 2042.  

According to South Korea’s Ministry of Trade, Industry, and Energy, the project aims to attract 150 other companies to produce materials and components and design high-tech chips in South Korea. The new fabs will be located near existing facilitators that create NAND and DRAM chips. Samsung said the new facilities would also produce memory chips despite the several months of tremendous downturn.  

Samsung, despite current losses, doesn’t believe the low demand for DRAM and NAND will last much longer. The company anticipates an “uptick in demand for memory chips due to new technology adoption like 5G wireless networks, artificial intelligence, and autonomous vehicles.” According to some experts, this demand is expected to return in late Q3 or Q4 2023.  

In the meantime, the facilities will also be used to promote other industries. This includes rechargeable vehicle batteries, electric vehicles (EVs), robotics, displays, and biotechnologies. The EV battery and overall EV market are quickly growing and are expected to reach $134.6 billion by 2027. That’s a CAGR of 19.9% from 2022 to 2027. An excellent investment to make after South Korea witnessed its main export drop so low.  

It also ensures that South Korea has a reliable domestic chip manufacturing supply, as the country joins the dozens of others that have invested in similar facilities over the past few years.  

Micron’s Gamble to Build a U.S. Workforce in Under 3 Years  

One of the companies taking advantage of the generous incentive and subsidy programs to build new facilities is Micron Technology. Micron recently broke ground in Idaho to construct a new memory manufacturing fab. Micron’s facility will be the first memory manufacturing fab in the U.S. in over 20 years, and it’s not the last of its planned facilities within the U.S.

In late 2022, Micron announced that it had selected Syracuse, New York, as the location for its $100 billion mega-complex of semiconductor manufacturing plants. Four separate semiconductor fabrication plants will be built at the 1,300-acre site, as reported by Micron’s president and CEO Sanjay Mehrotra. The first of several projects would employ 3,000 people for a $20 billion mega-fab, with construction planned to begin in 2024.

However, despite the aid from incentive plans and plenty of attractive career options, there might not be enough candidates within New York, let alone the U.S., to take these positions. Civic leaders and Micron are working to cultivate a new workforce for this once-in-a-generation opportunity.  

Colleges and universities are now doing their best to quickly overhaul education and training programs to increase the number of engineers and technical worker skills they produce. Duncan Brown, the vice president of research at Syracuse University, said, “we have to remake a decade of workforce development in two or three years. It wasn’t just the manufacturing that went offshore, but it was also the talent pipeline that went offshore.” At least two other semiconductor manufacturers had considered expanding in Syracuse but opted against further development after examining the area.

While Syracuse, and to a greater extent New York, is far more established to host the semiconductor industry, as over 70 such companies operate within state lines, the talent pool must be larger for thousands of highly specialized jobs. It will take a lot to fill the soon-to-be 9,000 available positions at the first of four chip fabs. Micron plans to help aid further development with a planned $10 million to K-12 schools in the area dedicated to science, technology, engineering, and mathematics. According to the Wall Street Journal article, Micron will also collaborate with community colleges and universities to prepare graduates for working with the company.  

Despite the semiconductor demand slump, the projected workforce growth and the need for a large talent pool have not changed. Overall, the market for engineers within the U.S. at these planned semiconductor facilities will grow by 20% over the next five years, according to the Semiconductor Industry Association (SIA). For the U.S. and many other countries to achieve their goal of a thriving domestic ecosystem, these collaboration efforts must be utilized to achieve such demands.  

Onondaga County Executive J. Ryan McMahon knows the task will be difficult but has spent years pitching the area of Clay, where Micron’s facility will be built, to chipmaking giants. “We had all this higher-ed power in one room,” McMahon said, “and they talked directly to Sanjay and said, ‘We’re going to develop the talent you need.’”

Cars parked on a production lot

Fortifying Chip Production and Passive OCMs Helping Struggling Automakers - March 24, 2023

With the chip shortage in a downturn, countries continue to race toward creating a new, resilient supply chain. For many, that means decoupling the existing supply chain while demand remains low, so the redistribution does not impact logistics when it eventually picks back up. Traditional methods are being cast aside to create new proactive approaches to supply chain management and stability, which means diversifying supply.

As volatile geopolitics threaten future disruptions, many countries are doing everything possible to form their own domestic supply of chips. The U.S., while working hard to increase domestic manufacturing facilities, has been working with India toward a solid trade agreement. For chipmakers, many are taking this opportunity to branch out into other markets, primarily automotive, where demand is still hot for scarce chips.  

U.S. and India Work Towards Arrangements for Chip Resiliency  

In early March 2023, the U.S. and India signed a memorandum of understanding (MoU) on semiconductors. U.S. Commerce Secretary Gina Raimondo announced earlier that same week that the goal of the MoU was to continue to discuss coordination of investment and resume dialogue around policies to spur further private investments towards chip production. This goes together with the new initiative called the India-US Strategic Trade Dialogue, which focuses on aligning export control regimes of both countries for critical chip technologies.  

This comes after talks in January between the U.S. Semiconductor Industry Association (SIA) and the Indian Electronics and Semiconductor Association (IESA). Both groups agreed to form a private-sector task force to strengthen collaboration between the two countries. This was on the heels of India’s decision to seek strategic alliances around semiconductors and further boost its domestic chip production. Over 2022, India saw great strides in this goal coming to fruition with Foxconn investing in several future manufacturing plants and India’s own Polymatech producing the first made-in-India semiconductors.  

While official details of what the MoU entails haven’t been made public yet, it’s assumed that it might include sharing production-grade technology between American companies and India, as the U.S. is currently the hub for leading fabs and fabless companies. Raimondo told reporters that the U.S. would “like to see India achieve its aspirations to play a larger role in the electronics supply chain.”

Raimondo continued taveling and meeting with Indian public and private-sector leaders throughout the week with ten leading executives from the U.S. She saw “unbridled enthusiasm and optimism for how we can generate jobs in both of our countries, and both share the benefits of a more resilient supply chain.” With India quickly becoming the go-to for overseas semiconductor manufacturing, it is no surprise that the U.S. is quickly working alongside India to align export controls while creating a task force to aid India through upcoming challenges.  

SIA president and CEO John Neuffer had only positive things to say about the MoU. “India is already a major hub for semiconductor research, chip design, and equipment engineering, but its future potential is even greater. This task force will help identify tangible ways to unlock this potential by increasing collaboration between the U.S. and India within the global chip ecosystem.” While India doesn’t have native semiconductor firms, the strategy by Prime Minister Narendra Modi has been working overtime to attract foreign giants such as Foxconn.

This aligns with the current U.S. administration’s plans to offset the geopolitical dominance for semiconductors by boosting resilience through diversification. This agreement comes at the same time the Netherlands’ placed new restrictions on semiconductor technology for China. ASML Holding, the leading supplier of lithography machines necessary to create advanced chips, is a Dutch company expected to require a license to export equipment to China.  

Passive Component Manufacturers Aim for Auto Win

Automotive original equipment manufacturers (OEMs) are still struggling despite the chip shortage downturn. Big automakers, including Volvo, Audi, BMW, Mercedes-Benz, Volkswagen, and Skoda, have been forced to delete safety features, among others, in the face of the semiconductor shortage. Toyota remains one of the few that has been taking production cuts and longer delivery times as they refuse to delete important safety features.  

Waiting periods for many car models are still a year into the future. Maruti Suzuki India recently announced a 58.5% drop year-on-year (YoY) due to the chip shortage leading to fewer vehicle sales. This is despite the demand for vehicles, particularly electric vehicles (EVs), being high and contributing to a steadily growing YoY.  

Automotive components are primarily legacy components. Consumer demand dictates chip capacity. Most vehicles utilize chips between 65nm-90nm in size. Some have adapted to nodes in the 28nm, but it's few and far between. Most original component manufacturers (OCMs) have limited investment interests in building new fabrication plants for legacy nodes.

Consumer electronics and other white goods make up most of the chip demand. Most products in these industries require advanced chips, usually with nodes ranging in size under 11nm. More significant investments are often poured into research for smaller, advanced nodes over increasing capacity and equipment for legacy nodes, contributing to the continuing chip shortage for automakers.  

It will take years for capacity to increase to accommodate the current high demand for vehicles. Many of these nodes are also likely to become obsolete, specifically for legacy nodes above 65nm, as manufacturing processes specialized in their production are becoming scarce.  

Taiwanese and Japanese passive component manufacturers are lending a hand to help offset the current automotive chip shortage and provide relief to struggling automakers. Mainly suppliers of MLCCs and other passive components are devoting more resources to automotive applications. Last year, Japanese MLCC manufacturer Murata invested $305 million in a new factory in Jiangsu, China, to capitalize on auto and EV demand. Likewise, passive OCM Yageo focused on increasing capacity for automotive components when the overall demand started dropping.

Unsurprisingly, more MLCC and other passive suppliers are refocusing supply into the automotive component market as the auto chip shortage drags on. With excess inventory building up in different sectors and OCMs being forced to cut capacity or lose more revenue, shifting markets will help soften the blow.  

Busy Japanese street at night

New AI Tools Fuel Demand as Domestic Chip Production Remains Top Priority - March 17, 2023

As 2022 ended, companies unveiled their latest projects in preparation for the holiday season. For many toy manufacturers, December is the perfect time to market new toys for eager parents looking for Christmas Tree present fodder. December is also the ideal month for product unveiling within the tech industry.  

Like toys, everyone from enterprises to individual consumers want to kick off the new year with a bang. Smart tools accomplish that. For OpenAI, November 2022 was the perfect time to debut their new versatile chatbot, ChatGPT. ChatGPT quickly rose in use among other artificial intelligence (AI) bots, as it can be used in anything from computer debugging to controlling numerous robotic arms on an assembly.  

As its popularity grew, it fed the cooling demand for processing chips, reigniting the market’s flame. Will there be enough foundries to support such monumental growth? As countries increase domestic chip-making facilities, there might be.

ChatGPT Popularity Fuels Processor Foundry Growth

Unless you’ve been living under a rock, you’ve probably come across the term ChatGPT recently. ChatGPT is an artificial intelligence chatbot developed by OpenAI which launched officially in November 2022. ChatGPT is a generative pre-trained transformer (GPT) and a part of the family of language models as it uses machine learning and natural language processing (NLP) to operate.

ChatGPT was designed to generate anything from simple messages to essays that mimic human conversation. Unlike other chatbots, ChatGPT can remember previous prompts from the same discussion giving it further data training and learning capabilities. ChatGPT is integrated with OpenAI’s company-wide moderation API to prevent offensive prompts.  

After its release on November 30, 2022, ChatGPT quickly skyrocketed in popularity, reaching over 100 million users by January 2023. By February 2023, Microsoft showed how ChatGPT could be utilized in robotics, as the versatile chatbot can write and debug computer programs. In its research on ChatGPT and its integration with robotics, Microsoft found that “ChatGPT unlocks a new robotics paradigm and allows a user to sit on the loop, providing high-level feedback to the large language model while monitoring the robot’s performance, enabling ChatGPT to control multiple robotic arms while solving robotics puzzles.”

While OpenAI admits that ChatGPT has limitations, as it sometimes writes incorrect answers, these challenges are common with large language models. Microsoft’s Bing AI and Google’s Bard chatbot, competitors to ChatGPT, made similar errors upon their debut. However, the solution to these limitations involves further training to reduce the frequency of “artificial intelligence hallucinations” like these.

ChatGPT’s versatile applications and popularity are aiding more than assembly robots and students with their essays. The various uses of ChatGPT continue to help its rise in use, and the more that use it, the more technology is needed to support it.

Like most AI applications, these programs run on chips. The more they’re implemented into different organizations, schools, or industries; the more chips are necessary to power adoption. Despite overall shortage easement, specific technologies, like ChatGPT, keep the semiconductor industry and its supply chain afloat.  

With ChatGPT, the need for processors has increased. As processors' demand rises, the need for foundries has risen. TSMC, leading in the processor race, has seen performance growth while the rest of the market faces a downturn. While South Korea worries about the lack of support across the global supply chain, in the face of growing stockpiles of DRAM and NAND, most original component manufacturers (OCMs) are far less worried. In order to keep ahead of growing demand, partnering with a global marketplace, like Sourcengine, will prevent sourcing complications in case of disruptions. Like that of spiking demand, as seen with ChatGPT.  

Japan Increases Incentives to Boost Domestic Chip Production

Following in the footsteps of many, Japan is prioritizing domestic chip production. As a result of the 2020-2022 shortage, the Covid-19 pandemic, and sanctions, fortifying domestic semiconductor manufacturing is a top priority for many. Over 2022, many countries increased incentive programs or proposed new government programs to help attract large OCMs. Some countries, like Japan, offered subsidies for OCMs that went in on new factories together for those that couldn't shell out billions.  

This includes Micron Technology and Kioxia’s agreement to expand production in Hiroshima. Japan committed $644 million to Western Digital Corp for Kioxia, and these plans with Japan increasing its subsidies as Micron pledged $320 million for the joint venture. TSMC pledged $7 billion, of which Japan’s government will subsidize half, for constructing a new manufacturing plant in collaboration with Sony.  

As reported by DIGITIMES, “Japan-based firms’ investments in their home market in 2022 were more robust than in years past.” The reasons for this include the Covid-19 pandemic and geopolitical unrest causing a rethinking of supply chain strategies, economic security, and depreciation of the Japanese yen. All this was done to fortify chip resilience after overreliance on one geopolitical area caused massive disruptions over 2020-2022.

However, thanks to the depreciation of the Japanese yen, while subsidies have now been made lower, the country is a far more attractive option, with initial costs to invest in facilities dropping. DIGITIMES explained that “shifting production back to Japan is more beneficial to the company’s operation as surging costs from transportation are far more expensive than those from investment in Japan…exports also enjoy enhanced competitiveness in costs thanks to the yen’s depreciation.”  

With chip demand remaining steady thanks to popular tools like ChatGPT, taking advantage of these opportunities before the window closes must be done now. A rebounding yen could present a possible challenge in the future, along with Japan’s low-birth rate limiting future talent pools. However, creating a stable foundation while the market is favorable would be far more helpful in the long run when establishing a resilient domestic supply chain. Sourcengine can help you secure the latter and diversify your sources to provide additional resilience.

A cell tower at sunset

U.S. Nurtures Semiconductor Ecosystem and GaN Chips Shine - March 10, 2023

Innovation that’s what’s on everyone’s mind. As the world grows its domestic semiconductor manufacturing facilities, so are countries allocating resources to chip research. Now that the chip shortage is easing, and it has been for the last few weeks, the industry is jumping headfirst into new chip applications left unexplored over the pandemic.  

And if the pandemic taught us one thing, it’s that constant evolution, not complacency with the traditional, is how the industry will survive future shortages. With all the gains in market share semiconductors saw over the pandemic, they are putting it toward growing a broader, more diverse supply chain in locations and products.  

The 2 Cluster U.S. Semiconductor Ecosystem  

Since the U.S. CHIPS and Science Act was initially drafted and up to its passage in 2022, the U.S. has seen an increase in domestic chip manufacturing facility plans. Over $200 billion has been invested and pledged to U.S. semiconductor capabilities, from new plant construction to research and design initiatives. U.S. states have passed laws to offer further funding to draw original chip manufacturers (OCMs) to their borders.  

Oregon is considering $200 million for incentives and forgivable loans for OCMs. New York pledged $5.5 billion in state incentives, and Michigan approved a series of incentives reaching over $800 million. Since the CHIPS and Science Act passed, OCMs have doubled, if not tripled, original investments. TSMC increased its investment in Arizona plants from $12 billion to $40 billion.

The U.S. is well on its way to increasing its global share of semiconductor production thanks to the CHIPS and Science Act. The few remaining challenges to accomplish this goal in the set time frame remain. Though with Silicon Valley’s layoffs, the labor shortage for tech-skilled talent in the U.S. might end.  

Secretary of Commerce Gina Raimondo, who has spent the last few years campaigning for the importance of regaining semiconductor manufacturing capabilities, recently announced another boon for U.S. semiconductor manufacturing. The Biden Administration plans to use CHIPS and Science Act funds to create “at least two large-scale logic fabs for the manufacture of semiconductors, along with multiple high-volume advanced packaging facilities by 2030.”

“Each cluster,” Raimondo continued. “Will include a robust supplier ecosystem, R&D facilities to continuously innovate new process technologies, and specialized infrastructure.” Raimondo reiterated the administration’s plan to invest $11 billion into a National Semiconductor Technology Center (NSTC). The goal of the NSTC will be to put the U.S. in a leadership position for next-generation semiconductor technologies, including quantum computing, materials science, and AI.  

“The vision for it is an ambitious public-private partnership…to innovate, connect and solve problems,” Raimondo said. “To solve the most impactful, relevant, and universal R&D challenges in the industry.” The project is already starting on a great note with the competition to become the state hosting any one of these powerful semiconductor fabs or one of the two clusters. Should states continue to provide extra funding on top of the CHIPS and Science Act, OCMs will likely construct more fabs domestically.  

The only remaining challenge is training the new candidates for these facilities as the U.S. talent pool is still low compared to other countries such as India and Vietnam.  

GaN Chips and 5G

Gallium nitride (GaN) semiconductors, the more recent contender to silicon carbide (SiC) and traditional silicon chips, have found their niche. GaN semiconductors and their wider bandgap properties have made a big splash in communication network applications. Compared to SiC chips, their smaller range has made them the go-to for mobile chargers, data center power supplies, and 5G.

Ideal for high-frequency and high-power applications, GaN chips are suitable for devices with 20-W, like cellphone chargers, to 20-kW, like power supply applications. Their thermal stability, high electron mobility, and high breakdown voltage make them the perfect partner for 5G applications. GaN enables faster data transfer speeds, improved efficiency, and high-frequency reliability. With their capabilities packed into one chip, the weight and space of equipment needed in 5G base stations are ultimately reduced.  

GaN chips are frequently implemented in other 5G tools, including high-power amplifiers, high-frequency power supplies, and voltage regulators to support 5G operations. Many suppliers are increasing their production of GaN-based power devices for successful 5G implementation for organizations.  

Qorvo, NXP Semiconductor, Infineon Technologies, Rohm Semiconductor, and others offer clients a line of GaN-based power products. Qorvo is the leading provider of GaN-based solutions for 5G networks and supporting products such as power amplifiers and front-end modules. NXP Semiconductor’s portfolio of GaN-based solutions is for 5G infrastructure and improved GaN technology, including multi-chip modules for energy-efficient mobile networks. NXP Semiconductor’s product line-up is expected to increase with a new GaN factory planned for Arizona.  

Infineon provides GaN-based power devices and modules for 5G infrastructure, including low-noise amplifiers and switches. Rohm Semiconductor provides high-electron-mobility transistors (HEMTs) utilized in 5G infrastructure. All of which offer the same high-power efficiency benefits that GaN chips boast.  

However, unlike silicon chips, the mass production of GaN semiconductors, while an overall less demanding process than SiC, still needs to be improved. GaN chips can be produced utilizing 500nm existing equipment, but GaN wafers are in short supply. Likewise, they are still relatively new to the market, so there could be unknown downsides to their reliability over long periods. Further research will be necessary to discover such possibilities.

That said, the U.S. is increasing the expansion of GaN technology with $4.3 million in funds allocated to start-up Finwave Semiconductor to expand next-generation 3DGaN FinFET technology development. As recently as January, Finwave joined the American Semiconductor Innovation Coalition to advance semiconductor research and development leadership. The market for GaN chips is expected to grow globally between 2023 and 2030 at a 25.4% CAGR.  

GaN will be the cornerstone of a connection revolution, and Sourcengine can help you get there.

A hacker using a laptop keyobard in the dark

Ransomware Attacks Continue Against Suppliers, More in Future? - March 3, 2023

As chip accessibility’s importance rises, cybersecurity risks increase in both frequency and danger. Chip manufacturers and their suppliers have a target on their backs! It doesn’t matter how large or small an organization might be. It's open season.  

Applied Materials recently announced that one of its suppliers was attacked with a very hefty resulting cost. The information the attack compromised was directly related to production and product shipping. The resulting delays and vast pool of affected clients will likely grow as this disruption resolves.  

It’s unlikely the ransomware attack on Applied Materials’ supplier will massively impact the recovering automotive sector. However, the increasing number of cyberattacks on chip manufacturers will likely indicate an alarming future trend. This comes as the automotive market is beginning its rebound after chip delays and the longer-lasting automotive chip shortage.  

Applied Materials Addresses Recent Supplier Ransomware Attack

Semiconductor manufacturing equipment supplier Applied Materials has recently revealed one of its suppliers suffered from a $250 million ransomware attack. The true extent of the damage is still relatively unknown and may end up costing more than the original estimate.

Applied Materials never named the supplier that was attacked, but industry experts believe it is the technology and engineering company MKS Instruments. The ransomware attack was discovered in early February, and MKS Instruments, not long after, had to reschedule its fourth-quarter earnings call. Applied Materials CEO Gary Dickerson announced that the disruption would likely impact Q2 shipments.  

MKS Instruments released a statement after the attack stating that they are entering the recovery phase. The company asserted that they are working “diligently to restore operations at affected facilities. The ransomware event has had a material impact in the first quarter on the company’s ability to process orders, ship products, and provide service.”

This recent ransomware attack is the latest in similar cyber-attacks on the semiconductor supply chain. Over 2022, there were 600 documented ransomware attacks through the industrial infrastructure sector, up 87% from 2021. That’s more than double, according to the cybersecurity firm Dragos. Worse is that 437 of these 600 ransomware attacks targeted manufacturing.  

In a further breakdown by the same study, 27 major ransomware attacks were on electronic and semiconductor manufacturers, including Apple supplier Foxconn. 40% of the ransomware incidents occurred in North America, meaning 600 247 incidents targeted U.S.-based manufacturers. A number that’s most likely to rise over the coming years as semiconductors dominate the priority list for governments worldwide.  

The world is already seeing a massive reorganization in geopolitics, and the global supply chain after accessibility to chips deteriorated during the global Covid-19 pandemic. World governments do their best to fortify domestic chip manufacturing and create multi-billion incentive plans. These attacks might become more common as chip manufacturers become attractive targets.  

Especially as technology becomes more integrated with all aspects of modern-day life, from healthcare to home comfort. Especially with the rise in electric vehicle (EV) dominance.

Auto Market Sales Rebound as EV Developments Continue  

Automotive chips might still face allocation issues, but an automotive market rebound is coming. EV popularity is still reaching new heights. Thanks to consumer downturns in other areas, chipmakers can divert more efforts toward increasing auto chip capacity. As competition heats up, other chipmakers are eager to cut a piece of the ravenous market demand.  

Taiwan-based ICT and electronic component manufacturers are preparing to increase production in a concentrated effort to become a part of the Southeast Asian (SEA) supply chain, with new manufacturing locations in Thailand, Vietnam, and Indonesia to bolster this competitive move forward. Taiwanese Apple manufacturer, Foxconn, has been moving toward becoming a well-known EV manufacturer.  

In a recent study by DIGITIMES, Foxconn was discovered to be a very competent EV maker thanks to the benefits the long-time electronics manufacturer already possesses. According to DIGITIMES, those benefits are supply chain management, large-scale production, system-level solutions, and capabilities to perform overseas production. Like the other chipmakers, Foxconn is increasing overseas production capabilities across the SEA supply chain. Recently, Foxconn has planned on setting up an EV production plant in India, Thailand, Indonesia, and possibly Japan for their prospective markets.  

With an EV-hungry population, China isn’t standing by the wayside either. After the national subsidy program ended in 2022, contributing to the EV momentum, Shenzhen quickly developed new financial policies. These new policies support the development of a new energy vehicle supply chain by 2025 from domestic components. These plans are boosted by the global auto market rebound happening within China.

As the critical pillar that supports the entire global market for new cars, China had a growth of 3.7% year over year (YOY) in 2022 while other countries saw declines. The new financial policies Shenzhen will be passing will likely drum up more interest among China’s consumers. The U.S., despite growing automotive costs, is quickly growing in confidence among consumers. The auto market, and more specifically, EVs are keeping chip demand afloat now that consumer product demand has dropped off. Which, in turn, is preventing the growing problem of excess components spreading too much.  

In any case, it might be another year of challenges, but the automotive industry is well on its way to stabilization sooner than later. For those having trouble finding some components to help sustain the hungry automotive sector, Sourcengine can help find your much-needed part.  

A silicon wafer being manufactured

As Silicon Valley Lays Off Hundreds, Chip Industry Stands to Gain Their New Talent - February 24, 2023

The semiconductor market is experiencing a steady drop in chip orders thanks to low consumer demand for tech products. This has led to hundreds of layoffs by tech giants to combat lost revenue. This unfortunate loss of thousands of jobs could be a boon to U.S. semiconductor manufacturing and the tech talent now out on their own.

The tech talent pool in the U.S. is small compared to other countries like China, India, and Vietnam, which have a large selection of candidates with years of experience. Usually, most industries within the U.S. lose out on hiring software-skilled workers thanks to tech giants quickly scooping them up after graduation. Now with the tech world cutting thousands of jobs, industries that previously didn’t get the chance to hire these savvy tech wizards do.

Chip demand, while low now, is expected to return to pre-pandemic levels sooner than later. With that in mind, it is pertinent that chipmakers building new facilities in the U.S. hire these newly available candidates. Their experience and expertise will be invaluable in building a solid U.S. semiconductor manufacturing foundation.  

As Tech Leaders Let Go of Talent, Chip Makers See an Opportunity  

Silicon Valley, home of defining tech giants like Amazon, Google, Meta, Salesforce, and Microsoft, has spent the first few weeks of 2023 slashing thousands of jobs. In an article by CNN, tech leaders from Mark Zuckerberg to Marc Benioff have cited “misreading pandemic-fueled demand for tech products” contributing to the job cuts.

While experts agree the current instability of the tech sector is nowhere near the intensity that followed the dot-com meltdown, the effects are painful and wide-reaching. For many years tech sector jobs have been seen as relatively safe positions thanks to tech’s continuous developments and necessity in the modern day. Anyone in any sector benefits from tech’s involvement within an organization, so it is a surprise that tech giants are slashing so many positions.  

Amid massive layoffs, tech-adjacent sectors are watching what was a slim talent pool grow larger. Eager to hire this oncoming wave of software-knowledgeable talent, start-ups, and even farm equipment manufacturers are doing what they can to entice former Silicon Valley employees to join their ranks. Offering remote work and other benefits, automotive original equipment manufacturers (OEMs) and other industrial OEMs are taking advantage of hiring tech experts that were previously unavailable to them before.

For original chip manufacturers (OCMs), this new wave of talent might solve the labor shortage the electronic component industry is experiencing, specifically for those in the U.S.

Over the last few months, OCMs that flocked to the U.S. after the passage of the CHIPS and Science Act have encountered a problem. The U.S. doesn’t have a large pool of tech experts readily available to work. Most of them worked for you guessed it, Silicon Valley, and those in school are often pipelined into positions within California’s tech metropolis. So, as these massive chip fab mega sites began construction, labor shortages stalled progress. After all, who's supposed to support the facility's processes and automated lines if there are simply not enough candidates to accept these roles?

The U.S. doesn’t have the same labor pool as China, India, and Vietnam, which are attractive destinations for OCMs. The solution was to automate semiconductor facility processes, so labor could still commence. Unfortunately, most automated processes need human supervision to monitor software and hardware. Artificial intelligence tools are advanced but still need humans to make final decisions.  

At least not before.  

The talent pool for U.S. tech experts is getting bigger enough to possess candidates to support chip-making facilities and research. While current semiconductor demand is low, industry experts see a rebound in late 2023 and 2024. That gives OCMs just enough time to bring in new candidates, train them and get them started before demand picks up once more.  

Silicon Wafers Make Records Despite Market Drops Everywhere  

The chips might be down, but only for a short time. In 2022, even with the slowdown in the latter half of the fiscal year, global IC wafer shipments increased by 3.9%. Revenue for wafer sales rose by 9.5%, supported by strong demand for 8in and 12in wafers in automotive, industrial, and IoT segments. 5G buildout also heavily contributed to the new records in 2022.

The wafer industry continued to advance despite global macroeconomic concerns, according to Anna-Riikka Vuorikari-Antikainen, the chairman of SEMI SMG and CCO of Okmetic. “Silicon shipments have grown nine out of the last 10 years, a testament to silicon’s central role in the vital semiconductor industry.” A trend that 2022’s chip sales reflected

Despite the ups and downs of 2022, chip sales reached the highest annual total. According to the Semiconductor Industry Association (SIA), a dive into the year-end data reveals that “this pattern is consistent with the semiconductor industry’s predictable cycle and why the current short-term downturn does not change the reality that long-term growth prospects for this foundational technology remain very promising.”

The current cause of the short-term downturn is due to a variety of contributing factors. As reported by SIA, increased inflation, geopolitical tension, and Covid-19 have led to macroeconomic uncertainty, decreased consumer spending, and fluctuations in semiconductor demand. The weaker industry growth in the latter half of 2022 was expected and did not change the structural drivers of industry growth. These pillars are expected to reassert themselves over the next year, more intelligent technology, efficient automated processes, and better connectivity.  

A joint study by the SIA and the Boston Consulting Group predicted that semiconductor manufacturing capacity will increase by 56% in 2030. That’s impressive if one looks beyond the negativity of the current short-term downturn. Demand for chips will continue to rise, and the SIA believes OCMs will need to invest more in research, design, and manufacturing to keep up. As the SIA states, “the question is not whether more chip manufacturing facilities, or fabs, will be built, but rather where they’ll be built.”

The SIA stressed in its article that the chip industry is notoriously cyclical and is prone to experiencing brief periods of weakness in the short term. Since chips are essential to emerging technologies such as AI, IoT, and 6G and contribute to breakthroughs in other areas such as medicine, their vital status and market domination are likely to stay the same.  

This contributes to finding and maintaining a skilled labor base to operate these fabs.  

Solar panels in the sun

Rebounds and Price Jumps Coming - February 17, 2023

Good news, here we come. After weeks of negative updates, a shiny silver lining is on the horizon. The automotive industry is still suffering from a chip shortage, but a rebound is coming. After years of production stalls and waiting lists, Chinese automakers are securing joint ventures to bring forth a wave of technological advances.  

These advances will bring new smart features to popular automotive lines over the coming years. This wave is expected to hit China’s automotive market first before branching out into the European Union and the entire Asian auto market. A welcome change to the unhappy twists and turns of 2022.  

As countries fortify domestic chip manufacturing, some components are increasing in price. Prices will jump for polysilicon, solar wafers, and other products as China considers a ban on solar panel product exports in the coming year.  

Automotive Market Is Picking Up After Months of Losing Ground  

The automotive industry is rebounding despite existing chip shortages. After several years of production stalls stemming from automotive chip scarcity, clear skies are on their way for auto original equipment manufacturers (OEMs). The rebound is expected to begin in China, where electric vehicles (EVs) are the most popular among the country’s population compared worldwide.  

Chinese automakers, BYD, Geely, Great Wall Motor, and more, have exploded in popularity over the last several years. Many of auto lines, especially BYD, have become favorites worldwide, with BYD taking Tesla’s spot in global sales over 2022. Outside of China, several prominent Chinese automakers have expanded into the European Union.

With Chinese automakers developing EVs at light speed along with wanted features, including autonomous driving, smart cockpits, and automotive connectivity, other automakers have scoped out new manufacturing plant locations within China.  

Volkswagen CEO Olivier Blume recently visited China to oversee its joint venture project in Shanghai, Changchun, and Hefei. When asked about the automotive outlook for 2023, Blume expects to see a strong rebound, specifically for China, in the second half of the fiscal year. With over 50 testing sites in China for autonomous driving, Blume sees great potential in China’s continued EV development. Volkswagen’s software subsidy, Cariad, is partnering with China-based Horizon Robotics further to develop advanced driver assistance systems (ADAS) soon as well.

Furthermore, Bosch China and Beijing Automotive Group (BAIC) are strengthening their ties to provide other high-end automotive solutions that will extend worldwide. Bosch has previously collaborated with BAIC on the supply of electronic fuel injection systems, chassis, smart driving systems, and other products. Bosch plans to extend its reach by dedicating $1 billion over the next few years to amplify its R&D efforts for electric and innovative mobility products.  

While the automotive shortage is still present, strides within China’s automotive industry will have ripple effects globally. All of which are positive. These developments will likely spread throughout the European Union, where BYD, Geely, and Great Wall Motor have established plants. Since China has a greater domestic supply of automotive chips, Chinese EVs will continue to dominate, at least for the next several years, in both sales and technological advances.  

Sourcengine will help clients get their hands on some of these remarkable developments as they occur over 2023. If you can’t find the part listing in our 1 billion part inventory, you can send our global team an RFQ for the needed component.  

Solar Wafers Are About to Get Way More Expensive  

Sustainable energy is on the rise. EVs continue to set record sales with each passing year, and manufacturers of all shapes and sizes are making strides toward a greener future. Sustainability isn’t a trend. It’s a necessity. Environmental protection, employee health and safety, and financial stability are what we all need. The best way to accomplish that is through green energy efforts, such as wind, water, and solar power.  

Solar power may become more expensive soon.  

Beijing is considering a ban on the export of technology used in solar panels. According to Reuters, the possible ban, which is still in talks, might cover the technology and machinery used to produce solar panel components, including large wafers, black silicon, and ultra-efficient silicon ingots. China currently dominates 75% of the global supply chain, which would dent the world’s push for green energy.  

This year, world governments have tried to protect their nation’s standing in the worldwide supply chain. Presently, China manufactures 79% of solar panel polysilicon, 97% of solar wafers, and 85% of photovoltaic cells, according to the International Energy Agency (IEA). In 2021, China accounted for more than 98% of global wafer production for the solar industry.  

China’s plan is nothing unexpected. The U.S. passed sanctions in late 2022, banning the export of advanced chip technology. Germany denied the acquisition of a semiconductor fab then the U.K. did the same. Frank Haugwitz, the senior advisor of Apricum Cleantech Advisory, was hardly surprised.  

“Such technology-related export restrictions are nothing new,” Haugwitz said, that China was planning to keep its lead in this part of the value chain. “If you take into account the years of significant investment in wafer R&D, this may not be surprising.”  

That doesn’t mean the move is without consequences for Chinese solar manufacturers. They will be limited to new wafer facilities and where they’re constructed depending on the finalized rules of a possible ban. A ban would also certainly slow green energy adoption worldwide but not bring it to a halt. The U.S. and EU have been planning tax credits and other incentives to boost domestic solar supply. While China’s bans would disrupt the existing solar supply chain, the recent push worldwide to fortify domestic production after the global semiconductor shortage only provides further justification for such decisions. Either way, prices for solar wafers and polysilicon, among other components, will likely rise over the next few years.  

Accessibility might stumble, but the push for green energy and sustainability won’t stop.  

Construction operations

Labor Shortages Halt Construction as Semiconductors Prepare for an Encore- February 10, 2023

The shortage is easing, but semiconductors won’t stay down for long. Experts see chips returning to high demand by mid-2023. Chipmakers that have spent the last few months cutting capacity have reached a fork in the road. This is seen best in the memory chip market.

The DRAM market’s original chip manufacturers (OCMs) are taking it slow, but the NAND market is far more fragmented. By cutting production OCMs will need to scramble when demand picks up. If OCMs don’t cut production, they’ll lose revenue while contributing to the growing problem of excess.

Despite incentive programs and subsidies encouraging their growth, semiconductor manufacturing plants are beginning to waver. The reason? Besides the dropping economy, there needs to be more experienced labor in the U.S. to keep these fabs running.

Construction Hits a Snag for U.S. Semiconductor Facilities  

Full steam ahead on semiconductor manufacturing facilities is now slowing down fast. As semiconductor demand drops and the shortage eases, the rush to quickly complete fab construction is growing less frantic. Most of that is thanks to the unexpected rise in excess inventory as the economic outlook worsened.  

Over the last few quarters of 2022, many OCMs saw a drop in orders. TSMC warned clients in June not to over-order as recession concerns, inflation, and shipping costs rose. When the back-to-school shopping season was a dud, clients quickly canceled orders, and OCMs cut capacity. The revenue lost in the final quarter of 2022 varies from OCM to OCM, but most saw billions slip.  

Going into 2023, many leaders are re-evaluating despite incentive programs and subsidies aiding construction plans for OCMs in the U.S. Raw materials for the construction of fabs and their equipment are experiencing shortages. Despite the overall easement from the chip shortage, raw materials and logistics challenges have not been abated. That said, stopping the plans is off the table. Semiconductors are expected to overcome this slump faster than expected, and these facilities will be necessary to keep up with demand.  

There are several more challenges beyond economic pressure impacting construction. Chiefly, there needs to be more construction talent. There have been no large-scale fabs constructed in the U.S. for over 20 years, and a tiny pool of builders with the expertise and capabilities. With so many fabs entering construction phases simultaneously, hiring construction talent creates competition between OCMs.  

Semiconductor manufacturing is an involved and delicate process that takes numerous steps. Without sufficient staff in this specialty, the fabs might lie dormant as labor is trained. Similarly, once the fabs are completed, the U.S. needs more technical staff to operate the facilities. China and India both have large populations of specialized laborers within their countries. Both were and still are more attractive to OCMs scouting locations for new facilities.  

Other concerns include greater emphasis on sustainable energy, supply chain complexity, federal and local incentives, and difficulties with performance management and execution. All of which impact fab construction during and after completion. Regional supply chains can still suffer setbacks, raw material shortages can delay construction, and meeting requirements to obtain incentives and subsidies.  

Despite the complications, the opportunity to transform fab construction is possible. Semiconductor manufacturing plants will continue to rise within the U.S., increasing the number of experienced construction and technical staff. As OCMs continue to build out facilities, the option to find more efficient ways will open, as well as creative financing and strategic negotiations for future plants.  

While the disruption is vexing after months of forging ahead, the snags impacting U.S. semiconductor fabrication plants will likely resolve soon. The opportunity to learn from these challenges will be more fruitful than damaging in the overall push toward growing semiconductor manufacturing.

Semiconductors Could be the Comeback Kings of 2023  

Global PC shipments were down by 28% in Q4 2022. Smartphone shipments slowed in late 2022 and hit a 10-year low, with China’s market alone with an on-year drop of 14%. The inventories for memory chips have tripled to record levels. The collective operating losses by Samsung Electronics and other OCMs are expected to reach $5 billion globally.  

The cyclical nature of the semiconductor industry is not new. Over its history, there have been many examples of its “boom and bust” tendencies, with examples of note being DRAM and disc drives. This current slump is much worse than a regular downturn causing many OCMs to aggressively cut production. Micron and SK Hynix are two large OCMs that reacted to the downturn quickly with production, budget, and construction costs.  

The NAND market, far more fragmented, is more mixed. DRAM OCMs are quickly reducing supply as the dominant suppliers, Samsung, Micron, and SK Hynix, set the pace. NAND recovery usually follows one quarter after DRAM, but there might be consolidation in the NAND sector if this glut continues. This is not an unexpected outcome, should it occur, as the DRAM market when through the same process after its large boom-bust cycle.  

That said, many OCM leaders are optimistic about the future.  

Some concerns remain. Pat Gelsinger of Intel and Michael Hurlston of Synaptics expressed trepidation over the shortage’s downturn. Worried that should semiconductor demand spring back, the global supply chain would be unable to handle the demand. ASML Holding CEO, Peter Wennink, spoke to CNBC about forecasted growth for the semiconductor manufacturing equipment maker.  

With an expected 25% in sales growth from 2022 to 2023, ASML is moving ahead.  

“Most of our customers tell us that they expect a recovery in the second half of this year,” Wennink told CNBC. Considering that the lead time for ASML’s equipment is relatively long, it makes sense customers, such as Intel and TSMC, aren’t canceling current orders. Especially with a rebound on the horizon.  

Developments on the rise in popularity will keep semiconductor growth alive when consumer demand bounces back in 2023. The largest drives of semiconductor growth are the metaverse, digital health, and e-mobility. Smartphones and other consumer devices will spring back into high demand later this year when Apple and other organizations release their new products ahead of holiday shopping.  

If semiconductors bounce back as quickly as we think, sourcing will become difficult after production cuts through early 2023. You must ensure your sources now or purchase from a global market distributor such as Sourcengine for components.

Manufacturing a circuit board

The Future of Semiconductors as New Technologies Rise - February 3, 2023

Shortage or no shortage, tech innovation moves at the speed of light. The shortage gave many the opportunity to explore beyond traditional components in their absence. Most semiconductors today are made from silicon that has gone through hundreds of processes, adding impurities and patterns to create a microchip. While silicon is abundant on Earth, the second most after oxygen, that does not mean it cannot run out.  

Researchers discovered far more energy-efficient elements that can be used as semiconductors. These advanced semiconductors, initially more expensive and less common than silicon, have quickly become more available.  

As their accessibility rose, so too did their use in numerous power applications.  

SiC and GaN: A Tale of Two Sustainable Semiconductors  

Silicon carbide (SiC) and gallium nitride (GaN), two semiconductor types racing to outmatch silicon, have entered mass production and are becoming hot market items. By 2027, according to market research by Yole, GaN and SiC will capture 30% of the power semiconductor market. Silicon MOSFETs and IGBTs usually hold that market share.  

GaN is a new contender in the power semiconductor market compared to SiC. SiC has been in production for over a decade, so “more power design engineers are familiar with it,” said Stephen Oliver, vice president of marketing at Navitas Semiconductor. However, GaN is catching up as a powerful alternative to silicon.  

According to Oliver, most SiC devices are available in three-pin packages that make them suitable for high-power and voltage applications. They are used in wind turbines, solar inverters, railway locomotives, and other vehicles. SiC semiconductors can serve applications above 1,000 V, making them prominent in traction inverters for EVs and high-energy grids. Many applications use SiC, and more facilities are under construction to produce SiC semiconductors.

GaN has a much smaller range, making them suitable for devices ranging from 20-W cellphone chargers to 20-kW power supply applications. GaN semiconductors are mainly used in mobile chargers and data center power supplies. However, GaN semiconductors have recently taken off in automotive applications, specifically their onboard chargers (OBCs) and DC-DC converters for EVs. Where GaN triumphs over SiC is that wafer capacity for SiC is limited. SiC semiconductors require specialized manufacturing processes, of which few facilities exist.

GaN semiconductors, while advanced, can be created using 500-nm processing equipment. “It uses equipment that is completely written down financially,” said Oliver. “And still offers very high quality and good capacity. China, Taiwan, and Korea have plenty of factories that offer and utilize such equipment.”

Both are still very new technologies that are rapidly advancing and diversifying in applications and design innovations, according to GaN Systems CEO Jim Witham. “Specific markets are shaping up for GaN and SiC devices, and there is some market overlap between these wide bandgap (WBG) technologies.” As continued innovation takes place and energy efficiency attracts large OEMs and OCMs alike, silicon, despite its uses, may fall further in market share.

Further adoption will continue as companies embrace greener and more sustainable technologies.

Germany’s New SiC Plant a Boon for Europe’s Semiconductor Capabilities  

Wolfspeed, a U.S.-based SiC semiconductor manufacturer, is building a chip manufacturing facility in Germany. The over €2 billion facility is set to begin production in four years and marks a significant step toward Germany’s green mobility and Europe’s overall chip industry. A minority stakeholder, German automaker ZF, will become a majority shareholder within the facility’s research center. The goal is to continue innovation and research into SiC automotive applications.  

While silicon carbide is still costlier than silicon, the new plant will boost Germany’s domestic car industry immensely. SiC chips have been proven to increase EV range, reduce charging time, and reduce operating costs from lower energy consumption. Tesla, a catalyst for the change from silicon to SiC chips was the first automaker to put SiC chips in a mass-produced car, specifically some Model 3s. SiC chips gained a much-needed boost within the EV supply chain, which has since gained traction.  

Infineon Technologies, in June 2021, unveiled a SiC module for EV inverters after Tesla’s move. Hyundai announced it would incorporate Infineon-made SiC chips into its next-generation electric cars. Hyundai would boast that Infineon's SiC chips resulted in a 5% range improvement in its EVs compared to those with regular silicon.

Wolfspeed’s new plant is surrounded by many of Germany’s EV production sites, including BMW, Ford, Mercedes, and VW. These automakers hope to secure a resilient supply of chips from Wolfspeed’s plant after years of shortage. Overall, Europe hopes Wolfspeed’s new facility and the European Chips Act will help increase its semiconductor manufacturing abilities. Europe currently only accounts for 10% of global chip production.  

SiC chips are now only twice as expensive as regular silicon compared to 5 years ago, when they were ten times as expensive. Sourcengine will help clients get their hands on these energy-saving chips as more enter the marketplace.

Plane flying overhead between buildings

Semiconductors Are Redefining World Economics, and Global Instability is a Symptom - January 27, 2023

The global supply chain finally has breathing room after years of disruption and a never-ending shortage. Now the shortage is easing, and we can all finally take a collective breath of relief.  

Right? Wrong.  

The shortage might be easing, but storm clouds are on the horizon. The world is prioritizing semiconductor manufacturing by building more facilities, but it’s still a far cry from the stability we need, as mounting geopolitics threaten recovery.  

Why have semiconductors become such a hot topic in world politics? Well, the shortage opened a lot of eyes to their importance.  

Semiconductors are Reshaping the World’s Geopolitics  

It should be no surprise that the last two years have taught the world a valuable lesson. In the modern technological age, semiconductors are the foundation of a flourishing economy. Everything from a smartphone to a coffee maker to a gasoline-powered car uses dozens, if not thousands, of chips.  

Across nearly every industry sector, production stopped during the semiconductor shortage. Even cars, which use an average of 1,600 chips, faced production stalls. Electronic product launches and employee onboarding faced delays from chip allocation challenges. Thousands of businesses closed their doors for good during the early months of the semiconductor shortage and pandemic.  

It cost the economy billions. The U.S. alone lost $240 billion in 2021 due to the semiconductor shortage. Automakers worldwide lost a collective $210 billion thanks to production stalls caused by the shortage. Many automakers are still hemorrhaging sales as ravenous auto demand remains high and automotive chips are still scarce.  

Worse were the impacts on medical device manufacturers from the shortage. ResMed, a San Diego manufacturer, could not obtain a steady supply of chips for its sleep apnea machine. This forced customers to endure months-long waits—effectively raising the mortality rates of many users.

Beyond that, many of us still remember the worse days of the Covid-19 pandemic, when life-supporting ventilators were in short supply for Covid suffering patients. The lack of chips contributed to the ventilator shortage.  

The shortage's effects woke many governments up to the importance of these tiny powerhouses. Pat Gelsinger, CEO of Intel, made the comparison that chips have become the new oil, defining world geopolitics.  

“Where the oil reserves are located has defined geopolitics for the last five decades,” Gelsinger said. “Where the chip factories are for the next five decades is more important.”  

The U.S., over the last few years, has begun to viciously claw its way back to becoming a top semiconductor manufacturing hub. After losing its previous nearly 40% in semiconductor manufacturing ability to a small 12%, with leading-edge chips dropping to a shocking 0%, the U.S. is fighting to regain lost ground. Many original chip manufacturers (OCMs) outsourced to the same geopolitical area for semiconductor manufacturing. That left the global supply chain prone to disruptions, which the Covid-19 pandemic significantly impacted.  

The CHIPS and Science Act dedicated $52 billion toward semiconductor manufacturing and research incentives. The introduction and passage of that bill incentivized many OCMs to begin projects within the U.S., gathering nearly $200 billion in new projects.  

The CHIPS Act isn’t the only step the U.S. has taken either. In October, the U.S. placed broad but extensive sanctions on China's semiconductor manufacturing to discourage continued outsourcing. The U.S. isn’t the only country chasing resiliency either. The European Union is looking to pass its version of the CHIPS Act to attract OCMs. Germany and the U.K. in late 2022 both denied the acquisition of domestic semiconductor manufacturing facilities by China-based companies. Both cited domestic resiliency and security concerns for the denial.  

And that only scratches the surface of all the government-sponsored programs worldwide to court big-name OCMs. This trend will likely continue, as Gelsinger said, far into the future due to semiconductors’ importance in the world today. The next few years will be very telling in the disruptions a new global supply chain will face.  

2023 is Starting on a Volatile Note. Can We Come Out Unscathed?

The shortage is easing, but the risk of disruption is only building. The disruptions to the supply chain we faced throughout 2020-2022 were novel in some cases and bad luck in others. The Covid-19 pandemic is nothing the world expected, and its impact, still entirely unknown, started the months of misfortune that still affect us today.

The disruptions that followed, though smaller scale to a worldwide pandemic, were normal expectations. Bad weather is uncontrollable, but when it happens, the effects can be contained and minimal. Fires at manufacturing plants are far more problematic but usually only involve the plant suffering from damage. Its ripples throughout the industry are small. A transport ship wedged in the Suez Canal? Unfortunate and entirely unexpected, but there are ways to work around it.  

All these events stacked together with a global pandemic? Far more extreme and volatile. Unfortunately, these happenings may become more regular than in previous years.  

The shortage is finally winding down, but we’re not out of the woods. The current state of the global supply chain is exceedingly fragile. Especially now that it's being reorganized after decades as countries prioritize domestic manufacturing and geographical diversification of suppliers. That is a prominent disruption on its own, and like in 2021 and 2022, more unpredictable events might stop recovery dead in its tracks.  

Bloomberg’s recent article “Energy, Chips, Taiwan: Flashpoints for 2023 in a Fractured World” named five concerning points that could have massive repercussions on the global supply chain. Those being Russia’s weaponized energy plan which disallows oil sales to countries participating in sanctions, the current battle for chips that led to U.S. sanctions on China, a possible war for Taiwan, the home of chip giant TSMC, subsidies for domestic manufacturing that put developing countries at a loss, and finally, the U.S. dollar’s reign.

These disruptions could have had a massive impact on the global supply chain. If these problems reach a tipping point and commence one after the other, the chip shortage might fall back to square one. Everyone in the global supply chain must take advantage of the current calm to strategize for a possible worst-case scenario.  

The best way to do that is through market monitoring combined with the help of a global marketplace. That way, you can have total visibility of market changes and risks to prepare long before it happens. With a global marketplace, even if your ordinary supplier gets cut off directly, you can still buy from them or others for the same part. The tools to survive another massive shortage are at your fingertips, available to you whenever and wherever you need them.  

An array of solar panels

Electric Vehicles Push Sustainable Energy Forward as MCUs Make Billions - January 20, 2023

A new year might be here, but one thing hasn’t changed: the world’s desire for EVs. Electric vehicle demand continues to reach new highs with record EV sales making 2022 headlines. One of the reasons the automotive chip shortage is still ongoing is that EV demand refuses to dip.  

As the world continues to go electric, the challenges with doing so are becoming a public concern. Despite electricity being more sustainable than gasoline, the traditional method of obtaining electricity differs. Rather than face that problem later, growing EV adoption pushes governments and companies to evaluate solutions now.  

With electric and innovative options rising in popularity after the pandemic, another market is also seeing long-term gains in its future, microcontrollers.  

Soaring EV Sales Open Paths to Sustainability  

If the world becomes increasingly dependent on electricity, how do we make enough of it without overwhelming power grids? Electricity availability isn’t a challenge for certain countries, it is a hurdle for everyone.  

Strained power grids lead to power cuts and blackouts. An overtaxed power grid can result in fires that can put human lives, structures, and the environment at risk. California’s wildfires have exposed how badly an old power grid can react to high demand. Electricity is created through various methods, most of which are traditional.

The traditional way of producing electricity is through coal plants, nuclear power, wind turbines, or gasoline. If the change to electric vehicles is supposed lower the world’s greenhouse gasses and reliance on fossil fuels, what’s the point if producing the electricity to fuel these millions of EVs does the same damage? The more EVs, the more this challenge grows.  

Thankfully, it’s a hurdle everyone is facing head-on. India, as an example, sees increasing EV sales as a great case to tackle sustainable energy in the country. India’s population struggles with blackouts and power cuts from overtaxed grids, relying on coal plants for electricity. The Indian government plans on making EVs achieve 30% market penetration by 2030. Doing so would double energy demand by 2040.  

According to Sunil Gandhi, the CEO of JLNPhenix Energy, “solar companies have a vast potential to deliver the additional energy demand created by EV adoption. It can be integrated into the national grid or come as a microgrid serving the cluster of EV charge points.”

The biggest challenge with implementing solar power on that scale is the infrastructure will take years to set up. Especially in a country with a large population, like India or China. That said, what better reason to start than doing so by growing EV adoption? Traditional gasoline-powered cars are slowly phasing out. Carmaker lineups are becoming increasingly electric, and EV sales have only increased despite the chip shortage.  

Legislation in many countries has gone from passing tax breaks for EV buyers to outright banning the sale of gasoline-powered cars by 2030-2035. These measures are likely to continue, and the electric vehicle market is getting more competitive as the years go on. Tesla was recently replaced as number one, with BYD taking the EV manufacturer crown in sales delivered over 2022.  

The push toward sustainable energy should be done in collaboration with EV companies. The collaboration will only provide more opportunities for competitive advantages in a rapidly evolving market space. Since solar companies can provide a broad range of solar products, it is more likely that the mutual growth opportunities for EV and solar companies are wide-reaching across international and local areas.  

The benefits of this collaboration would be the sustainable energy future many of us are working toward.  

MCU Market Booming Thanks to Smart Cities and IoT

Supply chain complications from ongoing macroeconomic and political issues might still affect the semiconductor industry, but the market for microcontroller units (MCUs) is stable. In the long term, the MCU market will grow, despite the minor hiccups affecting it.

According to ABI Research’s Trusted Device Solutions Research Director, Michela Menting, ABI’s latest report says the MCU market will reach $2.2 billion by 2026. “Due to the niche nature of security demand which commands a higher value proposition,” said Menting. “Supply chain issues due to trade embargoes and pandemic quarantines at manufacturing sites will affect availability. Yet, demand for security, especially in general purpose microcontrollers, will ensure the secure MCU market continues to be a high priority for OEMs.”  

Cloud and network services and security IP for provisioning and onboarding within IoT lifecycle management will contribute to a competitive market within secure MCUs. This strong demand comes from utilities and industrial IoT, and smart cities. “Specifically, MCUs with Trusted Execution Technologies that securely run high-sensitive and mission-critical applications,” according to ABI Research’s report.  

Smart cities and IoT applications will increase over the coming years, especially after lessons learned during the Covid-19 pandemic. The work-from-home (WFH) model showed how necessary cloud services are in any enterprise, pandemic or not. Further digitalization of workspaces incorporating machine learning or AI will only require more MCUs.  

Chip manufacturing reached nearly $200 billion from CHIPS Act

Demand for EVs Continues to Climb in 2023, and the U.S. CHIPS Act Courted Billions - January 13, 2023

Welcome back to Sourcengine’s coverage of electronic component industry news. While many of us got a break over the year-end holidays, the industry kept pushing forward to the last second of 2022. Despite remaining chip scarcity and excess stock concerns, there are some highlights to set 2023 on a good note.  

EV demand continues to outpace supply, and while that means another year of waiting for some anxious car owners, manufacturers are increasing their capacity to produce more EV components. That’s good news for many component manufacturers looking to focus on other areas now that personal electronic original equipment manufacturers (OEMs) are cutting orders.  

The world’s also gotten a taste of just how incentivizing their incentive programs can be! The U.S., since the announcement of the CHIPS Act, has received a flurry of interested semiconductor parties eager to build or expand facilities domestically. India and Vietnam, likewise, continue to court big-name suppliers for tech titans with their subsidy programs and skilled workforces.  

EV Companies See Booms in Europe and Asia from Insatiable EV Demand  

Everyone’s got a fever, and the only prescription is more electric vehicles. According to industry experts, automotive components are still scarce, and the price of cars will increase by 5-10%. Thanks to rising chip costs that took place through December and into January, car prices are still “grossly inflated,” said one industry expert to CNBC.

EV prices are down by 20% since their peak in July 2022, when gas prices skyrocketed. These prices are still far above average and will likely continue throughout 2023 before dropping once more. Voracious EV demand is contributing to fueling these costs, especially in Europe.  

China’s EV manufacturers are winning the EV game as they doubled their exports to Europe in November. Chinese EV battery maker CATL has started serial production of lithium-ion battery cells in Germany this January to meet EV orders. Europe is a major hotspot for EV automakers, with several plants in the surrounding area for Tesla, VW, and Mercedes. CATL hopes to capture a significant portion of the EV market with this new plant.  

Belgium and England made up the lion’s share of Chinese EV imports in 2022, with 70% of all imports split between the two. SAIC Motor, the Chinese owner of European MG Motors, recently expanded its European distribution network after seeing consistent sales gains.

Europe isn’t the only continent fueling EV mania as Southeast Asia (SEA) markets see continued year-on-year (YoY) growth. In Q3 2022, SEA saw 35% YoY, with Thailand leading the charge with the highest percentage of EV sales by 60%. While the EV market in SEA is smaller than in other regions, especially in comparison to China, demand is gradually increasing. Many countries within SEA are passing legislation to attract a more extensive client base to help demand continue flourishing.  

Demand continues to outmatch supply for EVs, despite slowdowns in certain countries such as the U.S. At this pace, the global EV market could reach a value of $128.13 billion by 2030, with a compound annual growth rate (CAGR) of 28.2% between 2022 and 2030. Some of the leaders within the EV market expected to play critical roles are BYD, Tesla, EVgo, and Hyundai. This opportunity is prompting original component manufacturers (OCMs) to quickly increase capacity for automotive components as scarcity continues to plague the industry.  

Though with incentive programs gaining traction, that problem might only last for a while.

$200 Billion in U.S. Semiconductor Manufacturing Thanks to the CHIPS Act

After passing the CHIPS Act in August 2022, semiconductor manufacturers didn’t take long to whip out the old checkbook. It will take some more time for the Act to finish implementation, but in the meantime, its passage has sparked a series of private investments into U.S. semiconductor manufacturing. Some projects, or at the very least the conception of such plans, began as early as the CHIPS Act’s introduction in 2020.  

Over 40 semiconductor projects have begun since the CHIPS Act announcement, including the construction of new semiconductor fabs, facility expansions, and the building of semiconductor manufacturing equipment facilities. These have helped the U.S. take huge strides at improving and increasing its previously diminished domestic manufacturing capabilities. With nearly $200 billion in private investments to increase U.S. semiconductor manufacturing, these projects will increase U.S. capacity for advanced logic, memory, analog, and legacy chips.  

Other companies that supply manufacturing equipment or raw materials for semiconductor production have also announced plans to invest in facilities to support semiconductor manufacturing. Many of these projects started construction in 2022, with production planned to start as early as 2024. Several groundbreakings will begin in 2023 as construction commences.  

With these continued investments, the U.S. chip ecosystem is on track to make a powerful comeback after decades of deteriorating semiconductor manufacturing capabilities. After the effects of the 2020-2022 chip shortage, chip accessibility is essential to a country’s economy. Without chips, economic strength depends on the global supply chain, a fragile beast prone to constant disruption. It’s why domestic manufacturing has become so crucial over the last several years.  

It’s why the globe, not just the U.S., has poured billions into domestic semiconductor manufacturing incentive and subsidy programs. Many countries that have passed this kind of legislation have seen massive gains since announcing these programs, not just the U.S.

India and Vietnam Continue to Expand Influence in Global Supply Chain

Overall, the Asian sector in the global supply chain saw exciting updates throughout 2022 and into early 2023. Vietnam and India were on the fast track in 2022 to becoming contenders for the title of global semiconductor powerhouse. Other countries, including Thailand, in the Asian theater, have also made great strides alongside these up-and-coming giants.  

With the help of Japanese and Taiwanese technologies, India will be seeing the first India-made memory ICs from Sahasra Electronics this month. The advance comes on the heels of Apple suppliers continuing to invest in northern India for business. Apple supplier Seiko Advance plans to invest $340 million in new manufacturing plants in Greater Noida. India recently approved incentives for Foxconn Hon Hai Technology India Mega Development, the Indian subsidiary.  

As a result, India will see a 10% growth in smartphone shipments over 2023 despite global inflation factors. This development comes on the heels of Ericsson, a Swedish telecommunications company that plans to ramp up production of 5G telecom equipment in Pune. India is quickly increasing its 5G network deployments with Indian telecom providers as Ericsson increases production. As India races toward first place in the Asian electronics market, Vietnam keeps a close pace.

Vietnam’s experiencing a quick pandemic recovery as its economy expanded faster than expected in Q4 2022. Gross domestic production grew by 5.92% in Q4 2022, more quickly than the forecasted 4.65%. Vietnam’s also won the attention of Apple supplier Foxconn, which will begin manufacturing MacBooks in Vietnam this year.

Vietnam, and India, are cost-effective options for chip manufacturers that, make them highly attractive manufacturing locations. Foxconn plans to manufacture more Apple products within Vietnam in the coming years. Beyond Apple, Samsung Electronics has reportedly prepared to invest $3.3 billion in chip manufacturing in Vietnam over the coming years.  

As more manufacturers move away from China and Taiwan to diversify manufacturing locations, Vietnam and India will continue to grow in influence over the coming years.  

A collection of images from 2022

State of the Industry Over 2022 and Happy New Year - December 23, 2022

The industry has experienced a lot over the last year. In 2021, big disruptions threw the fragile electronic component supply chain into a loop. Covid-19 lockdowns in China, followed by the invasion of Ukraine, turned recovery efforts upside down.  

The shortage is mixed as 2022 ends. Consumer electronics demand has quickly shifted from high to low, resulting in chipmakers slashing production, some by 30%, to avoid excess piling up. And piled up it has. TSMC warned clients in June to refrain from double-ordering or ordering excessively when it became clear that consumer demand was starting to drop. Whether or not they heeded the warning is unknown. What is known is the sudden successive cancellations of top clients for TSMC.

OCMs and OEMs are now dealing with excess stockpiles. For some, it is up to six months' worth. This is a massive change from earlier in the year when the shortage hit ASML Holding, and the lead time for chipmaking equipment jumped. The machines necessary to make more chips to combat the shortage were suffering from shortages in an ironic twist. Likewise, ASML Holding suffered a fire at one of its factories at the start of the year, which caused concern over recovery being possible. Luckily, it wasn’t too damaging.  

The industry is currently between two extremes, with companies swimming in too many chips. Those that aren’t, such as the automotive and industrial sectors, are bereft of chips. Further complicating matters are new sanctions placed on China by the U.S. regarding chips. The restrictions have impacted automakers who utilize older legacy chips, such as 90nm, rather than advanced semiconductors.  

All-in-all, it will take time for excess to be sold off and shortages to stabilize. During this time, manufacturers with excess stock must sell on a global marketplace. That way those lacking components that some might have in excess can obtain them. OCMs and OEMs are doing what they can to prevent either problem from spiraling out of control through production cuts and stalls when necessary.  

2022 was not full of negative news either. The year saw numerous countries planning or further contributing to incentive and subsidiary plans for chipmaking facilities. India, the European Union, the U.S., and China have passed bills or pledged billions to attract chipmakers to build domestically. Even chipmakers have invested billions into various facility plants throughout the globe, diversifying the global supply chain and fortifying domestic efforts.  

The shortage taught the world plenty of lessons, but the biggest would be how important chip accessibility is. The shortage's impact on every industry sector was nothing short of massive. Countries have been taking domestic production seriously to avoid a similar occurrence. With that in mind, it is no surprise that the programs are reaching billions and constantly being added to.  

That is where 2022 is leaving off, excess stock is growing but chipmaking facility plants and programs are pushing forward. It is unlikely that the industry will see a supply-demand balance across the entire industry over 2023. But if OCMs and OEMs continue to work together by not canceling orders and selling off excess, things will resolve much faster.  

As we begin 2023, Sourcengine will continue to help its global audience in sourcing hard-to-find components to keep their production lines going. This will be the final update of industry news for the year 2022. We will be back with the latest industry news in January to help you prepare for the upcoming challenges and mounting problems of excess stock.  

Happy Holidays to everyone and have a Happy New Year!

EV sales keep rising

EV Industry Has the Midas Touch and Predictive Analysis Will Mitigate Future Shortages - December 16, 2022

While the industry is suffering from weakening consumer demand, there is one sector that continues to make monumental gains in revenue year-on-year. That’s the electric vehicle industry. Even with some cuts in tax breaks and competitive pricing, EV purchasing continues to surge across the globe as other consumer markets suffer.  

The world is embracing a smarter and cleaner future with new technological breakthroughs. The most important for those in the electronic component supply chain is artificial intelligence and machine learning advances. Sourceability’s own Jens Gamperl spoke with Thomas Insights in detail about how predictive analysis will protect us from shortages of tomorrow.  

New Energy Vehicle Sales Rise as the World Embraces Clean Energy Vehicles  

New energy vehicles (NEVs), which include battery-electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs), and fuel-cell vehicles (FCVs) are in high demand. Global sales of NEVs rose by 70% YoY for the third quarter in a row. BEVs dominated global sales of around 2.2 million units for 75% YoY growth. PHEVs followed behind at 57% YoY, which is nothing to scoff at that’s for sure.  

With the automotive chip shortage still in full swing, it comes as a surprise that despite rising costs for automotive components and inflation prices, consumers are still eager to get their hands on an EV. This in part can be attributed to passing legislation banning the sale of gasoline-powered vehicles across the globe, increasing vehicle charging accessibility, and booming competition among EV manufacturers.

While Tesla takes the lead in BEV sales, BYD is quickly closing the gap. Many Chinese EV companies have risen to the top over the past year with sales increasing in Europe. BEVs have become hot-ticket items in China, something that can be attributed to the government’s recent NEV subsidy program and the rising battery-swapping industry. There is yet to be a country that outmatches Chinese consumers with their growing enthusiasm for EVs and electric transportation.  

Though other countries are quickly jumping on the bandwagon. In the UK a recent surge for EVs boosted the UK new car market by 23.5% in November 2022. This surge occurred despite recent removals of tax breaks for EV owners, such as the road tax exemption for EVs. Further cuts to tax breaks are expected but experts believe that half of all new vehicle purchases in the UK will be EVs by 2025.  

Beyond the finished product, EV-specific technologies such as traction motors, magnetic materials, battery box cases, and more are seeing huge percentages of growth over this year and into the future. If it goes into an EV, it’s going to see continued positive market growth in the next decade. That’s even with the electronic component market seeing declines in revenue over 2023.  

Can Technology Predict Future Shortages? You Bet!

By land, by sea, and by air, Jens Gamperl, CEO of Sourcability, has seen global supply chain logistics problems impact every link in the long process from raw materials to functioning electronic products. With 70% of U.S.-based manufacturing companies investing in reshoring or nearshoring capacity, supply chain resiliency is a top priority. The best way to help manufacturers from ODMs to OEMs and every company in between is to digitalize.  

Why? Intelligent data and predictive analytics will be key to making smart business decisions before the worst can happen. If you need an example of what happens without those tools, you need not look any further than the last few years. The 2020-2022 chip shortage was and still is bad, but the shortages of tomorrow could make this one look like a walk in the park. That’s if steps aren’t taken to prevent such occurrences now.  

Part of that solution is localizing manufacturing and focusing on plans that prioritize self-sufficiency. There is a vulnerability that comes from how often transportation is required along the supply chain, the Ever Given in the Suez Canal and rising gas prices from geopolitical tensions are prominent lessons. Onshoring is just one of the many pieces of the overall puzzle. The largest and most effective one is using tools to predict supply chain disruptions before such events occur.  

Artificial intelligence (AI) and machine learning are highly effective means to achieve greater supply chain visibility and data. There is no comparison when it comes to how much data a computer can process in the same timeframe human analysts could. AI and machine learning can pull from mountains of data and easily predict and minimize future disruptions. This is done through predictive analytics, a subset of machine learning that uses historical data to formulate a mathematical model to predict future events from important trends.  

How does that help the global supply chain? Gamperl said it best, “some of the largest manufacturers of electronic components on the whole planet have all this information, and they are working with ERP systems, with PLM systems, to collect this data and use this data, then to make these predictions.” As technology advances it will only get better at using existing data and historical trends to more accurately predict what happens.  

As of today, most digital tools, especially market analysis applications, offer great transparency of the global supply chain. Even now, a company can better prepare for component risk and obsolescence management with market intelligence tools like Datalynq.  

Black Friday sales reached big heights

Sales Boom Over Black Friday and Trepidation Sets in as 2023 Creeps Closer - December 9, 2022

2023 is only a few weeks away and with it comes both excitement and anxiety for what awaits us in the new year. Recovery of the global supply chain is on everyone’s wish list and with growing fears of excess, that might just be a gift that’s not under the tree this year.  

Concerns over growing stockpiles transforming into excess have been piling up. Back-to-school shopping had marked a poor turn-out with low consumer demand. Worries that holiday shopping would reflect the same poor numbers had PC manufacturers racing to advertise promotional cuts. Based on Black Friday and Cyber Monday, those plans might have paid off.  

That said, well-performing sales don’t mean we’re out of the woods yet. 2023 might bring less consumer spending if everyone empties their wallets now. If that happens, that might lead to a monumental surplus across all sectors of industry.  

Black Friday Success Gives Hope to Future Promotional Cuts to Ward Off Excess  

PC demand might have spent the last few months dropping, but even inflationary prices didn’t stop this Black Friday from being a success. In the U.S. alone, Americans spent an average of $325 USD on holiday purchases. This is up 8% from 2021, an unexpected increase as consumer spending power has weakened.  

According to the Wall Street Journal, more shoppers were out in stores over Thanksgiving than last year. Many retail experts are taking this as a sign that consumers are returning to pre-pandemic shopping behavior. Between Thanksgiving and Cyber Monday nearly 197 million shoppers in the U.S. visited stores or shopped online.  

As a result, the jump is expected to total between $942.6 billion and $960.4 billion. The almost four-decade high inflation will no doubt contribute to this increase in total money spent. National Retail Federation CEO, Matt Shay, says the weekend’s large sales reveal that Americans, despite inflation, are eager to take advantage of bargains and deals.  

Shay sees continued increase in spending over the coming weeks as the shopping season isn’t done yet. A bigger turnout is expected if certain factors continue, that being a strong job market which is currently trumping recession fears. While Americans are spending big, that doesn’t mean they spend without thought either. The better the sale, the more likely consumers will spend.  

This is good news for the PC market that has been slashing production amid growing excess stock. Planned promotional cuts should be taking place throughout this month and, if the deal is good enough, a spike in demand from holiday shopping could eat through excess stock.  

While the outlook is good, there are still worries that once the shopping season ends the period that follows could be one of little to no consumer demand. As Shay says, this might be a case of “by now, pay later.” NAND Flash revenue was down 24% in Q3 2022, and DRAM sales were down 40% in the latter half of 2022.  

Excess, despite this peak, is still a major concern for OCMs and OEMs alike. Covid-19 lockdowns in China have been rising and while U.S. sanctions have already disrupted that area of the global supply chain, these lockdowns might be a powerful second blow. With excess stock already casting a massive shadow, mitigation and selling off excess should be a top priority.

Crystal Ball Forecast: What Will 2023 Bring to the Supply Chain?  

The forecast for 2023’s electronic supply chain is anything but stable. The automotive semiconductor shortage, Covid-19 lockdowns, and recent legislation have continued to wreak havoc on the supply chain. Its fragile recovery has faced disruption after disruption over the last few years. At the start of 2022, on the verge of Ukraine’s invasion, no one knew how the year would exactly end.  

Now, with 2022 almost over and 2023 about to begin, we’re all wondering what the next year has in store. As it turns out, expectations of what could happen are mixed depending on what industry you’re looking at.  

While predictions on when the shortage would and will end have been consistently mixed, there is one underlying truth. Closure of the supply-demand gap continues to shrink, even if it is centimeter by centimeter. Shortage persistence continues, that’s true, but despite the disruptions of 2022 none have sent the global electronic supply chain spiraling backward. Barring any major economic disruptions, we should stabilize through 2023 in most sectors.  

Automobiles, unfortunately, will continue to grapple with chip scarcity. Most other sectors could be forced to reckon with a large surplus of semiconductors before there is even a chance to balance supply and demand. Excess is set to become the next global supply chain villain in the coming year.

Selling it sooner rather than later, while the shortage still lingers, is an advantage you don’t want to ignore.

Mushrooms in electronics? More likely than you think!

China Striking Out in Europe as Scientists Find New Semiconductor Material in Mushrooms - December 2, 2022

Circuit boards made from bonafide toadstools, actuators that utilize the walking dead, and layoffs at Nexperia Newport are how the industry is kicking it off in December. Talk about a nightmare before Christmas!

In a continued effort to restore domestic semiconductor manufacturing, the European Union is looking to pass their own Chips Act in 2023. Like many others, the EU hopes that the investment of $43 billion euros will bring chipmakers back to the continent. While Europe waits for that measure to pass or those not in the EU that means taking drastic measures now.  

What are those measures? Blocking and reversing previous sales of chipmaking facilities to outside nations.  

Nexperia Denied Purchase of Welsh Semiconductor Firm

Last week, Germany denied the sale of Elmos Semiconductor’s wafer fabrication plant to a subsidiary of China-owned Sai Microelectronics. The decision was made due to “security concerns” and a desire from the German government to be far more critical of purchases in sensitive areas of business, like semiconductors.  

This week, the Department for Business, Energy, and Industrial Strategy (BEIS) in the United Kingdom blocked the complete takeover of the largest producer of semiconductors in the UK by Chinese-owned manufacturer Nexperia. The semiconductor plant at the center of this debacle, Newport Wafer Fab in South Wales, was bought by Nexperia in the summer of 2021 for $63 million. The plant, renamed Nexperia Newport, has been operating under this new arrangement since 2021.  

Now, in a final order given by the BEIS, the secretary of state cites national security concerns about such a takeover. In a statement by the secretary of state, “technology and knowhow that could result in potential reintroduction of compound semiconductor activities at the Newport site, and the potential of those activities to undermine UK capabilities,” contributed to the decision. The UK government has ordered the sale to be reversed and is now investigating the matter.

The sudden reversal has shocked Nexperia’s UK boss, Toni Versluijs, who plans to appeal the decision. While Nexperia Newport is not the largest chipmaking facility on a global level, the concerns about the takeover revolve around the future of the UK’s chipmaking industry as some products are used in defense. Something that could be influenced by a company’s ownership under a geopolitical rival.

These actions, while sudden, do not come as a complete surprise. Over the last few years, countries across the globe have been doing what they can to bolster domestic semiconductor production. Reliance on one geopolitical area, that being Taiwan and South Korea, has been looked at more critically since the global semiconductor shortage threw the global supply chain into disarray. As a result, many countries, including the UK, have been doing what they can to protect and expand what number of chip-making operations they have.  

Like the U.S., the European Union is currently hearing a proposal on its very own Chips Act which aims to address semiconductor supply shortages and funding to the industry. The proposal is seeking to gain a $43 billion euro investment to revitalize Europe’s semiconductor industry. As companies and governments alike wait for these new laws to pass, it is clear actions like this might become more commonplace.  

The downside to Nexperia Newport’s sale reversal would be the loss of jobs that comes as a result. However, revitalization efforts within the semiconductor industry will increase jobs in the market sector. As those projects wait on the sidelines, the loss of jobs might continue in the intermittent. It is unlikely the job losses will continue throughout domestic semiconductor improvement.  

After all, advances are still happening every day within the industry.  

Form-Fit-Function Fungi? Scientists Make Chips Out of Shrooms

You read that right, scientists have found a new alternative to plastics in batteries and circuit boards in forest fungus. As scientists strive for cleaner and renewable energy sources, researchers at Johannes Kepler University, Austria, found a solution for non-degradable materials in electronics.  

The replacement for plastic in flexible and stretchable electronics, mushroom skin.  

This was not an out-of-the-blue decision to experiment with mushroom skin either. A team member had been studying the use of fungus-derived materials in various areas. Particularly, that of the Ganoderma lucidum mushroom. Its skin proved to be a candidate for a substitute substrate in electronic components.  

Team leads, Doris Danninger and Roland Pruckner, discovered that the Ganoderma lucidum mushroom forms “a compact protective skin made of mycelium, a root-like network, to protect its growth medium.” While less insulating than plastics, the mushroom skin provided a safe and successful environment for the electrical circuits. The skin can withstand temperatures exceeding 200 Celsius or 392 Fahrenheit with a thickness like paper.  

Biodegradable skins, like mushrooms, would be a sustainable and degradable material for short-lived electrical circuits. The environment needed to grow these mushrooms is as green as the skin substrates themselves. Typically, mushrooms require wood to provide a stable growth environment and there is plenty of waste wood in the world if this ever scaled to a mass-production level. Though, the team acknowledges that it is far off in the future.

Sustainability in electronics is not limited to substrates made from organic material either. As clean energy initiatives continue to rise across the globe, electric vehicles being an example of this rising trend, so too do the efforts to explore more sustainable options.

Perovskite solar cells are far more powerful conductors than silicon. Since its own scientific breakthrough in 2013, researchers and manufacturing startups have worked hard making this sustainable option closer to a mass-produced reality. Today, companies like Oxford PV that has created perovskite solar cell panels at its factory in Brandenburg an der Havel, Germany.  

Most of these efforts in sustainable alternatives to plastics, silicon, and other materials have had some measure of success. The challenge lies within the feasibility of mass production for these materials. Perovskite and mushroom skin have proven themselves to be not only capable of reproducing the same results as their counterparts but are also more efficient.

The drawback is how practical these alternatives can be overall. An example that stands out is the use of dead spiders as necrobiotic grippers by researchers at Rice University, Texas. While the results of the study are immense to the study of necrobiotics in real-life scenarios, as the sider gripper could easily manipulate the moving of components on a circuit board, the practicality of a mass-produced effort is insurmountable.  

There is hope that with these studies the research might lead to another alternative that lies somewhere in between. Where a new material that possesses the efficiency and sustainability of the current material, such as mushroom skin, can be developed from these current tests. The new material might not have all the same capabilities as mushroom skin, but enough paired with some degree of biodegradation to replace harmful plastics.  

It will take some time to see, but these efforts are not only promising but happening more often. 2023 will no doubt have some of its own surprises up its sleeves.

Asia-based EV companies take world by storm

Germany Seeks to Fortify Domestic Resiliency as Asian Companies Target EV Dominance - November 25, 2022

The challenges of the shortage are still being felt today. As the market suffers the sudden change from scarcity to abundance, domestic semiconductor manufacturing and its importance remain at the forefront of everyone’s minds.  

As chipmakers grapple with constraints and excess across the market, plans to increase facilities remain unchanged. In some cases that means purchasing existing facilities rather than constructing new plants entirely. However, it might not be that easy as world governments become increasingly concerned with bolstering domestic capabilities.  

Germany Blocks Sale of Chip Facilities to China-Owned Dutch Chipmaker  

Fortifying domestic semiconductor manufacturing has become a topic of economic and security importance for numerous countries. Germany is no exception. The German government has announced its recent prohibition of Chinese-subsidiary Silex purchasing German chipmaker Elmos Semiconductor’s wafer fab plant which focuses on automotives.  

Germany’s economic minister, Robert Habeck, reported that while Germany desires to build a stronger relationship with China it should be done on a broader level. The country plans to exercise “particular sensitivity” on transactions in critical sectors, such as semiconductors. This comes as no surprise after Covid-19 lockdowns in China devastated the global supply chain.

This decision came after Germany’s chancellor, Olaf Scholz, said “that Germany needs to lower its reliance on China in areas that are risky and one-sided,” as reported by The Register. The statement by Scholz went on to say that investments should be scrutinized, and the country’s supply chain broadened.  

The German government’s decision comes on the heels of Taiwan’s $3.5 million investment in Lilit a Lithuanian startup. This will be part of three planned investments by Taiwan in Europe’s high-tech industries totaling $10 million. Taiwan’s Industrial Technology and Research Institute will be working with Lithuanian electronics manufacturer Teltonika. The focus of these partnerships will center around semiconductors, EVs, and laser development.  

U.S. sanctions and the German government’s refusal to the purchase has increased China’s frustrations. On top of this, U.S. sanctions have cut off China from ASML Holding NV, one of the few manufacturers of sophisticated lithography machines necessary to make midgrade semiconductors. ASML also manufactures one-of-a-kind equipment that makes the most cutting-edge chips.  

ASML has reported that the total impact of U.S. sanctions on China will only impact 5% of its backlog. Most of its advanced ultraviolet lithography machines aren’t sold to China anyway, only its older machines, so it’s unlikely this will have a major effect on either company or the country. However, this does add to China’s struggle to break into the European electronic market.  

While these minor stumbling blocks are frustrating now, it is likely they will become more impactful as EVs continue to rise. Since EVs utilize more of these advanced chips access to wafer fabs and equipment like ASML’s will be necessary.  

Asian Chip Companies Dive into EV Market  

Automakers have been facing the brunt of the shortage for the past few years. Whether gasoline, electric, or both, demand for vehicles has done nothing but boomed. Despite the shortage and its impact, consumers are eager to get their hands on a new car.  

EV sales continue to climb. Even during the worst lows of the shortage and even still as automakers grapple with continued allocation issues, consumers continue their orders. Due to the unprecedented level of demand, hundreds of eager car buyers are currently on waitlists. It is unknown when their purchase will arrive, but a guess is anywhere between 2024 to 3 years from being placed on a waitlist.  

Due to this demand, OEMs are investing in increased production to quickly catch up. Japanese MLCC manufacturer Murata plans on investing $305 million for the construction of a new factory in Jiangsu, China. This is part of Murata’s decision to begin increasing MLCC capacity by 10% annually. As of December 2020, Murata Manufacturing has been devoted to extending its automotive market portfolio.  

Taiwan’s Apple suppliers, Foxconn and Pegatron, have taken steps over the last year to break into the EV industry. Last year, Pegatron’s $164 million investment was just the beginning of its foray into the EV landscape. Foxconn is looking to continue building supply chain resistance and finds that producing components for EV manufacturers, like Tesla, is the best way to do it.

China is currently dominating the EV market sector as enthusiasm for electric transportation is unmatched by any other country. With continued support from the government in its regulations and policies for EV adoption, the automotive battery management system has spiked. Chinese battery manufacturer CALB has leaped to new highs as battery swapping, a big aspect of China’s EV scene, grows in popularity.  

Alongside CALB is EV manufacturer and power swapping station start-up NIO, China’s EV powerhouses are making waves in European markets. With so many players leaping full force into the EV market, chipmakers are racing to increase capacity for EV components. This relief will hopefully catch up with demand as consumer product orders drop overall.

A series of promotional price cuts for holidays

A Christmas Miracle? Chipmakers Cut Prices for Shopping Season to Unload Excess Inventory - November 18, 2022

The results are in! Q3 revenue and global sales were not kind to chipmakers and PC OEMs alike.

Suppliers have experienced negative year-on-year (YoY) growth across the board. Only a few suppliers saw positive growth from underlying circumstances. To combat these losses and get rid of excess inventory, many PC vendors are considering a series of price cuts and promotions for the upcoming end-of-year season. Though, there might not be enough holiday magic to pull off that kind of Christmas miracle.  

Series of Price Cuts Might be Coming Before New Year  

Weak consumer demand has been rising for the past few weeks. Now, as the end-of-the year shopping season has come along, PC suppliers are looking to launch a series of price cuts to clear out excess inventory.  

According to EE Times, “global PC shipments have fallen 15% year-on-year in Q3 2022.” This drop in demand is being attributed to the continued weakness in the consumer market from inflation costs and worries of a recession. Since this drop has resulted in some component shortages being resolved, original equipment manufacturers (OEMs) and original design manufacturers (ODMs) aren’t too generous for their view for Q4 2022 and Q1 2023.  

Despite promotional activities from large scale OEMs, PC purchases continue to dwindle. Suppliers will resume destocking rather than adding more inventory even as the holidays arrive. This is due to the back-to-school season, another peak sales season for PC devices, falling short this year. The same results are expected for the upcoming end-of-year shopping.  

Economic uncertainty among promotional price cuts has affected the PC market revenue by lowering average selling prices (ASPs). Many PC vendors have seen negative growth throughout Q3 into Q4. HP saw a 26.5% YoY decline in Q3, and Dell saw a 20% YoY decline. Lenovo saw 16% YoY from enterprise spending offsetting the weak consumer demand.  

Apple was the only one that came out of Q3 higher with 7% YoY growth. This can be attributed to Apple’s product launch in late Q2 once shipments refilled after China’s Covid-19 lockdown. Though even with this slight sunny spot, experts believe that recovery for the PC market won’t be possible until the latter half of 2023.  

Experts say the PC products that will make it through Q4 2022, and the first half of 2023 will be Arm-based PCs and gaming PCs. Now that consumer demand is softening, highly sought items that have been on backorder for the length of the pandemic will become more readily available such as Microsoft's Xbox and Sony’s PlayStation.  

While the outlook is guarded, refocusing on enterprise targeting and spending has aided PC vendors to survive the lows of the Q3. By shifting promotional efforts to a different market sector, there is a chance the blows expected of Q4 could be significantly lessened.  

Keeping an eye on market trends will be necessary for the next few months. Demand, as it has done throughout the last few years, can change almost overnight. Having the tools to monitor the market and sell unneeded excess, if necessary, will help manufacturers get through this hectic holiday season.

TSMC Remains Confident for 2023 Amid Sales Drop, New Facilities Continue Construction

Semiconductor sales continue to take a dive.  

As of Q3 2022, semiconductor sales were down 3% in comparison to last year and 6.3% from earlier this year. TSMC has been affected by a slew of canceled orders from many of its top 10 clients, more than expected throughout Q3. This is a result of “a range of macroeconomic headwinds,” said John Neuffer, the Semiconductor Industry Association (SIA) president and CEO. Despite these negatives, both TSMC and Mr. Neuffer remain positive.  

“The long-term market outlook remains strong,” Neuffer continued. Boosting this assessment are record-breaking highs for silicon wafer shipments in Q3. SEMI statistics reported that worldwide silicon wafer shipments reached a new record high of 3.74 billion square inches (MSI). This is up 2.5% YoY according to Anna-Riikka Vuorikari-Antikainen, the chairman of SEMI SMG and CCO of Okmetic.  

“The silicon industry continues to show quarter-over-quarter shipment increases,” Vuorikari-Antikainen said. “As the role of silicon wafers is fundamental in the broader cyclical industry, we remain confident in long-term growth.”  

Semiconductors rely on silicon wafers, the fundamental building material for most semiconductors. If this market continues to reach new highs, it is unlikely that the semiconductor industry as a whole, despite the downturn, will fall for long. In fact, it’s not hurting everyone to the same extent either.  

NXP Semiconductor has experienced revenue growth throughout Q3 thanks to their diversified portfolio of industrial, automotive, and consumer chips. While the 5nm nodes used in consumer products, like Apple phones, are falling, the 90nm nodes used in automotives are still in high demand.  

It should come as no surprise that despite the negative sales growth of semiconductors, plans to forge ahead with new facilities have not stopped. TSMC has just recently finished its $12 billion dollar plant in Arizona and is expected to start production of Apple’s A- and M-Series chips in 2024. Coming on the heels of this project is Arizona’s newest investment plan to continue to boost its semiconductor manufacturing facilities.  

Arizona’s $100 million investment will be used to fund building out the state’s infrastructure alongside its skilled workforce. These steps will aid in the research and development of semiconductors.  

Even with the latest impacts from softening demand the semiconductor industry will recover. In the meantime, during this period of excess, selling it off is the fastest and easiest way to recover lost cost. During this holiday season, as other OEMs enact protocols to digest inventory, others that are still having trouble obtaining chips can do so at lower cost.  

The easiest way to buy excess inventory at low prices? Through Sourcengine’s digital marketplace.

Demand for SIM cards is dropping

The Chip Shortage is Quickly Becoming a Chip Glut - November 11, 2022

Shrinking consumer demand that started trickling in during Q3 2022 has grown into a tsunami-like force. Chipmakers are facing a plethora of canceled orders as chip orders change from a hot ticket item to an untouchable abundance.  

Globally shipped orders for PCs and other consumer electronics, such as smartphones, are reducing previous expectations of possible growth and shipments. 5G chips are expected to plunge by 100 to 120 million units as consumer spending decreases resulting from inflationary prices.

Concerns over a shortage-turned-glut have given way to an actual period of glut that’s arrived far faster than expected.

Shortage Turned Glut Throwing Wrench into Vulnerable Recovery  

Now the tables have turned, chips that were sparsely available only a few months ago have become excessive. As if overnight, semiconductor manufacturers went from being sold out to dealing with “unsold stockpiles” of inventory. Chipmakers struggling to find production capacity are now dealing with shrinking demand and canceled orders.

Even TSMC, which came out of Q3 2022 better than its competitors, is facing significant reductions in orders from tech giants Qualcomm, MediaTek, and more. These manufacturers are dealing with up to “six months of stockpiles” from the peak of the shortage in 2021 and, at the time, soaring demand.

These supplies could last manufacturers well into 2023, if demand had continued onward. Now? These chips might deteriorate before they ever have the chance to go to market. Prices for components haven’t dropped either, warding OEMs off and rushing to cancel existing orders. For those that can’t large amounts of excess inventory are piling up leaving many struggling of how to get these unwanted chips off their hands.  

For the many struggling with excess inventory, there are ways to sell it and recoup costs. In order to regain most of the cost, OEMs with too much inventory must act sooner than later to get their excess to market. For those that don’t know where to start, some digital component marketplaces can help.

Despite these complications, chipmakers including Intel, Micron, and Texas Instruments are not slowing down in new facility plans. Even with excess piling up, semiconductors will always be needed and getting these facilities online sooner than later is still a top priority. Some market sectors will be grappling with the shortage for another year to come, such as automotive OEMs.

To prevent a stressful period of excess from derailing recovery, manufacturers across the global supply chain should work together to send excess inventory to those that are still battling constraints. If you don’t have the time, find a seller to do it for you.  

Softening Demand Hits Phone SIM Cards

Globally shipped SIM cards will be down 8.5% year-on-year in 2022, thanks to continued constraints and Covid-19 obstacles. The biggest hurdle comes in the form of rising average selling prices for SIM cards as a result of inflation. Worries over a global recession have impacted the demand for phones and most consumer electronics.  

With the reduction in consumer spending power, the large portion of sales that usually comes from consumers within the SIM market will be nothing short of impactful. The market is already adjusting for 2023 by lowering its year-on-year growth expectation of 7.2% to 1.8%.  

Beyond inflation and continued supply chain constraints comes another issue, that of Apple’s new eSIM-only smartphone devices. The 14 Apple eSIM-only devices will be limited to the U.S. after their launch in the fall of 2022. How the eSIM-only smartphone will impact the SIM card market is unknown and it will take a year of their release in the U.S. to gain a better perspective.

However, if that succeeds, Apple plans to expand the eSIM-only smartphone range into other global market regions. Should that occur the SIM card market will be facing significant reductions in global shipments. During the first year of Apple’s release in the U.S., alone experts forecast SIM card supply to drop between 50 to 60 million.  

If that is only the tip of the iceberg, we need to start preparing the life jackets now.  

Passive component demand is falling

Passive Components See Demand Drop and Component Research Takes Off - November 4, 2022

Demand slumps continue to build across the electronic components industry. This month passive component suppliers noticed a decrease in demand for customer orders. As with other consumer electronics trends, this revelation is not entirely unexpected. The downward trend is in response to recession concerns, but sanctions have exacerbated China’s drop in chip imports.  

In North America, the U.S. organization American Semiconductor Innovation Coalition (ASIC) prepares to announce its semiconductor research proposals. These proposals aim to take advantage of CHIPS and Science Act funds set aside for component research. This comes at the same time the U.S. space industry announces their upcoming research on transistors for spacecraft power efficiency.  

The drop in consumer demand might be able to reallocate chips to other sectors that have been struggling for the last few years, including aerospace. However, complications may still arise during this geopolitical fragile environment. To avoid further complications, experts are telling supply chain professionals to digitize so trouble does not occur.  

Passive Orders Slow and China Stops Battery Orders Amid Crunches  

Passive component suppliers, including American Taiwan-based manufacturer Yageo, are beginning to experience cooling orders.  

As inventory adjustments begin with many mass-market ICs, many experts see the consumer electronics industry facing corrections throughout the first half of 2023. As this happens passive component suppliers like Yageo, have seen commodity products fall 50-60% in Q3 of 2022.  

Experts predict that MLCC and chip resistors will continue to see capacity and average selling prices (ASPs) drop over 2023’s first and second quarters. Uncertainty over the pandemic and electricity use restrictions combined with Covid-19 lockdowns in China alongside inflationary pressure has resulted in an uncertain outlook for 2023.  

Yageo saw an increase in its cumulative 2022 revenue of 14.1% but, like other passive suppliers, is unsure of 2023’s turnout. 25% to 30% of its total revenue comes from Yageo’s passive lines and dropping demand might have a greater impact than previously expected. Yageo and other passive suppliers are ramping up shipments for automotive applications, as automotive OEMs are still hunting for chips.  

By refocusing their production on automotive components, Yageo and other passive suppliers might lower or nullify the lost revenue from their passive lines over 2023. This refocus would help mitigate some of the possible production stalls automakers have planned for 2023.  

One step forward but two steps back. China-based suppliers have stopped taking new battery orders amid automotive chips and battery delays. This battery shortage rose in 2022 as the Chinese energy industry rapidly developed. The batteries currently in the highest demand are 280Ah battery cells that utilize fewer components than 50-100Ah cells, which saves on costs.  

Unfortunately, many automakers, such as EV battery manufacturer CALB, use these components that go into the batteries and the batteries themselves. While stopping orders will prevent further disruption within the supply chain–erasing the chance for companies to double orders which leads to more strain–production stalls might be inevitable.  

Experts forecast that shortages of the future could be long-lasting and more impactful than the 2020-2022 global chip shortage. We are still struggling with the effects of this shortage and will for some time to come. As technology continues to improve and become further integrated with numerous industries consistent strategizing and monitoring of market trends will be even more pertinent.  

The U.S. Prepares to Hear Semiconductor Research as Space Industry Eyes Transistors  

The American Semiconductor Innovation Coalition (ASIC) is preparing to lay down its proposal for the $11 billion investment of the CHIPS and Science Act. The ASIC is an association of over 150 technology companies, U.S. national laboratories, universities, and nonprofit organizations involved in semiconductor manufacturing.  

All members of the coalition worked together to develop a plan on how the National Semiconductor Technology Center (NSTC) and Advanced Packaging Manufacturing Program (NAPMP) will be implemented. The NSTC and NAPMP along with three new Manufacturing USA Institutes is where the $11 billion in funds will be invested.  

The ASIC plans on utilizing existing resources that support the research, development, education, and prototyping of semiconductors. These resources are the Albany NanoTech Complex and SUNY Poly’s College of Nanoscale Science and Engineering. These sites will be used with large semiconductor partners including IBM, GlobalFoundries, Samsung, ASML, and Lam Research. With this aid, the Department of Commerce Industrial Advisory Committee member and Vice President at IBM Research, Mukesh Khare, believes the NSTC and NAPMP will be completed and equipped in a quick six-month period.  

These existing and established facilities will decrease the cost and time it would take to construct new ones. IBM’s involvement is expected to add decades worth of leading semiconductor research to the program to build upon immediately. These recent steps come timely as U.S. military researchers begin to inquire about radiation-tolerant high-voltage transistors with high performance and small size.  

These transistors are to enable high-conversion-ratio-point-of-load power converters for the space industry. This project, called the Space Power Conversion Electronics (SPCE), has been announced by the U.S. Defense Advanced Research Projects Agency (DARPA). The challenges of this project, and for many components utilized in the space industry, are to achieve both high-performance and high-voltage while being radiation-tolerant.  

Most components that are tolerant of aerospace conditions are limited in overall point-of-load efficiency to less than 60%. To avoid burnout these radiation-hardened silicon lightly doped-drain MOSFET (LDMOS) transistors operate at maximum voltage far below the device’s breakdown voltage.  

SPCE is looking to overcome these technological drawbacks and is calling on researchers to investigate possible alternatives which includes gallium nitride (GaN) and silicon carbide (SiC) that have greater bandwidths than most LDMOS.  

With both the SPCE and ASIC developing proposals for future component research, the U.S. is taking a running start to reestablishing itself as an electronics powerhouse.  

Supply Chain Trouble Solved with AI and Analytics  

The global supply chain of electronic components is both a fragile and complex beast. The semiconductor shortage throughout the pandemic illustrated just how intricate the supply chain is. Winter storms, fires, Covid-19 lockdowns, and more had long-lasting impacts on the supply chain’s ability to recover.  

Due to the vast quantity of data that makes up the supply chain, it is difficult to keep track of current complications while forecasting potential future challenges. Unexpected events happen and will continue to do so. These can take the shape of weather conditions, trade bottlenecks, and labor strikes. Any one of these can result in disruption and decrease the efficiency of a supply chain’s operation.  

In the face of such unpredictability, using tools to sort through such data and offer solutions to possible disruptions is imperative to make smart and effective decisions to combat headaches. Data analytic tools that provide insights into market trends can help supply chain professionals build supply chain resilience.  

Visibility and transparency are key as lack of which usually comes from incomplete data. AI and analytic tools can provide a much wider range of visibility that can spot certain opportunities, such as users that lack components and those that have too much. These opportunities can help resolve supply chain issues quicker and with users struggling from either lacking or excess inventory.  

As technology becomes more advanced, the use of smart tools to keep track of the extreme amount of data will be necessary. AI and other analytical tools can sort through data faster and more efficiently in greater volumes. As the supply chain recovers, companies and other supply chain professionals should implement and adopt these tools now.  

So that when complications arise in the future, one is prepared and ready to understand the information provided. The other option if you do not have the time? Find a market intelligence tool that takes little time to learn and use.  

Chip production tools

First Made-in-India Chips Rollout as EV Sales Dominate in Europe - October 28, 2022

Global recession fears might have cost semiconductor manufacturers big in shared market value, but that doesn’t mean the bad times will stay forever. Semiconductors are a necessary cornerstone in dozens of industries and will continue to be so as technology advances. As such, even with cooling demand, many countries are still bolstering incentives to draw chipmakers to their shores.  

India has been working hard to attract numerous clients with incentive programs and subsidies. Recently, an Indian-based company took the first step to help launch the country closer to its semiconductor goals. Meanwhile, recession woes have done little to dampen the mood in the EV market.  

Electric vehicle sales are expected to grow larger year after year as many automakers shift gears to an entire lineup. Some are doing better than others. While the world works toward stabilization from the effects of the shortage, it’s important that auto brands embrace electricity sooner than later.  

If not, they might just be left in the dust.  

Polymatech Kicks-off India’s Semiconductor Production

The first made-in-India semiconductors are being rolled out in Tamil Nadu, where India’s own Polymatech has started production. While on its initial run, the company’s main manufacturing plant in Kancheepuram, Tamil Nadu is producing over 400,000 chips daily. Chips that have already being released to the market.  

Polymaytech plans to increase production steadily until it attains its planned output of 1 million chips per day. Annually, Polymaytech wants to produce at least 300 million of its opto-semiconductors and memory modules. These chips are also completely packaged in both high temperature co-fired ceramic substrates (HTCC) and chip on board (COB). These chips and their packaging were designed and developed by Polymatech.  

This is a huge development in India’s plan to become a self-sufficient semiconductor hub in the future. Polymatech’s aims are to become one of the largest chip manufacturers in Asia by 2025, bolstering the Indian government’s goals. On top of the growing list of companies looking to extend their reach into India's large economy with trained personnel, Singapore’s IGSS Ventures is looking for an Indian-based partner for its foundry fab investments.  

India is quickly becoming a competitive destination for dozens of electronics manufacturers setting their sights beyond traditional locations, such as China. After strict Covid-19 lockdowns disrupted production in many of China’s provinces, many companies are diversifying their supply chains. As the second-largest market in the world for domestic smartphones, bigger players like Apple, Samsung, and Google are eyeing the generous incentive program.  

With other electronics manufacturers close behind, Apple plans on starting production of the newest iPhone in India in 2023. India could reach their goal of expanding electronics manufacturing from $75 billion U.S. now to $300 billion annually by 2026. India will have to keep advertising itself as a solid location for manufacturers as other countries, like Vietnam, are working to increase their own global output.

Renault Sees EVs Reach 40% of Total Car Sales

An EV tomorrow becomes more and more likely every day. As automakers slash production across the board, the demand for electric vehicles grows by contrast. French carmaker Renault has recently reported a startling increase in their EVs and hybrids through 2022. Electric vehicles and hybrids made up 40% of total sales in Europe, double what it has been over the last 2 years.

Fabrice Cambolive, Renault’s COO, told reporters during the pre-Paris auto show that the brand would be well-positioned to manage its shift to electric vehicles by 2030. As of Q1 2022, the electric vehicle lineup makes up a third of Renault’s models which is up from the quarter they possessed in 2021.  

Renault’s new strategy for electric vehicles is something other automotive titans are looking into ever since Tesla and Chinese EV makers started dominating in Europe. With further changes coming in EV legislation, like Europe’s planned ban on gasoline-powered vehicles by 2035, legacy automakers like Stellantis and Volkswagen that have been losing to EV newcomers must adapt.

The expected slowdown of demands, fueled by global recession fears, will only temporarily affect electric vehicle growth. This upward momentum is forecasted to rocket as developments are made in EV battery range, charging stations become more available, and more bans are signed into law across the globe. Chinese manufacturers, in contrast to European EV leaders like Volkswagen and Mercedes, are continually launching wide ranges of new and affordable electric cars.

Renault, Volkswagen, and Mercedes are closer to the higher end of the market, while foreign brands such as Great Wall Motors' European brand Ora attack the lower end of the market. However, with a wide range of EV models, brands like Ora are positioned to tackle any sector of the EV market. These competitions are planned to increase once automotive components continue to stabilize as the shortage winds down.  

How Sanctions are Impacting the Semiconductor Market

Last week, the semiconductor market lost a combined $240 billion in market value. Weakening demand set the stage for a drop in chip sales but a significant blow came from new restrictions placed on China by the Biden administration. These sanctions dealt a massive blow to both the Chinese semiconductor industry and the global chip market.  

These sanctions have had immediate effects on numerous electronics manufacturers. ASML Holdings, a company that designs and manufactures the tools that go into making semiconductors, immediately cut ties after the sanctions were enacted. California-based KLA Corp. and Lam Research Corp. have both suffered since the restrictions with both ceasing installation of equipment for Chinese chipmaker, YMTC. American talent based in China are leaving or have left former positions at the risk of losing citizenship if they remain.  

Companies that still wish to continue exporting or purchasing from China will require licenses to do so. The reason the effect of the Biden Administration’s sanctions has been so far-reaching is the intricacies of the global supply chain. America might not have the semiconductor manufacturing prowess as before, but many leading-edge chips are designed by American companies. It is very likely that most chips produced around the world use some kind of tools or design an American company has made.

As one of the most complex industries out there, in both volatile market conditions and 500 processing steps, it’s not surprising that these sanctions have delivered such a massive blow. While the semiconductor industry is tenacious in its ability to recover from shocking upsets, this one will take time to adjust to.  

A line of empty EV charging stations

China’s EV Plans and Billions Lost from Chip Makers - October 21, 2022

The tides are starting to turn. Chipmakers are seeing large drops in revenue and sales as 2022 ends. While some manufacturers are faring better than others, changes are being felt all over the electronic components industry and beyond. Signs of a global recession appear week after week, but the semiconductor industry will still grapple with constraints from the shortage throughout 2023.

As chip sales cool, EV continues to grow, as it did throughout the shortage. An EV future is coming and for some countries, it is already here. The challenges of today won’t be tomorrows. We need to look at the shifts happening in the market to prepare.

How China is Preparing for an EV Future

Legislation and financial incentives have encouraged and boosted the sales of electric vehicles over the last few years. Even with the effects and delays of the semiconductor shortage, demand hasn’t lessened but bloomed. The European Parliament is considering a law to ban the sale of gasoline-powered cars by 2035. California and New York have already passed similar laws that ban the sale of gasoline-powered cars by 2035.  

China’s Hainan Island will be the first province in the country to ban the sale of gasoline and diesel-powered cars by 2030, joining the ranks for an electric future. Global sales of EVs surpassed 10 million in 2022 and are expected to reach over 65 million by 2031. As governments continue to pass laws that limit or prohibit the sale of gasoline-powered cars, demand will only grow.  

As of right now, many countries aren’t prepared for the infrastructure of an electric future. The roll-out of charging stations has been a constant thorn in the side of every region that wants EV accessibility. Though some are doing far better than others. China, Hong Kong, and Taiwan have the lion’s share of installed charging stations.  

The Netherlands, Germany, the United Kingdom, and France together make up 10% of installed EV charging stations and connectors. At 5% are the combined numbers of South Korea and the U.S. It’s important to note that China’s charging stations are only single connectors, as opposed to multiple connectors used in the U.S. and Europe, due to regulations. Volume alone, however, doesn’t solve the problem.  

There might be a solution that tackles both the charging wait time problem and the single connector issue. It’s called battery swapping and it’s a large business in China. It’s faster than charging wait times and easier to have numerous batteries at a station where Chinese charging stations are limited to one connector.  

Battery swapping is one way China is tackling the challenge of EV rollouts and new infrastructure. These solutions are not one-size-fits-all either. The U.S. is unlikely to use battery swapping to the same extent China is due to the country’s own regulations as it would require EV manufacturers to standardize battery design or make vehicles “swap-compatible.” Start-up NIO Inc, a battery manufacturer focused on battery swapping, continues to grow with help from government subsidies.  

As China continues its foray into battery swapping to solve the EV charging challenge other countries similar in both economy and population, such as India, are taking note. A few other battery-swapping companies are beginning in Europe and the U.S. but are nowhere close to the same 2 million swaps NIO Inc has completed.  

As EV use continues to rise it will be important to watch what each country and their respective provinces or states do to aid consumer adoption. If we can all learn from trial and error now, there will be a far less rocky road ahead of us.  

Plunges in Orders and Drops in Earnings Worry Semiconductor Manufacturers  

Concerns about a global recession are increasing as semiconductor manufacturers see a “breathtaking” drop in demand. Samsung Electronics and Advanced Micro Devices (AMD) posted disappointing numbers as they missed third-quarter sales goals. The signs are piling up that an economic downturn is in the future. With that comes sales slumps and another problem, what to do with the excess chips.  

AMD forecasted a $6.7 billion target for Q3, this week that dropped to $5.6 billion. The company cites soft PC chip sales that have dropped 40% year-over-year in Q3. Samsung Electronics saw a 32% drop in operating income. While not all bad, as embedded processing chip sales rose 29%, these drops are exacerbated by rising material and shipping costs.  

Companies that hoarded chips during the shortage are now canceling or postponing orders in the face of weakening demand. To add to that, restrictions on exports from China by the U.S. have cost the global semiconductor market value $240 billion in losses across shares in South Korea, Japan, and Taiwan. Geopolitical challenges are only the tip of the iceberg for the industry’s problems.

Texas Instruments, NXP Semiconductor, and Microchip Technology are close behind as Citi cuts estimates on their earnings forecasts. The concern, like with Samsung and AMD, is the glut that is soon to follow once the shortage ends. PC shipments have been seeing the worst numbers since the 90s with little to no hope of reversal.  

TSMC, which came out of Q3 better than most, had warned its clients in July of excessive inventory. Many chipmakers, TSMC and AMD among them, had warned of a grim outlook for the latter half of 2022. Signs of those predictions coming to fruition continue to roll in. Excess will be a challenge after the shortage, whether it ends tomorrow or in 2024.

Despite cooling demands, we are not out of the shortage yet. As we end 2022 and go into 2023 it is pertinent to keep a close eye on market shifts to formulate a plan. One of the problems that caused the shortage was the number of canceled orders by companies expecting weak consumer demand. If we don’t want to repeat history companies need to watch the signs, fulfill orders not cancel, and prepare for any outcome.  

We’ve gotten through the worst of the shortage, and we will get through the uncertainties of the future.

A crane lifting construction materials

Semiconductor Giants Are Investing Big to Lure High-Paying Buyers - October 14, 2022

The semiconductor industry is a big business. In 2021, the semiconductor industry made over $595 billion in sales with 26.3% growth from 2020. Electronic components of all shapes and sizes will continue to be used to an even greater extent than they are now each passing year. Why? Simple.

The world continues to embrace digitalization. Digitalization includes automation and AI software, which saves both time and increases cost-effectiveness. The semiconductor industry will remain a billion-dollar industry for the foreseeable future. No matter how different the semiconductors of tomorrow may look.  

This comes with a catch. In order to make billions in sales, most semiconductor manufacturers must spend billions to do so. Semiconductor facilities take talented and skilled staff to run the expensive machines used to craft these tiny powerhouses. The semiconductor shortage showed world governments how important these tiny components are to national and economic security.  

Lucky for them, many semiconductor manufacturers are ready to expand their operations across the globe.

Micron Pledges in New York, Texas Instruments in Texas, and Japan Builds Up Foundries

Micron announced on Tuesday, October 4th, 2022, that it plans to spend upwards of $100 billion in the next 20 years. The goal is to build a large factory in upstate New York. This deal is a good sign that the federal incentives put in place by the CHIPS and Science Act are working. As the $52 billion dollar package of grants and subsidies should help Micron with its goal.

Chief executive of Micron, Sanjay Mehrotra, said: “without the CHIPS Act, we would not be here today.”  

Micron plans to build in Clay, New York with preparation for the site beginning in 2023. Over the next 20 years, Micron says the project will generate over 50,000 jobs in total with up to $500 million to be spent on community and workforce training. New York pays one of the highest incentive packages at $5.5 billion for support and is no stranger to semiconductor manufacturers.

Micron would be among GlobalFoundries and before that IBM in Albany, New York. Meanwhile, Texas Instruments has started to expand its facilities in Richardson, Texas.

The new fabrication plant, called RFAB2, will be another 300-mm wafer fabrication plant. It will be connected to the first plant, RFAB1, and boasts 15 miles of automated delivery systems to move wafers between the facilities. The Richardson fabrication plants are reportedly set to manufacture more than 100 million analog chips a day.  

This isn’t the only plant Texas Instruments has in the works either. There are 6 plants in the pipeline that will stretch across Texas from Dallas to Sherman with one plant going out of state to Utah called LFAB.  

The U.S. isn’t the only one pushing for increased domestic semiconductor production either. After talks between U.S. Vice President Kamala Harris and senior executives from a dozen Japanese technology groups in relation to the CHIPS and Science Act, Japan will increase subsidies up to $320 million to Micron.  

In July, Micron pledged $644 million to Western Digital Corp and its partner Kioxia for expanded production in Hiroshima. It will be joining TSMC which pledged $7 billion for the construction of a manufacturing plant in Japan in collaboration with Sony. The Japanese government has agreed to subsidize half of the $7 billion investment.  

Though building new manufacturing plants isn’t the only thing these semiconductor manufacturers are investing in.  

Samsung Electronics Introduces 5-Year Plan to Catch TSMC’s Lead

In order to pull ahead in the race to the top, Samsung Electronics announced on Tuesday, October 4th, 2022, that it will triple its advanced chip capacity by 2027 to meet demand. The technology Samsung is aiming to produce is transistors that are only 1.4 nanometers wide. Executive Vice President Moonsoo Kang said the company plans to triple its revenue by 2027 from numbers in 2021.

The plan to get there? Making technological leaps and more inroads in the U.S. market for outsourced chips. This will be done by starting mass production of the second-generation 3nm chips in 2024 followed by 2nm parts in 2025. Then finally the 1.4nm chips will follow two years later.  

Part of this plan is helped by the decision to manufacture in the U.S. as Samsung starts to develop a new plant in Taylor, Texas. Samsung has an existing plant in Austin, Texas but this new plant is likely to be devoted to the 3nm technology goal.  

Samsung Electronics is trying to play catch-up with TSMC after the latter scored a deal with NVIDIA to produce the RTX 40 graphic cards which require a 4nm process. Samsung Electronics is coming in late to the foundry business but believes 3nm production will be the game-changer. The company has poured 3 times the resources into 3nm production than earlier tech generations.  

TSMC is still the favored heavy-weight champ in the chip-making business. Things change and by 2027 there might be a new favorite depending on how these plans turn out.

An image of numbers on the DOW Jones board

Government Incentives to Aid Semiconductor Manufacturing but Will it be Enough? - October 7, 2022

It costs a lot to build a semiconductor fabrication plant. Everything from the equipment to the personnel that them are short supply but high demand. To invest in that kind of project it’s going to be a pretty penny. For the past few years and after the extreme effects of the chip shortage, world governments are finally putting the money where their mouth is.  

Administrations around the world have been formulating incentive plans to attract large-name clientele. These efforts to establish a domestic semiconductor presence are in the billions. India made the news last week for raising its former $10 billion investment to $25 billion. China has spent upwards of $180 billion since 2015 in support of domestic semiconductor fabs. U.S. Congress recently authorized the passage of the America Competes Act which includes the $52.7 billion CHIPS Act.

Time will tell if these plans are enough.

What Does the CHIPS and Science Act Mean for the U.S. Domestic Semiconductor Industry?

The CHIPS and Science Act has one fundamental goal: to bring U.S. semiconductor production back home. Early this year, the Biden Administration discussed the importance of semiconductor accessibility in the State of the Union Address. Secretary of Commerce, Gine Raimondo, called it a “national security risk,” urging Congress to act.

Now the CHIPS Act has been signed into law. So, what does that mean for the semiconductor industry in the U.S.?

For starters, it means Intel will be fulfilling its promise to dedicate $100 billion toward its planned mega-site in Ohio. In the State of the Union Address President Biden made earlier this year, Pat Gelsinger pledged $80 billion on top of the $20 it planned should Congress sign the Act into law.  

The CHIPS Act is part of a larger bill called the America Competes Act which possesses over $250 billion in funds. $54.2 billion will be subsidized for chip plants as well as chip research and development. There will be a 25% tax credit for the building and equipping of these chip plants which equates to $24.3 billion in support. That’s quite a start.  

The U.S. Department of Defense (DoD) is praising the passage of the CHIPS Act. While the concern over chip accessibility was already a concern of the DoD, the shortage reignited those fears. Hopefully, those concerns will be doused soon as Intel began construction in Ohio on September 9th, 2022. The Biden Administration hopes the CHIPS Act will increase production back to 1990s levels.  

U.S. chip production in the 1990s was around 40%. Now it is barely 12% with leading-edge chip development coming in at a startling 0%. The change was mostly due to government incentives in other countries that drew manufacturers away from the U.S., which previously had none, in the first place.  

Should there be this much concern over foreign vs domestic chips? The answer is a resounding yes. An investigation done by the U.S. Department of Commerce, found that over-reliance on foreign chip supplies resulted in heavy tolls to the U.S. economy.

The CHIPS Act has already started to draw in some big names to the U.S. Such as TSMC. The Taiwan-based company has already started building in Arizona. As groundbreaking begins across the country, more might be looking to join in.  

Though this might not come at a good time.

Intel, NVIDIA, and More Semiconductor Players Take a Dive on the DOW  

Global sales of semiconductors are starting to slow. The large percentages of year-to-year growth we’ve gotten so used to are beginning to dip into single digits. As sales drop so do numbers on the Dow Jones, and everyone’s taking the hit.

Intel, NVIDIA, and AMD, all semiconductor rivals, have dropped 50% in the past few months. This decline is all thanks to a variety of things. Supply shortages aren’t good for anyone, even if semiconductor sales have been the strongest they’ve ever been in the last few years. The Covid-19 lockdowns in China only added stress onto a fragile and recovering supply line.  

Worse still are the concerns of a global recession sparked by inflation costs driven by the war in Ukraine. The Philadelphia Semiconductor Index or SOX is down nearly 40% this year. All thanks to a myriad of supply chain disruptions that have cooled the demand for semiconductors.  

This could be further proof that the semiconductor shortage we’ve all had to live with for so long might soon reach supply-demand stability. While there’s no guarantee, as market stocks usually fair the worst in September and October, manufacturers could use the slump to play catch-up. Especially if a global recession does occur within the next year.  

A global recession isn’t the only concern that chipmakers are having to deal with now either. As manufacturers adjust to inflated prices, some companies are flat out refusing to pay the hikes.

Apple to TSMC: No, We Won’t Pay Your 6%  

No, that’s Apple’s reported answer to TSMC.

In August 2022, TSMC was rumored to be taking price hikes into consideration. The semiconductor shortage and the new rising inflation has already spurred other manufacturers to raise their product prices. Some even started to do so in 2020. TSMC? Not so much.  

In fact, TSMC has been very slow to raise their prices over the past few years. The original planned price hike was that of 6% to 9%, depending on the fabrication process. This was later revised from 3% to 6%. The more advanced the chip the higher the percentage increase.  

These plans were expected to go into effect in 2023 but have rolled out a few months sooner. This isn’t a completely out of the ordinary action, but Apple’s reported answer does come as a surprise. Which brings up another question. If Apple flat-out refused the price hike what does that mean for TSMC’s other clients?

Apple makes up 25% of TSMC’s orders, which makes its response, if true, a little harder to negotiate around. This answer, according to some, isn’t unexpected. Apple reports less-than-stunning sales numbers for the iPhone 14 this year and might be covering for the lost revenue.

It is important to note that neither company has released any official statement on the rumor.

As the year comes into its final three-month sprint, the forecasts for the industry change daily. It will take more developments and keen eyes to prepare for what 2023 might have in store.

Funding Increases for Semiconductor Manufacturing Across the Globe – September 30, 2022

Semiconductor manufacturing has become a hot topic over the past few years. The pandemic-fueled shortage of electronic components has put a spotlight on the once overlooked importance of these small powerhouses. In the months since, having uninterrupted access to chip production has become a prominent issue. While world governments have given corporations access to incentives for increased production in the past, the number of programs along with their budgets currently are breaking into multi-billions.  

India’s Semiconductor Investments Reach $25 Billion

Junior IT minister Rajeev Chandrasekhar reported on Wednesday, 9/22, that the total investment India is now expected to court will hit $25 billion. As explained in an article by Reuters, the incentive is meant to boost local manufacturing of chips and display panels. Prime Minister Narendra Modi’s government is trying to attract more hefty investments under a $10 billion incentive plan. All these steps are aimed to make India a key player in the global supply chain.  

These comments came hours after an announcement from the government which raised fiscal support for new semiconductor facilities. The government aims to cover 50% of all project costs and will remove the maximum ceiling for permitted investments. This step is to provide incentives for display manufacturing.  

Previously, Prime Minister Narendra Modi’s administration agreed to cover between 30% to 50% of the costs for building new display and chip plants. With Wednesday’s announcement, the administration will now cover 50% of the capital expenditure needed to create semiconductor packaging facilities. The decision, Chandrasekhar said, is in response to “the multiple incentive packages and programs that have been announced by various countries.”

Just last week, the mining conglomerate Vedanta Resources and Taiwan’s Foxconn, an Apple products manufacturer, signed a pact with India’s Gujarat to invest $19.5 billion. This investment will be sent to India’s western state to build semiconductor and display production facilities.  

Vedanta Resources and Foxconn are the third companies to announce a chip plant location in India after the semiconductor consortium ISMC and Singapore-based IGSS Ventures announced their own semiconductor facilities plans for Karnataka and Tamil Nadu respectively. While Foxconn announced the intention to move into India’s semiconductor market earlier this year, it has now made the plans official.

Vietnam Becomes New Target Location for Big Investors

As India lands Vedanta Resources and Foxconn, Vietnam is being assessed as the next country to move up in the supply chain. Not with just any company either, the U.S. company Synopsys known for its silicon chip design tools. According to reports, Synopsys is set to continue investments in Vietnam along with shifting its engineer training into the country.

This doesn’t come as much of a surprise; Synopsys has 2 offices in both Ho Chi Minh City and Da Nang. There are a total of over 400 employees currently employed in either office with plans to add 300 to 400 more in the coming years. Vietnam has been reported, along with India, to be better outsourcing options for OEMs, CMs, and EMS providers. Synopsys isn’t the only big-name company scouting new locations either.  

In August 2022, Roh Tae-moon, the CEO of South Korea’s Samsung Electronics informed Vietnam Prime Minister Pham Minh Chinh of the decision to test manufacturing ball grid array products. This would be done at their plant in the Thai Nguyen Province before moving to commercial production in July 2023. Samsung Electronics has completed 85% of its research and development center in Vietnam and is expected to be completed by the  

Amkor Technology, a supplier for Samsung, Qualcomm, and NVIDIA has recently signed a deal for a $1.6 billion semiconductor materials manufacturing factory in the northern province of Bac Ninh. However, Samsung Electronics, Amkor Technology, and Synopsys aren’t the only ones in Vietnam either.

Companies such as Renesas Electronics and Intel have been in Vietnam for years now. The number of great semiconductor engineers in the country reaches the thousands. According to microchip engineer, Dang Luong Mo, these engineers are producing chips for companies such as the U.S., Taiwan, Japan, South Korea and more.

Europe Union’s Semiconductor Industry Ambitions – July 19, 2022

Europe Union member states local few chipmakers have made major strides toward boosting the region's semiconductor supply chain. In the last few weeks, top manufacturers based in the area have announced plans to build new fabs, open new R&D facilities, and expand their existing capacity with government support. And major players in the European Union want to make more big moves in the coming years.

STMicroelectronics and GlobalFoundries Partner to Build Wafer Factory

Switzerland’s STMicroelectronics and America’s GlobalFoundries announced plans to build a 300mm wafer plant in Crolles, France, earlier this month. It’s set to reach full capacity in2026 and will produce 620,000 silicon wafers annually.

The jointly owned factory will use both manufacturers ’technological resources to make 18mm components with automotive, IoT, industrial, and communication infrastructure applications. Notably, it will use the California-based firm's innovative 22FDX fully depleted silicon-on-insulator (FD-SOI) process to make microelectronics with next-generation performance and ultra-low energy consumption.

GlobalFoundries and ST will split the plant's output 58/42percent and will build it near the latter company's Crolles 300mm fab. Because of its location, the new plant will benefit from the area’s existing production framework.

Market watchers expect the factory to bring in over$1 billion in revenue. The facility will also provide Europe’s many carmakers with greater access to electronic components. Ideally, that will mean lower part costs and fewer supply chain disruptions for the continent’s OEMs, CMs, and EMS providers.

ST and GlobalFoundries received "significant financial support" from the French government to build a new factory. And that's not the only investment Paris plans to make in its domestic semiconductor industry.

France’s Multibillion-Dollar Chip Sector Investment Plans

French President Emmanuel Macron recently unveiled along-term electronic components initiative called “Electronique 2030” to bolster the region’s IC development and manufacturing resources.The program will direct capital toward constructing new chip factories, educating and training workers to staff those facilities, and researching and developing new microelectronics technologies.

Electronique 2030 follows on the heels of the similar EuropeanChips Act. The legislation is intended to make the European Union responsible for 20 percent of the world’s semiconductor production by 2030.

Paris is kickstarting its project with €10 billion in funding for 150 startups, universities, research organizations, and 15industrial providers. Murata, Renault, Continental, and Valeo are among the corporations that will receive public capital. The initiative is already contributed toFrance’s production capacity as it provided €5.7 billion to ST andGlobalFoundries’ Crolles plant.

President Macron revealed that wafer fab is only the tip of the iceberg.

Electronique 2030 aims to support the construction of over12 manufacturing sites. If everything goes to plan, France’s semiconductor production will increase by 30 percent in the next five years. That will enable the European republic to have greater digital sovereignty. It will also further its “France 2030” strategy, which aims to revive its industrial economy.

As it happens, France is not the only EU country that will see its chip manufacturing resources blossom in the near future.

Bosch Dedicating €3 Billion to Expanding EU Semiconductor Ecosystem

Germany’s Robert Bosch GmbH announced plans to spend €3billion expanding its semiconductor research, design, and manufacturing capability. The corporation will establish new R&D centers in Reutlingen and Dresden. It’s also adding 3,000m² of clean room space to the €1billion Dresden wafer fab it launched last year and a 3,600 m² production area to its Reutlingen factory.

The firm has earmarked €400 million to complete its capacity expansion by 2025.

The automotive component supplier reportedly intends to use its new resources to make products using 40mm to 200mm nodes. Although those manufacturing processes are far from state-of-the-art, the strategy makes sense. Experts anticipate the average car's chip content cost to rise from less than €200 to €400 by the decade's end. The company can substantially grow its revenue by expanding its lagging edge automotive parts market share.

Like STMicroelectronics and GlobalFoundries, Bosch isn’t funding its construction projects independently. It will receive €3 billion from the EU and German governments as part of the European Chips Act.

Right now, the trade bloc has a long way to go catch up with chip design and production powerhouses like the U.S. and East Asia. But its recent efforts to boost its domestic resources suggest it will achieve semiconductor independence sooner rather than later.


A Chill in the Air? – July 11, 2022

Softening demand for consumer electronics is beginning to impact several top chipmakers negatively, but the situation could change soon. And semiconductor companies are considering moving their production capacity outside China following recent disruptive events.

Weak Consumer Electronics Demand Is Hurting Component Manufacturers

Bloomberg recently published an article highlighting the fact that semiconductor manufacturing represents the worst-performing S&P group, falling 40 percent year-over-year. Major players like Intel and Micron Technology expect their earnings to take a hit in the medium-term. And some market analysts believe the sector is entering a major down cycle.

At the same time, it’s important to acknowledge that the sky is not falling within the industry.

Market intelligence experts anticipate chipmakers will see a 19 percent increase in annual profits this year. That outlook makes sense in the context of the wider electronic components market. Although shoppers might hold off on upgrading their iPhones this year, demand for high-performance computing (HPC) server processors is robust. After all, cloud service providers must keep supporting the societal digitalization that began after COVID-19 reached pandemic proportions.

In addition, interest in electric vehicles (EVs) is robust now and is on track to become even stronger.

Bloomberg stated that global EV adoption reached a tipping point recently. Within the last six months, 5 percent of new automobiles sold in China, Europe, and the United States have been battery-powered. It predicts that one out of every four cars purchased in 2025 will be an EV. Those rapid changes to the landscape will require automotive manufacturers to significantly ramp up their electronic components purchases as EVs have a much higher chip content than internal combustion engine personal transports.

Foxconn, the world’s top EMS provider, knows which way the wind is blowing and intends to capitalize on the transition. Last month, the firm revealed it would mass-produce EV parts in 2023-2024 to capture 5 percent of the emerging market. The iPhone assembler's new roadmap indicates its faith in the future growth of the vehicle electrification revolution.

Unfortunately, consumer electronics provers are likely facing a difficult road ahead as the components marketplace undergoes a global transformation.

Electronics Manufacturers Contemplate Moving Capacity Out of China

China has long been the world’s center for electronics manufacturing for many years. However, Caixin reported that the paradigm might change due to recent events, most notably the country’s recent COVID-19 flare-up.  

The publication explained that the region’s low labor costs, strong talent pool, and industrial infrastructure have made it very appealing to device vendors. But rising geopolitical tensions and increases in employment expenses have diminished its perceived value. Moreover, local leaders’ use of strict lockdowns to combat record-high coronavirus cases disrupted the operation of many leading manufacturers.

Consequently, some companies want to create more capacity in India and Southeast Asian countries.

In April, Apple and its foremost EMS provider Foxconn began manufacturing its iPhone 13 series in India. The Big Tech giant started producing its flagship product in the nation to diversify its supply chain outside of the Chinese mainland. Its decision was influenced by New Delhi’s Make in India program, which incentivizes foreign companies to establish new capacity in-country.  

Similarly, Vietnamese exports reached $153.2 million in the first five months of 2022, up 16.7 percent year-over-year. The region has directly benefited from the push for supply ecosystem expansion. It’s now home to factories maintained by 23 of Apple’s top 200 part vendors, an increase from 17 suppliers in 2018.

Despite signs of the capacity relocation trend accelerating, Beijing isn’t concerned with losing its status as a top worldwide production hub. Its Ministry of Commerce pointed out its comprehensive manufacturing resources, including domestic raw materials sources and low shipping costs, are unparalleled. Also, the nation’s industrial cores offer greater fabrication capability than any other country.

China’s leading position within the global electronics industry is unlikely to be challenged within the next two years. But India and Vietnam becoming better outsourcing options for OEMs, CMs, and EMS providers could shake up the global supply chain near the end of the 2020s.

A technician in full personal protective equipment holds a silicon wafer while standing inside a laboratory

Wafer Funding & Equipment Procurement Problems – July 5, 2022

A holdup in funding the $52 billion CHIP Act has jeopardized several major U.S. production capacity projects. And chipmaking manufacturing equipment lead times have reached 2 ½ years.

No Funding, No Wafers, No Chips?

Several major contract chipmakers have announced plans to establish significant manufacturing facilities in the United States. The sector’s top players sought to address the infrastructural problems revealed by the global chip shortage and better serve the American market. However, recent issues securing government funding are jeopardizing the nation’s production capacity expansion.

Intel suspended work on its $20 billion Ohio foundry because the CHIPS (Creating Helpful Incentives to Produce Semiconductors) Act hasn’t been funded. Congress passed the legislation in early 2020 with the intent to provide the U.S. semiconductor industry with $52 billion in financial support. But because Washington hasn’t dispersed the capital, the IDM’s construction project has taken longer than expected.

Intel has indefinitely delayed the groundbreaking ceremony for its Midwestern facility until the CHIPS Act is funded. However, the corporation still intends to start building the plant in late 2022, with production set to commence in 2025.

TSMC has expressed similar concerns about securing federal financial support for its $12 billion Arizona fab. The world’s biggest pure-play foundry revealed that the project had become more expensive than initially anticipated. Although the company has received $200 million in state funding, its executives have said the factory would only be feasible with Washington’s help.

The Semiconductor Industry Association (SIA) found that building a fab in the United States is 25 to 50 percent more expensive than in other countries.

The holdup in semiconductor sector funding has put another U.S. chip production project at risk. GlobalWafers, a Taiwanese firm, announced plans to build a $5 billion silicon wafer factory in Texas last week. The plant is intended to support Intel, Samsung, and TSMC’s local facilities and will produce 1.2 million wafers monthly. However, U.S. Commerce Secretary Gina Raimondo noted that the factory may not get built if the CHIPS Act isn’t funded soon.

Since experts believe demand for electronic components will double within the next ten years. Hopefully, Washington will help component makers operating within its borders capitalize on that explosive growth sooner rather than later.

Chipmaking Equipment Lead Time Hits 18 to 30 Weeks

TrendForce recently reported that lead times for semiconductor manufacturing equipment had hit 18 to 30 weeks. The organization noted that extended delivery turnarounds will delay several planned production capacity expansions in 2023. Ultimately, the holdup will reduce the predicted growth of next year’s worldwide IC fabrication resources from 10 percent to 8 percent. TSMC, UMC, SMIC, and GlobalFoundries are affected by the delays, which are impacting mature and advanced node machinery.

The market intelligence provider noted that chipmaking machines had been delivered in 3 to 6 months before the COVID-19 outbreak.

However, the coronavirus pandemic disrupted the production of the industrial control chips used to make part fabrication tools. Moreover, the global health crisis created widespread logistics bottlenecks that are still causing severe transportation gridlock. Russia's war in Ukraine is also a major contributor to the upending of the industrial supply chain.

On the plus side, TrendForce believes the lead time delays will not impact production capacity growth in 2022. The consultancy also pointed out that the disruption will not impact deliveries of extreme ultraviolet lithography (EUV) equipment. That means firms utilizing cutting-edge tools to fabricate electronic components should be able to keep their manufacturing schedules on track.

Unfortunately, the industry's procurement issues will likely extend the global chip shortage into 2024, as Intel CEO Pat Gelsinger forecast in May.


A distance shot of London

China Moves Closer to Semiconductor Independence - June 28, 2022

China is closer than ever to achieving semiconductor independence thanks to robust government support and private sector growth. And UBS Global Research anticipates that the global electronic components market has a bumpy road ahead.

Semiconductor Independence within Reach

The Chinese government has prioritized achieving semiconductor independence in the last few years to assert digital sovereignty and strengthen the country's technological and economic resources. But tight restrictions on technologies critical to advancing electronic component research, design, and manufacturing had hindered the initiative.

However, recent developments indicate that China is closer than ever to realizing its long-term ambition.

Beijing tackled the issue by offering land grants, tax abatements, and financial incentives to local and international chipmakers to establish a domestic microelectronics ecosystem, and that strategy is bearing fruit.

Related: Sourcengine’s Semiconductor Industry Lead Time Report

Shanghai's government held an event in April called the Global Investment Promotion Conference that concluded with 16 semiconductor companies securing capital. Local leaders agreed to financial back companies that make fundamental chip production materials like photoresists and silicon wafers in-country. The city's Lin-gang Special Are, a free-trade zone, has reportedly brought in over 40 chipmakers and $22.5 billion in investments interested its financial incentives and has 100,000 acres of underdeveloped land. 

In addition, Bloomberg revealed that China's domestic component makers are expanding rapidly despite significant geopolitical and public health hurdles. Cambricon Technologies, a processor design company, grew its revenues by 141 percent over the last four quarters. Yangtze Memory Technologies is negotiating with Apple to become one of its flash memory suppliers. And it is launching a new fab later this year to meet demand.

The nation's top radiofrequency component, communications chip, and optoelectronics vendors have enjoyed significant double-digit growth in 2022.

Similarly, SMIC, China's largest pure-play foundry, expanded its quarterly revenue by 67 percent year-over-year despite a major COVID-19 flareup. Even under lockdown conditions, the corporation kept its fabs running thanks to government intervention and air deliveries of raw materials from Japan. It's also mitigating the impact of global inflation on its margins by inking new deals with its clients.

Last year, China spent $431 billion on importing integrated circuits. The region's lagging-edge technological resources will keep its microelectronics spending in the twelve-figure range for many years to come. But its commitment to semiconductor independence will eventually bring about a global paradigm shift.

A Bumpy Road Ahead

UBS Global Research recently offered a forecast for the electronic components space with positive and negative aspects.   

The investment bank's analysts predict that macroeconomic instability and weak downstream demand will end the semiconductor market's two-year growth trend. Taiwan's IC industry, which had a 66 percent share of the contract chipmaking market last year, will feel the impact of that change soon. The group anticipates the sector will contract by 5 percent year-over-year in 2022 and 10 percent in 2023.

UBS also reported that chip inventories have "drastically" expanded in the last 18 months. Chipmakers will likely see a drop-off in orders as the sector emerges from two years of shortage conditions. Despite those warnings, the firm has a lot of optimism for the semiconductor field in other areas.

Related: Datalynq - Next-Generation Case Management & Market Intelligence

The multinational bank's analysts conducted a study recently that indicated Chinese smartphone sales will significantly rebound in 2H22. Moreover, it anticipates that the mounting global popularity of electric vehicles will bolster microelectronics earnings. In fact, it projects that EV demand will generate more value than the server, mobile device, and personal computer segment by 2026.

Ultimately, UBS asserts that the semiconductor industry will hit a long stretch of smooth blacktop once it clears the current rough patch.

Two fingers ominously hold a pushpin over a fully inflated balloon

Chip Sector Balloons Popping – June 21, 2022

TSMC recently revealed that the $12 billion fab it's building in Arizona is more expensive than expected. And several consumer electronics manufacturers have signaled that demand will remain soft throughout 2022.

TSMC’s $12B Fab is More Expensive Than Expected

During a recent shareholders meeting, TSMC Chairman Mark Liu revealed that establishing its $12 billion chip factory in Phoenix, Arizona, has become “more costly” than anticipated. The executive didn’t get into specifics about the issue but noted that the higher expenses are “manageable.” The plant is expected to commence production in 2024.

Last month, Nikkei Asia covered some of the difficulties the foundry has faced with its Arizona capacity expansion. TSMC initially planned to bring chip fabrication equipment into the facility in September 2021. However, construction problems forced it to delay those plans until early 2023. It’s also struggled to recruit skilled engineers, which is an industry-wide problem.

Nevertheless, Liu expressed enthusiasm about the plant’s success and a commitment to getting it built “no matter what.”

He asserted that Samsung and Intel's U.S. fabs would help cultivate a robust supply chain within the nation. Moreover, he commented that the global inflation trend disrupting the semiconductor sector will lessen over time, and his company’s capacity utilization is high despite an “inventory correction.” The foundry adjusted to softening demand for consumer electronics parts by taking on more orders for automotive and high-performance computing components.

TSMC has the resources and wherewithal to get its Arizona manufacturing complex up and running in the next few years. It had over 6,000 contractors working on its Phoenix location in May and has teamed with local colleges to fill out the factory’s staff. But Intel CEO Pat Gelsinger warned that limited semiconductor manufacturing tool availability is hampering the industry’s efforts to expand capacity.

That means TSMC’s Phoenix factory may not start making chips as scheduled.

Major Electronics Companies Signal Consumer Demand Has Dwindled

Several major electronics companies have indicated that consumer demand has declined due to macroeconomic and public health challenges.

Samsung reportedly slashed its smartphone production quotas because of a soft global handset market. DigiTimes stated that the conglomerate expects its annual mobile device shipments will fall by 270 million to 280 million units. As a result, its LSI division is considering cutting its image sensor orders from its third-party foundry service providers. The firm’s change of plans has negatively impacted camera module and circuit board vendors in South Korea.

Similarly, Acer CEO Jason Chen recently said the global supply of laptop computers exceeds interest. He further observed that a looming worldwide recession had replaced the global chip shortage as the segment’s biggest challenge. Asus and Hewlett-Packard are concerned that weak interest in consumer electronics will negatively affect their sales.

Market watchers also believe China’s protracted COVID-19 lockdowns dampen demand for gadgets, home entertainment products, and white goods. Because the country recently ended its quarantine mandates and population centers like Shanghai, locals could revitalize the market later this year. With the holiday season and new product launches approaching, a winter sales boom isn’t out of the question.

However, Intel recently told analysts that the uncertain global economy would contract its revenue. Since the world’s largest PC processor manufacturer believes that the era of ballooning consumer electronics revenues is about to end, OEMs, CMs, and EMS providers should prepare for the pop.

A bunch of sky cranes at sunset

A Stronger Semiconductor Supply Chain - June 14, 2022

ASML will invest $200 million in expanding its American R&D and manufacturing facility. And Shanghai, and China’s overall manufacturing sector, are recovering quickly from the region's recent COVID lockdown.

ASML’s $200M US Expansion

ASML Holdings recently announced plans to spend $200 million expanding its facility in Wilton, Connecticut. The capital infusion will go toward building out its research, development, and manufacturing capabilities. It will also go toward adding 1,000 new employees to the site's headcount.

ASML Wilton is the Dutch company's largest outpost based in the United States and employs more than 2,000 people. CEO Peter Winick said the lithography machine manufacturer would bring on 3,500 workers this year to meet intense demand. Last year, it hired 6,000 new team members to handle a surge in business that pushed its annual net sales to $19.4 billion, up 33 percent year-over-year.

The corporation’s tools are highly sought after because they can fabricate chips that are more sophisticated than anything else in the market. Its top-of-the-line systems cost $200 million, but major players like TSMC, Samsung, and Intel are happy to pay up to stay competitive. ASML’s technology played a critical role in helping the semiconductor sector's leaders make transistor miniaturization breakthroughs and generational leaps in component performance.   

The firm’s decision to invest $200 million in its American production complex is prudent from a business perspective. Its three biggest clients are in the process of establishing new fabs throughout the United States. As those factories come online, the corporation’s expanded complex will be able to provide more robust and faster support.

That means OEMs, CMs, and EMS companies with a presence in the U.S. could experience shorter lead times and more consistent availability in the future. Since ASML’s roadmap likely includes significant construction and recruitment programs, its capacity expansion will not happen overnight. But once it’s complete, the global semiconductor supply chain will be stronger.

Shanghai’s Post-Coronavirus Recovery

Beijing recently lifted the COVID-19 lockdown that Shanghai had been living under since April.

Bloomberg reported that conditions improved but are not yet back to full strength in the world's foremost electronics production hubs. Firms are restarting their normal operations after long stretches of “close-loop” methods that require staff to work and live on campus. Moreover, ground transportation and maritime shipping work are still delayed due to lockdown-related port congestion.

Despite those challenges, Shanghai’s manufacturing sector is on the road to recovery. Companies with factories in the region expect to make up for lost time in the second half of 2022. That’s good news for OEMs as demand for consumer electronics traditionally peaks as the holiday season approaches.

In addition, Caixin Global revealed that China’s overall manufacturing activity is on the rise.

The publication’s purchasing managers index (PMI), compiled by IHS Markit, increased from 46 in April to 48.1 in May. Along similar lines, Nomura Holdings anticipates the country’s manufacturing PMI will reach 50.3 this month, which would be the first time it's grown since February.

Local authorities could impose another lockdown if Shanghai experiences another sharp upswing in COVID-19 cases. The area’s recent revival could face a major setback in that scenario. But Premier Li Keqiang recently said that Beijing must find a balance between public safety and economic concerns when addressing the pandemic.

Ideally, China’s government and business leaders should be able to revitalize Shanghai and the nation’s other industrial cores ahead of 2023.

Three brand new SUVs sit in a car factory during the manufacturing process

Driving Into the Future - June 7, 2022

Foxconn is preparing to become a major player in the global automotive semiconductor market. NIO, China's fourth-biggest car manufacturer, reportedly wants to build an auto plant in the United States.

Together, these two events could significantly change the makeup of the electronic components market.

Foxconn Bringing Automotive IC Fabs Online in 2023-24

Foxconn recently announced its plans to begin in-house mass production of automobile ICs.

The Taiwan-based EMS provider will fabricate silicon carbide (SiC) parts for onboard electric vehicle chargers in 2023. The following year, it will start making SiC power modules for the LiDAR system and a selection of MCUs and PMICs. The firm plans to use wafer factories it acquired from Macronix and Sharp, with help from some Malaysian contractors manufacturers, to realize its roadmap.  

The company, Apple's chief device assembler, wants to make electric automobiles for the world’s top carmakers.

Foxconn is investing NT$15 billion ($510.6 million) to establish a place in the global EV market. It has also worked aggressively to expand its automotive technology portfolio. Last year, it announced a joint venture with Yageo to develop electronic components with applications in multiple sectors, including personal transport. It co-founded a new company with Stellantis to create new digital cockpit technologies.

The manufacturer hopes its big bet will greatly boost its revenue and diversify its business.

Foxconn aims to capture 5 percent of the global EV market by 2025. It anticipates that part of its business will generate NT$1 trillion ($34.43 billion) in annual revenue. However, its forecast is dependent on a yearly automobile output of 500,000 to 750,000 units.

That means it must ink significant contracts with the auto industry's most prominent players to achieve its goals.

On the other hand, the corporation could appeal to car companies that are eager to change how they do business. Auto conglomerates learned the value of having partners that maintain dedicated production capacity after the global chip shortage.

Last year, McKinsey & Company estimated that the global market for automotive semiconductors was $50 million. While significant, the segment is far below the computing and data storage ($225 million) and wireless communication ($170 million) as overall revenue contributors. But the consultancy asserts that demand for vehicle electronic components is growing and will translate to $150 billion in revenue by 2030.

Foxconn needs to make a name for itself as an IC supplier. As it happens, the multinational EMS firm may have a major business opportunity soon.

NIO Might Be Coming to America

NIO, based in Shanghai, has played a key role in mainstreaming EVs in its home market. DigiTimes reports it now has plans to make a place for itself in the U.S.

The firm’s vehicles have slick contemporary designs and next-generation features consumers want. It also introduced battery swap stations that enable drivers to enjoy long trips without extended recharging stops. In fact, the automaker's brand is so strong that it increased its sales sequentially last month by 38 percent, even amid widespread local COVID lockdowns.

NIO began recruiting staffers with experience establishing production lines in America. As of this writing, the company has not confirmed interest in expanding its footprint into the West. But it's working to secure ISO and ASE international vehicle safety certifications. And it won approval to test its autonomous cars in California.

Despite its past success, the automotive corporation would face serious challenges trying to compete in the United States market. Its biggest hurdle is supply-related; due to ongoing geopolitical tensions, importing equipment, car parts, and electronic components could be prohibitively expensive.

However, NIO might be able to tap Foxconn for assistance in clearing the obstacles to its expansion. When the car company establishes a factory in the U.S., the Taiwanese company's fabs will be online. That means it could source parts to power the technologically sophisticated features of its sedans, coupes, minivans, and SUVs.

Plus, NIO could end up strengthening the global supply chain by funding Foxconn's efforts to become a top chip vendor. As a knock-on effect, automotive OEMs, CMs, and EMS providers worldwide will benefit from greater parts availability and more competitive pricing. 

The close up view of a chip

Manufacturers Cutting Output - May 31, 2022

Earlier this month, Toyota stated it would be cutting its automobile output by 100,000 units in June. Qualcomm and MediaTek slashed their short-term orders for new mobile device components a few days later. Unfortunately, those very different corporations probably made those decisions for the same reason; COVID-19.

Toyota to Reduce June Vehicle Output by 100,000 Units

Toyota announced plans to cut its June automobile production goal by 100,000 cars because of the chip shortage.

Previously, the Japanese automotive giant said it would produce 850,000 automobiles next month. However, its manufacturing schedule took a major hit because of the recent coronavirus spike in China’s industrial cores. The carmaker revealed that Beijing’s lockdown of the Shanghai region seriously affected its supply chain; it temporarily halted work at multiple factories last month due to parts bottlenecks.

Toyota dealt with unprecedented adverse conditions last year due to the one-two punch of the pandemic and the chip shortage. Industry watchers estimate the global automotive sector lost $210 billion in revenue last year because of those challenges. This year, the auto sector was trending toward recovery until the COVID resurgence emerged as a major roadblock.

On a related note, Bosch began renegotiating its supply contracts in response to recent geopolitical crises in late May.

The automotive components supplier revealed that Russia’s war in Ukraine has significantly increased its raw materials and logistics expenses. China’s coronavirus quarantine mandates have disrupted work at its Shanghai and Taicang plants. As a result of that intense pricing pressure, it’s passing on its higher costs to its partners.

Given Bosch’s influence on the marketplace, OEMs, EMS companies, and CMs should expect similar price hikes from other electronic part vendors. And if Toyota can’t get enough semiconductors to make enough cars to meet demand, expect more intense availability tightness soon.

Mobile Device Chipmakers 5G Cut SoC Production Orders

Qualcomm and MediaTek have cut back their orders for 5G chipsets for the second half of 2022.

Qualcomm reduced orders for its premium Snapdragon 8 processors by 10 to 15 percent with its foundry partners. It also intends to cut the prices for that product line by 30 to 40 percent later this year. The firm wants to spotlight its upcoming Snapdragon 8 Gen 2 lineup.

Along similar lines, MediaTek slashed its mid-and entry-level SoC orders by 30 to 40 percent for Q4.

Both companies are probably reacting to the abrupt 14.1 percent contraction of the Chinese smartphone market in Q1. According to IDC, the region’s shoppers lost interest in buying new mobile devices due to the coronavirus surges and a lack of dazzling new product features. Therefore, Qualcomm and MediaTek’s component production cuts make a lot of sense.

The industry’s top smartphone processor manufacturers made a lot of money selling chipsets to Oppo and Honor, two of China’s leading consumer electronics companies. Cutting back production ahead of the traditional holiday season sales boom period is good business. Neither firm would benefit from having excess inventory on hand going into 2023.

Qualcomm’s price cut could create a major opportunity for OEMs, CMs, and EMS providers. Firms might want to stockpile the chipmaker’s high-quality and relatively new parts for future NPIs.

Close up of a chip being held up to the camera

Inflation Comes Full Circle – May 25, 2022

Earlier this month, the Federal Reserve Bank of St. Louis published a blog outlining the relationship between the global chip shortage and the recent surge in inflation worldwide. To make a long story short, the electronic components bottleneck negatively impacted almost 40 percent of the manufacturing sector. The disruption of fabricated goods hit a tipping point in the summer of 2021 and has driven the price of everything from gasoline to food to 40-year highs.

Recently, the inflation trend has come full circle and is starting to push chip prices to multi-year highs.

Foundry Service Fees Are Skyrocketing

Samsung is best known as the world’s largest supplier of memory modules, but it’s also a leading foundry service provider. The South Korean conglomerate uses the advanced IC production technologies it spent billions of dollars developing to make components for Big Tech giants like Apple and Qualcomm.

Samsung will probably charge more for its services due to rising inflationary pressure.

Bloomberg reported the corporation might raise its contract production fees by 15 to 20 percent depending on chip sophistication level this year. Although it utilizes state-of-the-art technology to make high-performance smartphone processors, that's not the segment of its customers that will feel the biggest financial blow.

Instead, the firm wants to charge more to make legacy node electronic components for its clients. From a financial perspective, the firm being is very prudent. Last year, it committed to spending $17 billion to establish a massive, cutting-edge foundry in the United States.

To be financially viable, that facility needs to run 24 hours a day, seven days a week, because even a brief shutdown can have multibillion-dollar consequences. And the next-generation silicon chips it produces must bring in the highest return on investment possible.

Therefore, Samsung has a powerful incentive to cut costs in its foundry services portfolio so the less lucrative chip production nodes are on the chopping block. Unfortunately, especially for OEMs, CMs, and EMS companies whose designs are dependent on older microelectronic devices, the firm is not an outliner.

The Way the Wind is Blowing

First, the bad news: chipmakers are raising prices across the board because the business of making chips is getting more expensive.

According to market insiders, prices of raw materials, machinery, and chemicals used to make electronic components have gone up 20 percent. There is no one driver for the industrywide volatility. A confluence of events, including rising geopolitical tensions, had exacerbated a problem that emerged when the world embraced digitalization to overcome the difficulties introduced by COVID-19.

As a result, TSMC, the world’s largest pure-play foundry, plans to raise fees between 5 and 8 percent this year. The firm intends to initiate the price hike later this year, a change that follows the 20 percent fee bump it made last year. Industry insiders have said its higher costs will impact customers that utilize its older and newer fabrication technology.

United Microelectronics Corporation (UMC), another market-leading provider of outsourced electronic components, also plans to raise its fees. 

For OEMs, CMs, and EMS providers with endless reservoirs of cash, this worldwide trend among foundries will be a severe problem. In the near future, essential and cutting-edge electronic components will be harder to find and more expensive.

However, there is a newly launched market intelligence platform that exists to help manufacturers mitigate the impact of shortages and accelerated part obsolescence. It offers robust design and redesign risk analysis, real transaction data-based forecasts, and historical insights regarding component availability and pricing that can’t be found anywhere else.

Even better, Datalynq is offering a limited-time 30-day free trial right now.

A stylized image of India as a printed circuit board

Make (Chips) in India - May 19, 2022

In 2017, the Indian government launched an initiative called “Make in India” designed to bolster the nation’s manufacturing capabilities through government funding and foreign direct investment (FDI).

New Delhi has recently increased its focus on developing a multifaceted electronic components ecosystem in the country, announcing a $10 billion incentives plan to enhance domestic IC design, fabrication, and packaging resources.

Due to recent events, it has gotten a lot closer to realizing that world-changing ambition.

India Government Officials Approach TSMC, Samsung is About Establishing a Local Fab

Rajeev Chandrasekhar, India’s Minister of State for Skill Development and Entrepreneurship and Electronics and Information Technology of India, told Bloomberg he has been pitching his country as the site of the next great global chipmaking hub.

The former Intel engineer has a difficult road ahead. But not because of limited interest from the industry.  

On the contrary, the world’s leading pure-play foundry service providers are currently on a production capacity spending spree. TSMC earmarked $40 billion to $44 billion to upgrade and expand its chipmaking resources this year. Samsung announced plans to dedicate $15 billion a year to launching new fabs and research centers across the world through 2030 and promised to triple its foundry resources by 2026.

Moreover, Intel intends to reassert its dominance in the microelectronics sector by significantly expanding its output worldwide. The corporation is in the process of establishing a $20 billion IC fabrication complex in Arizona, another $20 billion fab in Ohio, and an €80 billion ($93.9 billion) cutting-edge chip ecosystem in Europe.

TSMC, Samsung, and Intel have not recently announced new plans to establish silicon wafer manufacturing facilities in India. The problem is that those firms need specific infrastructural features at a location before making plans to build a foundry. If those resources are unavailable or inconsistent, chip yields could be affected, and a $10 billion plant could turn into a financial black hole with shocking speed.

That is the issue Chandrasekhar is grappling with right now. But recent circumstances have occurred that could make his job a lot easier as a huge wave of FDI capital could be on the way.

Apple Suppliers Might Move to India

Most of Apple’s suppliers conduct most of their manufacturing and assembly work in China. Compal, Pegatron, Quanta, Wistron, and Foxconn production sites with internal fabrication capabilities in China. Those providers have also experienced severe operational disruptions recently as a part of China’s COVID-zero protocol because they have sites in affected provinces like Shanghai and Jiangsu.

Apple announced that the coronavirus pandemic’s impact on its supply chain would curtail its Q3 2022 revenue by up to $8 billion.

The Economic Times reported Foxconn, the iPhone company’s biggest device assembly partner, had plans to ramp up output in its Chennai, India, plant significantly. A few weeks before its partner made that declaration, the EMS provider secured approval from regional leaders to turn 40 acres of land inside its local campus into a manufacturing site. It also intends to expand the facility’s headcount by nearly doubling its on-site staff due to an upswing in domestic smartphone purchasing.

Ming-Chi Kuo, an analyst with TE Securities, believes that development will kick off a new trend among Apple suppliers. The market watcher thinks the impact of China’s COVID lockdowns re-energized old considerations regarding reshoring manufacturing sites in India.

Even though Shanghai recently lifted coronavirus restrictions in six districts, the stop-start production issues in the region could prompt bigger systemic changes throughout the electronic components industry. And those shifts could reorient the global semiconductor supply chain around India.

Transistors being manufactured on a silicon wafer

The Silver Lining – May 10, 2022

After years of unprecedented supply tightness, market analysts believe global silicon wafer output will increase this year. Moreover, many Chinese tech firms are looking to utilize TSMC’s advanced chip production technologies to optimize their products and operations.

Wafer Capacity to Rise by 8.7 Percent in 2022

For the last few years, the world has grappled with a devastating chip shortage caused by an industrywide supply-demand gulf that followed the outbreak of the coronavirus pandemic. Because of how the contemporary microelectronics sector makes products, individual manufacturers and foundries could not quickly close the gap.

However, IC Insights recently discussed how the situation could meaningfully improve this year.

The market research company forecasts that global wafer capacity will increase by 8.7 percent in 2022. Ten new fabs will go online this year and provide the sector with its largest jump in available wafer production capability in six years. TSMC is leading the way by opening three chip factories in East Asia. Another pure-play foundry, Shanghai’s SMIC, is also bringing a new complex online to support its customers.

Beyond that, memory module providers SK Hynix and Winbond are each adding one manufacturing facility to their existing resources. Hong Kong-based China Resources Microelectronics Limited is set to activate a new power IC plant. Hangzhou Silan Integrated Circuit Co., Ltd. intends to kick off production of its power discrete and sensors fab later this year.

Texas Instruments’ RFAB2, located in Richmond, Texas, will start making analog components in the second half. Plus, STMicroelectronics and Tower Semiconductor have teamed up to launch a power, mixed-signal, and RF parts factory in the same period.

While the semiconductor industry’s global wafer output is growing, demand is not falling. IC Insights predicts worldwide production capacity utilization will only decline by 0.3 percent year-over-year. Further, the organization expects component shipments to jump by 9.2 percent despite macroeconomic instability, mounting geopolitical tensions, and growing inflationary pressure.

Nevertheless, the global chip shortage might reach an inflection point this year.

Chinese Tech Firms Securing TSMC Partnerships

DigiTimes recently reported several China-based technology companies are actively forging partnerships with TSMC, the world’s biggest and most advanced contact chipmaker.

Several mainland mobile device manufacturers have filled up space in the foundry’s state-of-the-art factories.

Oppo ordered 10 million imaging neural processing units using the corporation’s 6nm node. Unisoc requested 6nm and 12nm mobile CPUs, while ZTE wants 5nm and 7nm components to support its 5G base stations. Xiaomi, OmniVision, and Goodix Technology are also interested in using the service provider’s fabrication processes to make their smartphone and wearables parts.

Demand for TSMC’s manufacturing lines among Chinese firms extends past the consumer electronics segment.

Horizon Robotics booked various TSMC manufacturing lines to keep its automotive portfolio available. The Beijing-based company teamed with the foundry to produce its current generation offerings with its 16nm and 28nm technology. It is also collaborating with the contract chipmaker to launch its 7nm Journey 6 embedded artificial intelligence vehicle processors in 2023.

Horizon Robotics counts auto sector heavyweights Audi, SAC Motors, Bosch, BYD, and Continental as partners.

Pingtouge, Alibaba’s semiconductor unit, tapped TSMC to fabricate its designs using its 5nm, 7nm, and 28nm nodes. Cambricon Technologies, a Chinese cloud computing hardware vendor, ordered an unknown quantity of 5nm microelectronics from the Taiwanese foundry.

Moreover, Bitman Technologies, which offers cryptocurrency mining ASICs, secured places on its 5nm and 7nm production schedules.

Currently, China’s tech companies, in aggregate, only represent 11 percent of TSMC’s revenue as of Q1 2022. However, that is a significant increase from Q4 2021, when firms in the East Asian country constituted 5 percent of its income. DigiTimes expects the trend to pick up over the few years, with the regions contributing $8.5 billion to its annual returns in 2023.

So, what does that mean for the rest of the semiconductor industry?

If demand for TSMC’s leading-edge processes remains strong – and most available data suggests that it will - OEMs, CMs, and EMS providers will likely see higher prices for advanced silicon. As component manufacturers orient their output around newer technologies, shortages and obsolescence issues for older parts will become more common.

Consequently, companies navigating forthcoming industrywide pricing and availability shifts should prioritize enhancing their market intelligence resources by signing up with Datalynq.

There is another important implication of so many Chinese tech firms with different specializations partnering with TSMC. By decade’s end, the region’s domestic microelectronics output could be significantly more sophisticated than it is today.

The frame of an automobile waiting to be constructed

Jump Start Needed – May 3, 2022

China’s recent COVID-19 quarantines have had a significant negative impact on the output of its domestic auto and electronic components industries. And Apple expects to lose up to $8 billion in revenue this quarter due to the same issue.

Chinese COVID Lockdowns Hurting Local Carmakers & Component Suppliers  

China’s recent coronavirus lockdowns in Shanghai and other major cities have severely affected its domestic automotive industry.

The China Passenger Car Association estimated that the government’s mandates reduced local manufacturers’ vehicle output by 20 percent. The organization explained that Beijing’s zero-COVID policies have been especially damaging because of the areas impacted. The Yangtze River Delta region is home to leading vendors SIAC Motor and FAW Group, meaning over one-fifth of the nation’s overall vehicle sector has been hindered.

The disruption of China’s industrial cores and ground transportation infrastructure has also hurt overseas car companies with local capacity.

Tesla suspended work at its Shanghai Gigafactory for over 20 days last month. The EV giant reopened its biggest manufacturing center after enacting COVID mitigation procedures on-site. Market watchers believe the temporary shutdown prevented the American manufacturer from assembling a minimum of 45,000 automobiles.

Insiders expect a shortfall of electronic components to curtail Tesla’s vehicle output until sometime this month.

In addition, German auto parts firm Bosch halted work at two plants in compliance with a mid-April lockdown order. The European supplier initiated “closed-loop” procedures – keeping staffers on campus on shift and off – at two other Shanghai facilities during the same period. 

The Chinese government has moved to support local businesses hurt by its coronavirus containment strategy.

Beijing recently named 666 companies that will receive aid in restarting or continuing their Shanghai-based operations. The initiative primarily aims to support automotive corporations, but it also includes several semiconductor industry providers. SMIC, China’s largest contract chipmaker, secured local leaders’ approval to resume operations, as did Hua Hong Semiconductor, Applied Materials, and ASML Shanghai.

TSMC, the world’s largest component foundry, kept its two mainland fabs running normally during the recent coronavirus outbreaks.

However, China’s most populated city recorded 58 new infections on May 2, and its zero-COVID directive is still in effect. Consequently, local automakers and component suppliers will likely endure more disruptions in the coming weeks and months.

Apple Expects to Lose $8B in Q3 Due to COVID Woes

Apple disclosed that it anticipates a $4 billion to $8 billion revenue hit this quarter during its Q1 earnings report. The Big Tech firm attributed its predicted underperformance to the same COVID-related problems affecting Tesla and Bosch.

Although the corporation sources its electronics components for vendors all over the world, China is its primary supply hub.

As noted last week, almost half of Apple’s top 200 part providers have suffered manufacturing and logistics problems recently. Many of its partners maintain factories in mainland cities that are under quarantine. Moreover, its leading iPhone assemblers operate sprawling complexes in Shanghai and Shenzhen to put together, test, and pack its flagship product. Consequently, the $2.5 trillion OEM anticipates a softer than regular spring sales season.

If China’s current health and safety challenges continue through Q2, Apple’s traditional September device refresh might not go as planned. Even with its vast resources, Apple cannot work around problems generated by China’s COVID lockdowns.

The corporation and its suppliers have tried to diversify their manufacturing resources outside East Asia. But the sheer volume of its consumer electronics output – it sold 60 million smartphones in the January period alone – means its factories in India and Brazil cannot replace its main production center.

Apple is not the only global manufacturer to bear the brunt of the coronavirus pandemic’s effect on the supply chain.

Microsoft and SK Hynix are currently unable to address the demand for their gaming console and memory products because of the disruptions. Similarly, GMC recorded a 24 percent drop in profit from China last quarter caused by weak local demand. MediaTek, a mobile device component vendor, recently revised down its projection of single-digit revenue growth in response to the situation in China.

Last month, Apple reportedly changed its production schedule and design cycle patterns in response to end-market volatility.

Hopefully, May will give the world an overdue opportunity to recover and recalibrate from the first four months of 2022.

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Christmas ornament on tree

No Christmas in 2022?! – April 26, 2022

Traditionally, the holiday season lifts all ships in the consumer technology sector because computers, PC peripherals, wearables, and smartphones make great gifts. However, supply-side microelectronics challenges and a semiconductor manufacturing equipment shortage are disrupting OEM, CM, and EMS provider supply chains.

While Christmas may not be canceled, many consumers may find disappointment waiting for them under the tree this year.

COVID Takes a Big Bite Out of Apple

Even though Apple is the world’s largest electronics company by revenue, it is not immune to the impact of COVID-19.

Last week, Nikkei Asia reported about 50 percent of the corporation’s top 200 suppliers are grappling with government-mandated manufacturing and logistics lockdowns in the Chinese mainland. Since The start of 2022, Beijing has restricted the activities of industrial operators in Shanghai and other major cities. As a result, the iPhone maker’s leading device assemblers and microelectronics suppliers have struggled to meet their business commitments.

The publication noted thermal parts, PCBs, displays, and acoustic components production and transportation have been significantly undercut by China’s “zero-COVID” strategy.

Local leaders are attempting to address the problem by exempting certain firms from the lockdowns. But shortages of key raw materials and truck drivers, electricity rationing programs, and various logistics chokepoints are taking a major toll on the region’s industrial cores.

Paul Peng, Chairman of AU Optronics, offered a grim assessment of the situation, noting, “the disruption is not to a single company or industry, it's a global supply chain incident that could lead to a supply chain cutoff in the worst-case scenario.” The firm, which supplies Dell, HP, and Tesla, does not expect its operations to return to normal until Q3.

Similarly, Delta Electronics, a power management pasts company, worries its overall production will fall by 20 percent in April. Nevertheless, the company believes it can make up for its lost output in May and June, barring significant new restrictions.

An unnamed parts manufacturer told Nikkei Asia if China’s components producers cannot get back on track by June, they might miss their ocean freight shipments schedules. Consequently, major electronic device brands could come into this year’s holiday sales season with insufficient product inventories.

Apple reportedly responded to the volatility of its supply chain by slashing its production quotas for iPhone SEs and AirPods. However, Bloomberg recently revealed the Big Tech giant probably would not use a new generation of microprocessors in its non-premium 2022 iPhone lineup due to shortage and manufacturing challenges. That means its next flagship product refresh could come to the market without purchase-driving hardware improvements for the first time in several years.

While Apple is the most significant player in the electronics game, it is not the only vendor facing a bleak Christmas this year.

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Lead Times for Chipmaking Equipment Reaches 18 Months

The global chip shortage that cost the automotive sector an estimated $210 billion last year is now hurting the semiconductor industry.

Applied Materials, AMSL Holdings, KLA Corporation, and Lam Research recently began informing their customers manufacturing equipment lead times will be 18 months. Before the outbreak of the coronavirus pandemic, machine deliveries averaged around 3 to 4 months. But by last year, chipmakers had to wait 10 to 12 months to receive their orders.

The microelectronics field’s tool sourcing issues are being driven by unprecedented demand, which is causing a shortage of equipment components.

TSMC, Intel, Samsung, and other foundry service providers have rushed to expand their production capacity in response to the post-pandemic global digitalization wave. Those firms need IC, substrate, PCB manufacturing, and testing machines to build out their existing fabrication lines and outfit new fabs. But their supply partners only have so much factory space and raw materials stockpiles.

So, what does the semiconductor manufacturing space supply chain bottleneck mean for OEMs, CMs, and EMS firms?

The biggest impact will likely be continued tightness for electronic components for the foreseeable future. In addition, the shortage could severely constrain the availability of next-generation microprocessors this year and into 2023.

Earlier this month, TSMC, the world’s most advanced contract chipmaker, disclosed that “unexpected” tool delivery issues had affected its expansion plans for next year. Last year, the foundry declared it would spend $100 billion through 2023 to increase and enhance its global manufacturing resources. But the production equipment shortage might upend its long-term roadmap.

The corporation stated that its 2022 schedule has not been affected but did not go into details.

In addition, TSMC CEO C.C. Wei revealed his company’s supply chain would remain tight through year’s end. The executive also recommended its customers build up their inventories due to ongoing production and logistics unpredictability. The foundry will undoubtedly work to minimize the impact of those problems on its customers, but its mitigation measures may not be enough.

TSMC dedicates the bulk of its advanced nodes to making iPhone and Mac processors because it is its biggest client. However, noted above, Apple has seemingly shifted its product rollout strategy due to supplier limitations.

That means fabless chipmakers intending to utilize the foundry’s cutting-edge processes, such as AMD, Qualcomm, Nvidia, and MediaTek, might be unable to ship adequate quantities of their products to electronics manufacturers ahead of the holiday season.

Slam on the Brakes – April 20, 2022

Japan’s leading automakers are struggling to keep their car factories open amid unprecedented supply challenges. And Tesla has found unconventional solutions to fortify its procurement and production operations.

Japanese Automakers Grappling with Supply Chain Woes

Due to multiple overlapping events, Japan’s leading auto manufacturers are facing materials procurement problems and cost volatility challenges.

Tokai Tokyo Research Institute estimates the country’s seven passenger vehicle companies are paying $11.5 billion more for metals, microchips, and electronic components. Russia’s war in Ukraine is the primary driver of the surging raw materials costs for East Asia’s automotive firms. Eastern Europe is a leading exporter of essential car production metals like palladium, nickel, and aluminum. Because of the conflict and many international trade sanctions, the area is effectively cut off from the global supply chain.

Similarly, DigiTimes reports that vehicle manufacturers are experiencing a shortage of wire harnesses and tires due to ongoing geopolitical tensions.

Toyota, Honda, and Nissan are also struggling to source enough microelectronics for their factories amid the global chip shortage. Widespread demand for vehicle ICs is still significantly greater than the available chipmaker and contract foundry production capacity. However, market analysts and business leaders expect the bottleneck will ease up in the second half of 2022.

Finally, Japan’s auto industry is having trouble keeping its plants active because they adhere to the just-in-time (JIT) model.

The popular business methodology requires manufacturers to keep small material stockpiles on hand to keep overhead costs down. Unfortunately, for all economic benefits, that model left her automakers especially vulnerable to disruptions caused by the global semiconductor shortage.

Additionally, automobile vendors have been unable to replenish their inventories recently due to clustered COVID-19 outbreaks in China. Suppliers have been unable to get their badly needed orders because of frequent government mandates restricting production and transportation in the country’s industrial hubs. Last week, Bosch, Pegatron, and other firms closed their plants in Shanghai, Changchun, and Jiangsu amid a new coronavirus flareup.

Related: Global Electronic Component Shortage – April 2022 Update

Ultimately, the passenger vehicle sector’s sourcing problems do not have a “magic bullet” solution. Until more capacity comes online, companies will not have access to large quantities of the custom parts their fleets need. But they can be proactive about revamping their supply chains and replacing their outdated methodologies with more dynamic digital solutions.

Tesla Gets Creative to Overcome Sourcing Challenges

Tesla is dealing with the same problems as its Japanese counterparts and is employing fittingly untraditional solutions to overcome them.

The electric vehicle pioneer shuttered its car factory in Shanghai late last month following a government lockdown. As the corporation’s East Asian plant is its largest manufacturing center, the shutdown significantly affected its output. However, it secured permission to reopen the facility on April 18 after establishing a “closed-loop” system. Under the new structure, workers will sleep and eat on-site, comply with a strict hygiene regimen, and submit to daily nucleic acid COVID tests.

If all goes well, Tesla Giga Shanghai will resume rolling out 2,100 vehicles every day soon. Plus, the corporation recently opened two large manufacturing complexes in Brandenburg, Germany, and Austin, Texas. With those resources added, the carmaker should be able to correct its pandemic-related production shortfalls.

Tesla’s innovative supply chain management extends beyond expanding manufacturing capacity to avoid disruptions.

CEO Elon Musk identified availability and pricing uncertainty for nickel as a major business risk. Since the company uses the metal to make its EV batteries, delivery problems directly undercut its production rates. It made agreements with several mining companies to stabilize its nickel supply to address the issue. Simultaneously, many Tesla rivals are negotiating ways to acquire large quantities of Class 1 nickel.

In the past, manufacturers depended on providers operating in Russia to fill their inventories because the country produces 17 percent of the world’s battery-grade nickel. With that option off the table, some automobile vendors are scrambling. For OEMs, CMs, and EMS providers, the takeaway is that supplier diversification has never been more important.

above view of businessmen and women having a meeting

Data Centers Never Sleep – April 14, 2022

AMD just paid $1.9 billion to snap up an innovative data center processor company. And an Oracle-backed server chipmaker took steps to go public quietly. Within the decade, those two events could have a big impact on the global electronic components industry.

AMD Bets $1.9B on Data Center Chip Market  

AMD announced plans to buy networking technology startup Pensando System for $1.9 billion earlier this month. The Silicon Valley giant stated it made a move to bolster its position within the booming data center space and anticipates the transaction will close in Q2 2022.Its big bet could pay off in a major way as analysts predict the segment will reach $15.64 billion in annual revenue by 2025, up from $7.72 billion in 2017.

The fabless corporation's nine-figure entry into the data center chip segment makes sense given its long-term portfolio diversification strategy.

For decades, Intel dominated the enterprise server market due to its strength as an integrated design manufacturer. By meticulously crafting its firmware, instruction sets, and silicon in-house, it produced hardware solutions that blew away the competition.

But TSMC, the world’s largest contract foundry, has outpaced it in terms of chip miniaturization and transistor density in recent years. That created an opportunity for ambitious IC design houses to claim a much bigger piece of the semiconductor market, AMD chief among them.

If the corporation can bring Pensando’s innovative tech to the global market, it could claim a very healthy slice of the pie.

The startup secured $313 million since 2017 thanks to its core compelling offering, a fully programmable microprocessor and software platform. Its technology boasts the capability to run it cloud scale, with minimal jitter and latency while only consuming 30W of power at 100GbE. And reacquisition, it counted Goldman Sachs and Microsoft’s Azure unit as customers.

However, AMD is not the only big player with eyes on the explosive datacenter chip market.

Oracle-Backed Server Processor Startup Files IPO

Ampere Computing recently filed a confidential initial public offering that could have big implications for the semiconductor industry.

Founded in 2018 by former Intel President Renee James, the fabless firm uses Arm architecture to make specialized high-performance ICs. It strived to distinguish itself in a crowded market by launching flagship general-purpose processors fabricated with TSMC’s 7nm node. The Portland, Oregon company’s strategy paid off as it counted Oracle and Microsoft as customers in 2020.

Moreover, Oracle believed in Ampere enough to have invested $426 million in it to keep its chips in production.

At present, the startup’s future is difficult to gauge because it is facing institutional competition with bottomless pockets. But its tech clearly has potential, and a successful IPO will help it bulk up its manufacturing resources and expand its customer base.

James said she would be open to working with Intel Foundry Services if certain production requirements we readdressed last year. Since Intel has earmarked over $100 billion to build the Silicon Heartland, her terms will likely be met. That means Ampere could gain an advantage in the marketplace by depending on a domestic supply chain instead of navigating the complexities of the global chip sector’s stratified “new normal.”

Regardless, AMD’s acquisition of Pensando and Ampere’s IPO means one thing for midsized OEMs, CMs, and EMS providers: less support from foundries.

The semiconductor leading contract chipmakers want to cash in on the digitalization wave that followed the COVID-19 outbreak by booking up their factories years in advance. They are also mothballing older component manufacturing processes faster than ever to make room for more lucrative next-generation production lines. While those developments are fine for large corporations, less established companies will face tighter material availability and extended lead times.

For that reason, electronics manufacturers have a greater incentive than ever to access long-term industry forecasts and stockpile at-risk parts.

Winter is Here - April 6, 2022

Volvo Cuts Car Production Amid Parts Shortage

Volvo recently announced its annual automobile output would fall below its earlier projections due to a shortage of a critical electronic component. It reportedly cut five shifts at its Torslanda, Sweden, factory that it uses to make its XC60 and XC90 SUVs.

Europe’s largest carmaker made the declaration in response to the fallout of Russia’s war in Ukraine.

Right now, Ukraine produces 20 percent of the European markets’ wire harnesses. No other region or individual manufacturer can step in to fill Volvo’s needs, so its factories are ramping down production. The firm convened a 150-person working group to develop solutions to resolve its bottleneck.

BMW is also grappling with similar headwinds related to Russia’s war in Ukraine.

Ultimately, Volvo has been caught up in a tangle that many other OEMs all over the world are facing right now. How do individual companies move forward with the global supply chain in disarray?

On the one hand, firms can try to wait it out and work to reorganize their vendor networks once the current market volatility stops. The problem is that under our current unprecedented market conditions, no one is sure when the thaw will begin.

Accordingly, OEMs might be better served by taking action as soon as possible to future-proof their supply chains. In Volvo’s case, it might form partnerships with providers like Sumitomo Electric Industries, Ltd. and Furukawa Electric Co. Ltd. Both Japanese companies make wire harnesses and other electronic components. The two firms are vertically integrated manufacturers, so their customers will have options if an unprecedented crisis impacts their businesses.

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TSMC to Break Ground on First Japanese fab in April

TSMC intends to break ground on its first fab in Kumamoto, Japan, next week. The foundry, a joint venture between the contract chipmaker and Sony Semiconductor Solutions, will commence production in late 2024. Once operational, the facility will employ 1,700 workers and fabricate 55,000 12-inch silicon wafers every month.

The facility will utilize a 12/16nm FinFET process and a 22/28n node. University Wafer points out that 12-inch wafers can be used to make wireless communication chips, microcontroller units, and power components for smartphones and desktop computers. But Denso, the global automotive technology giant, declared it invested $350 million in the new fab in February. It received a 10 percent ownership stake and operational control of the facility in exchange.

In recent months, many popular online publications have expressed doubts regarding the long-term profitability of the semiconductor industry. The prevailing belief is that the 19 fabs that went into production between 2019 and 2020 will soon oversaturate the market. But Denso’s investment and the Japanese government’s $8.6 billion support of the plant indicate a high-level belief in the chip sector’s long-term recovery.

chip being fabricated on a production line

March 31, 2022 -Update

TSMC Gives Major Warning Regarding Electronics Industry

Dr. Mark Liu, Chairman of TSMC, recently noted that demand for consumer electronics is slowing down due to various macroeconomic concerns.

The executive explained that buyers’ interest in televisions, personal computers, and smartphones is weakening, especially in China, the world’s largest consumer market. He also noted that electronic component and raw material costs had surged recently, making device and chip production more expensive. Dr. Liu also mused that volatility might impact shoppers, “such pressure could eventually be passed on to consumers.” TSMC's biggest customers include Apple, AMD, Intel, Qualcomm, Broadcom, Nvidia, Sony, Marvell, STMicroelectronics, and Analog Devices, Inc.

Leading market analysts and the International Monetary Fund (IMF) have recently echoed the TSMC chair’s sentiments.

Last week, IHS Markit’s found semiconductor costs skyrocketed in February. The S&P Global PMI Commodity Price & Supply Indicators report revealed that upward pricing pressure for semiconductors outpaced every other item monitored last month, with its “index reaching a fresh record high of 28.3.” Simultaneously, it recorded significant leaps in the price of crucial microelectronics raw materials like aluminum and copper.

The consultancy also stated manufacturers’ uncertainties about microelectronics supply constraints hit a four-month high of 7.4. It supported its finding by explaining that recent COVID-19 outbreaks have effectively reversed the electronic components industry’s gradual recovery from the global chip shortage.

Along similar lines, the IMF reportedly intends to lower its global economic forecast for 2022 because of Russia’s war in Ukraine and other uncertainties. The organization reduced its estimate by .5 percent to 4.4 percent in January due to rising inflation and new coronavirus pandemic-related regional lockdowns. It also projected that growth for 2023 would be 3.8 percent, down 2.1 percent from 2021.


Apple, the world’s most valuable electronics OEM, has curbed its planned 2022 product output in response to predicted soft demand. Nikkei Asia reported the technology giant would make about 20 percent, or 2 million to 3 million, fewer iPhone SEs in Q2 2022 than initially intended. It also slashed its annual AirPod quota by 10 million units this year.

Foxconn in Talks to Build Dual-Line Foundry in Saudi Arabia  

Foxconn, Apple’s primary iPhone assembler, has approached the Saudi Arabian government about building a $9 billion dual-line foundry in-country. The Taiwanese corporation wants to establish the facility in Neom, a smart city development in the Northern Red Sea. If the project is greenlit, the complex will produce silicon wafers, surface mount parts, EV microelectronics, and other components like displays.

According to the Wall Street Journal, Riyadh is considering Foxconn’s offer and performing due diligence. Moreover, Foxconn has also started talks with the United Arab Emirates about building its dual-line factory within its borders.

It also noted that the Saudi government wants certain guarantees before okaying the proposal. Specifically, the kingdom wants assurances that two-thirds of the foundry’s output would be directed toward the company’s global supply chain. That way, it would have a consistent revenue stream to ensure its long-term success.

As of this writing, neither Riyadh nor Foxconn has commented on the $9 billion multipurpose fab.

However, the project offers significant benefits for both the company and the country. For Foxconn, the project would diversify its supply chain and bypass potential flare-ups in China-U.S. trade relations. For Saudi Arabia, owning a stake in a major semiconductor production hub would further its long-term ambitions to break into sectors outside the oil industry.

And for OEMs, Foxconn’s new fab would provide greater stability across the global electronic components supply chain.

extreme close-up of a silicon wafer

March 22, 2022 - Update

China’s Tech Champions Push for Digital Sovereignty

Despite being a major national priority for years, China has not yet achieved digital sovereignty. The mainland’s chipmakers cannot design, fabricate, or package cutting-edge microelectronics, so its semiconductor independence is currently impossible. As a result, the country spent $432 billion on importing electronic components in 2021, up 23.6 percent year-over-year.

But the region’s technology champions are making big moves to change that reality.

Luxshare and Goertek, two Apple device assemblers, recently took steps to move into the microchip packaging field. Luxshare is developing systems-in-package components to power its partner’s AirPod wireless earbuds. The Dongguan-based company has already taken on former Universal Scientific Industries (USI) engineers with relevant experience to execute its roadmap.

The two providers hope to win more business from Apple by adding SIP development to their knowledge bases. Though their technology is less advanced than some Taiwanese packagers, being in the mainland makes them a more cost-effective option. Luxshare and Goertek’s move into SIP development also strengthens the Chinese microelectronics supply chain.

In addition, Semiconductor Manufacturing International Corporation (SMIC), China’s largest contract chipmaker, recently revealed that it is in a major revenue growth phase. The pure-play foundry generated $5.4 billion last year, up 53.8 percent from 2020, and brought in $1.22 billion in the first two months of this year. And it is aggressively working to bolster its income through capacity expansion.

Related: Global Electronic Component Shortage – March 2022 Update

The firm is building a $2.3 billion 300mm factory in Shanghai and an $8.87 billion 300mm complex in Shenzhen. Once those facilities are online, its wafer output will rise by 120,000 units per month. While its nodes are not as technologically sophisticated as its overseas rivals, its accessibility is a major market advantage. Also, it has a business relationship with the maker of the world’s most advanced semiconductor manufacturing equipment.

China’s semiconductor ecosystem is also making significant progress on the chip design front.

Earlier this month, Dr. Rui Wang, SVP and Chair of Intel China, offered intriguing commentary on the sector’s future. “So far there has not been any local companies that can deal a substantial threat to Intel,” Dr. Wang said. “But in 3-5 years, it will become clear that local companies will emerge as strong rivals.”

DigiTimes pointed out several Chinese firms have had success creating powerful microchips using x86, ARM, and indigenous IC architectures. For example, Huawei’s HiSilicon subsidiary developed mobile device processors that equaled Apple’s iPhone CPUs in performance and capability. But that company lost access to state-of-the-art component fabrication services because of U.S. government-issued technology restrictions.

However, by the end of this decade, China’s tech champions could be laying the groundwork for an independent microelectronics supply chain.  

As it happens, China is not the only region to make a significant push for digital sovereignty recently.

Intel to Invest $36 Billion on EU Production Capacity

Intel announced plans to spend $36 billion to establish and expand production capacity across the European Union last week.

The chipmaker is dedicating $18.6 billion to two large-scale fabs in Madgeburg, Germany, that will utilize advanced manufacturing technology. The company intends to commence construction in the first half of next year and begin production by 2027. The four-year project will create an estimated 3,000 permanent jobs. Pending EU approval, the German government will contribute $5.5 billion to creating the fab.

If everything goes according to plan, Intel’s “Silicon Junction” will produce next-generation 2nm ICs before the decade’s end. That means it will be the most technically sophisticated chip plant on the continent.

The corporation’s European roadmap also includes pouring $13.1 billion into its Irish fab to double its production capacity. Moreover, it will launch an R&D center in France and build fabs in Spain and Poland. And the company is in discussions to develop a $4.9 billion packaging and assembly site in Italy.

Intel’s new financial commitments are part of its €80 billion ($93.9 billion) plan to develop a cutting-edge European semiconductor ecosystem. CEO Pat Gelsinger explained the initiative would enable the IDM to reclaim its technological leadership within the electronic components sector. He also noted it would help the industry diversify its supply ecosystem.

At present, Taiwan’s contract foundries make 60 percent of the world’s microchips. While that resource concentration has its benefits, it also leaves the global supply chain vulnerable to systemic disruption. However, thanks to Intel’s actions, tomorrow’s supply chain will be much less centralized and significantly more robust.

inside a chip fab cleanroom

March 15, 2022 – Update

Chinese Government to Create Committee to Boost Chipmaking Capabilities

The Chinese government plans to launch a committee made of domestic and oversee chipmakers and local universities to bolster its chipmaking capabilities. The country’s Ministries of Commerce and Industry and Information will spearhead the program. Tsinghua University, Peking University, the Chinese Academy of Sciences will likely participate alongside national technology champions SMIC, its biggest contract chipmaker, and Xiaomi, its top smartphone vendor.

Chinese President Xi Jinping wants the public-private organization to cultivate China’s digital sovereignty, meaning domestic electronic components supply chain.

Nikkei Asia reported the “cross-border semiconductor work committee” will seek the cooperation of Intel, AMD, Infineon Technologies. The group also wants ASML, the world’s foremost advanced microelectronics manufacturing equipment vendor, to join the initiative. Beijing intends to launch the organization sometime in the first half of 2022.

However, ongoing geopolitical tensions between China and the United States could thwart the committee’s goals. The U.S. Department of Commerce placed SMIC on its Entity List, which means it cannot buy advanced semiconductor fabrication technology. Similarly, the Dutch government prevented ASML from selling its cutting-edge tools in China due to concerns about its use for military applications.

On the other hand, Intel reportedly generated 26 percent of its 2020 revenue from China. Likewise, ASML derived 16 percent of its 2021 income from the East Asian country. Potentially, those two firms could broker a deal to share their mature node technologies with their overseas counterparts. Regardless, given Beijing’s support, the semiconductor work committee will be worth keeping an eye on.

Bosch Expands Production Capacity

Bosch recently announced it would expand the production capacity of its Reutlingen, Germany fab in response to the global chip shortage. The company will spend €205 million ($283 million) to create 3,600 square feet of clean room space at the facility. It is also constructing a new building on the campus to support its new and existing media supply systems.

The manufacturer expects its fab expansion to come online in 2025.

Bosch’s new capacity will utilize 150mm and 200mm wafer technologies to make products with automotive and consumer electronics applications. The firm indicated it would also address the growing demand for silicon carbide (SiC) microelectronics related to the vehicle electrification trend.

While market experts believe the chip shortage will be over by 2023, this new capacity will be invaluable to tomorrow’s supply ecosystem.

Intel Expresses Interest in Arm Ownership Consortium

Intel CEO Pat Gelsinger recently touched on the corporation’s long-term plans during its investor’s day event. The executive explained that the company intends to boost its gross margin from 52 percent this year to 58 percent by 2026. He also forecasted that the firm’s revenue would rise by 10 to 12 in that same time frame. If the IDM becomes part of China’s semiconductor working committee, its income projections would be more than reasonable.

Most intriguingly, Gelsinger also said Intel is interested in joining a consortium that would own Arm.

Until last month, Nvidia looked to become the renowned design house’s new corporate parent. In 2020, it announced plans to buy the firm from Japanese investment firm Softbank Group for $40 billion. It viewed Arm as a worthwhile investment because Apple, Amazon, Google, and Tesla use its chip architecture. However, the deal ultimately fell apart due to mounting regulatory scrutiny in America and the United Kingdom.

Government watchdogs questioned if Nvidia’s ownership of Arm would undercut its partnerships with other tech firms.

However, if the consortium owned the chip design company, that could alleviate competition regulators’ concerns. It would also help Intel’s foundry services division to have access to industry-leading component architecture. Given Intel’s interest in spending big to expand its market share, investing in an association to buy Arm makes a lot of sense.

a building is being constructed

March 8, 2022 – Update

TSMC to Spend $20.94 Billion on Capacity Expansions and Upgrades

TSMC, the world’s largest contract manufacturer, authorized spending $20.94 billion on expanding and upgrading its production capacity. The firm also approved the issuance of $3.26 billion in unsecured corporate bonds to support its plans further. In January, the company announced it would spend $40 billion to $44 billion this year bolstering its fabrication capabilities.

On the bright side, TSMC’s new capital allocation will enable it to fill orders from partners like AMD, Intel, and Nvidia.

Traditionally, the process of building and equipping new fabs can take several years due to construction and shipping times. But the Taiwanese chipmaker has established new component factories in as little as 12 months in the past.

Related: Sourcengine’s Semiconductor Industry Lead Time Report

The corporation’s newly sanctioned expenditure could help it make up for lost time with its Phoenix, Arizona chip factory. Last month, Nikkei Asia reported the complex fell three to six months behind schedule because of COVID-19 flareups and labor shortages. That means the facility will not commence operations in March 2023 instead of September 2022 as intended.

In addition, TSMC’s new production lines are unlikely to address the supply constraints fueling the global component shortage. The firm revealed that 80 percent of its 2022 capex would go to expanding its advanced nodes, meaning 7nm and below. Consequently, it will not significantly increase its capacity for the mature manufacturing processes used to make badly needed MCUs and analog chips.  

Still, the company will protect itself and its customers from future disruptions by enhancing its production resources.

Toyota Supplier Cyberattack Prompts 14 Factory Temporary Shutdown  

Toyota closed 14 factories for one day after one of its suppliers, Kojima Industries Corp., suffered a cyberattack earlier this month. The Tokyo-based carmaker revealed that the disruption of 28 production lines slashed its daily output by 13,000 automobiles. Malwarebytes reported that Hino Motors and Daihatsu, Toyota affiliates headquartered in Japan, shuttered their plants because of the cyberattack.

Kojima, a plastic components and electronic parts vendor, has not disclosed the extent of the hack or the type of malware used. However, the company did reveal it found a threatening message written in English on a server.

So why did the world’s largest automaker briefly close over a dozen factories because of a supplier problem? After all, its vendor ecosystem includes more than 60,000 companies. The issue is Toyota runs its plants under an inventory management system called just-in-time (JIT), which it adopted in the 1950s.

That means its facilities cannot keep its production lines running if shipments are interrupted.

The corporation found great success with the methodology, which requires plans to hold minimal or no stock to maximize efficiency. As the car company became a major player in the worldwide automotive sector, its rivals replicated its approach. However, Toyota’s once-revolutionary practices left it particularly vulnerable to the impact of the global chip shortage.

Last summer, the corporation began shuttering its assembly centers due to widespread component availability challenges. The firm estimated the bottleneck prevented it from making 20,000 vehicles at its domestic factories in 2021.

Over a decade ago, Toyota changed tact in response to the 2011 Fukushima disaster by providing its factories with 2 to 6 months’ worth of components. Theoretically, the chip shortage and cyberattack will prompt the company to reevaluate its supply practices.  

man examining something while wearing a mask

March 1, 2022 – Update

Why Intel is Buying Tower Semiconductor for $5.4 Billion  

Intel announced it would buy Tower Semiconductor for $5.4 billion earlier this month, a significant premium on the Israeli chipmaker’s previously estimated $3.6 billion value. The American corporation anticipates the transaction will close within 12 months, barring regulatory complications. Intel CEO Pat Gelsinger commented that the purchase would expand its portfolio and bolster its foundry services business in a press release.

Although the semiconductor company’s reasoning makes sense, its newly declared acquisition breaks with its recent strategic moves.

Last year, Intel unveiled its IDM 2.0 initiative, a program designed to bring the firm back to the forefront of the electronic components industry. The project entails spending billions of dollars to expand its manufacturing capacity significantly worldwide. It also involves the company using its new resources to accept orders from other chipmakers. So far, it unveiled plans to establish new largescale chip factories in Arizona, Ohio, and Europe to support its foundry service roadmap.

But in snapping up Tower, Intel will expand its specialty semiconductor assets instead of its state-of-the-art capabilities.

Tower maintains five fabs across Israel, Italy, and the U.S. that produce PMICs, CMOS sensors, analog RF parts, and display chips. It also has a controlling stake in three Japanese facilities that manufacture analog, CIS, SOI, and power discrete microelectronics. That capacity enabled it to rank as the world’s ninth-largest pure-play foundry by revenue in Q4 2021.

While Intel will not outpace TSMC and Samsung because of its tie-up with Tower, it will own a bigger slice of a lucrative market. TrendForce pointed out the corporation will gain 6.2 percent of the world’s 8-inch wafer capacity in the deal. The market research group expects the transaction will help it improve its position in the automotive, industrial, mobile device markets.

Plus, in the post-global chip shortage landscape, any transaction that involves the acquisition of component factories is worth pursuing.

Intel’s deal will also further its ambition to cultivate production resources outside Asia.

Intel reportedly tried to buy GlobalFoundries for $30 billion for similar reasons last summer, but a deal failed to materialize. Its purchase of Tower provides many of the same benefits with a lower cost and fewer regulatory hurdles. It will also help the semiconductor firm address a predicted paradigm shift occurring in the vehicle sector.

Gartner: 50 Percent of Auto OEMs to Develop Chips In-House By 2025

Gartner recently published a piece identifying five automotive technology trends that will shape that industry in 2022. The consulting firm forecasts that half of the world’s top 10 automotive OEMs will be designing chips in-house by 2025. It lists the global push toward vehicle electrification and autonomous operation as key contributors to the change.

However, Gartner noted chip shortages are the primary driver of auto part companies taking a page out of Big Tech’s playbook.

Gaurav Gupta, research VP at Gartner, explained that automobile component vendors are moving to reduce supply chain complexity. “In most cases, chip makers are traditionally Tier 3 or Tier 4 suppliers to automakers, which means it usually takes a while until they adapt to the changes affecting automotive market demand.” He explained that vehicle sector OEMs would gain much greater visibility by taking microelectronics development in-house.

Related: Automakers moving away from JIT inventory model post-global chip shortage

Moreover, outsourcing custom chip production has never been easier.

Last November, Samsung, the world’s second-largest foundry service provider, committed to tripling its global production capacity by 2026. Later that month, it announced it would establish a $17 billion fab in Texas to support its American clients better. Similarly, TSMC, the world’s top contract chipmaker, declared it would spend $100 billion over the next three years to ramp up its manufacturing capabilities. It also set its 2022 capex at $40 billion to $44 billion, up from $30 billion in 2021.

Automotive OEMs will have their pick of service providers in a few years’ time due to all the foundry sector competition. However, Intel may have the edge over its rivals thanks to its acquisition of Tower. The Israeli chipmaker’s 8-inch wafer fabrication resources are ideal for tackling manufacturers’ mature component orders.

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A man is playing a switch

February 22, 2022 – Update

Nintendo Switch Sales Significantly Undercut by Chip Shortage

Earlier this month, Nintendo revealed it would miss its annual sales goal for its Switch console by 1 million units. The corporation anticipated moving 24 million gaming systems in the fiscal year ending March 2022, but it revised its forecast due to the global chip shortage. It also revealed that purchases of its flagship product fell 21.4 percent annually in the nine months ending December 2021.

Nintendo also stated it had no visibility regarding the end of its component sourcing difficulties.

The Japanese company is one of many video game industry players that could not meet demand last holiday season. Sony recently lowered its PlayStation 5 fiscal year sales projection from 14.8 million units to 11.5 million. Microsoft has encountered similar procurement issues with its Xbox Series S|X consoles since launching them in November 2020.

Kantan Games, a consultancy, expects Nintendo, Sony, and Microsoft’s supply issues to remain a consistent problem until 2023.

At present, chip sector leaders expect that the microelectronics bottleneck will start easing up in the second half of this year. But contemporary gaming systems require a unique mix of customer premium processors and highly in-demand PMICs. Plus, the comparatively small production orders for popular hardware mean console components are less of a priority for contact foundries.

For instance, Nintendo recently announced that its Switch lineup had moved 103.54 million units since its launch in 2017. But Apple moved an estimated 40 million iPhone 13s since it went on sale in September 2021. Consequently, popular gaming hardware might not be widely available until sometime next year.

Consequently, dedicated gamers may need to face the unconscionable and touch some grass in 2022.

GlobalWafers to Invest $3.6 Billion in Expanding Capacity

GlobalWafers, one of the world’s largest silicon wafer manufacturers, recently revealed it would spend $3.6 billion to expand its production capacity through 2024.

DigiTimes reported the corporation would spend $2 billion to establish a new fab and $1.6 billion enhancing its existing sites. It intends to develop new 200m and 300m production lines and diversify its output to include silicon carbide (SiC), gallium nitride on silicon (GaN on Si), and silicon on insulator (SOI) wafers.

The company expects to start bringing its new fabrication resources online in 2H2023.

GlobalWafers’s declaration follows its failed $4.89 billion acquisition of Siltronic, a German wafer supplier. The two corporations announced their merger in 2021 and aimed to close it before that year’s end. But the deal collapsed because European regulators did not approve it before its January 31 deadline.

Nevertheless, both providers are moving on from their unsuccessful tie-up with a positive perspective.

Siltronic CEO Christoph von Plotho recently commented that the transaction no longer made financial sense for his company following the post-COVID digitalization boom. Similarly, GlobalWafers CEO Doris Hsu expressed excitement about pursuing the manufacturer’s new roadmap. Also, continued competition in the wafer fabrication space should benefit chipmakers in terms of materials pricing and availability.

close-up of woman examining circuit board

February 15, 2022 - Update

EU Gives Domestic Chip Sector $49 Billion Boost

The European Union recently adopted the European Chips Act to bolster the region’s digital sovereignty and microelectronics production resources. Most notably, the legislation set aside €43 billion ($49 billion) in private-public capital to boost its local chip sector. It aims to make the trade bloc responsible for producing 20 percent of the world’s electronic components by 2030.

Related: What the Global Semiconductor Supply Chain Could Look Like in 2030

However, the specifics of the EU’s plans could blunt its impact.

The European Chips Act includes €15 billion ($17 billion) in government and business funding for semiconductor research and development. It also features €30 billion ($34.2 billion) in previously announced chip sector support initiatives. European Commission President Ursula von der Leyen explained the body designed the initiative to establish advanced IC manufacturing capacity within the continent.

Von der Leyen also noted COVID-19 and the global chip shortage emphasized the need for greater microelectronics infrastructure in Europe.

While the EU’s ambitions are laudable, its current framework is more of a first time than a comprehensive strategy.

The plan only provides €5 billion ($5.7 billion), or 15 percent of the overall proposal, in direct government funding. The legislation calls on the EU’s member states to approve the Act and put up the bulk of its financing. The bloc’s member countries might have different priorities, so the program might encounter significant roadblocks.

Nevertheless, the region is still evolving into a major semiconductor production hub in the coming years.

Last summer, TSMC, the world’s leading contract foundry, said it was reviewing the possibility of building a new fab in Germany. Bosch, a leading automotive component manufacturer, opened a €1 billion ($1.21 billion) component factory in June and is investing €400 million ($451.8 million) in expanding its capacity. Plus, Intel declared its intention to create a $100 billion microchip ecosystem in Europe, including potentially constructing two factories in Belgium, France, Germany, or the Netherlands.

Hopefully, the European Chips Act will entice other corporations to support the region’s future digitalization.

Semiconductor Industry Labor Shortage

The EU is not the only region that has recently made a significant commitment to bolstering its electronic component capabilities. Earlier this month, the U.S. House of Representatives passed the America COMPETES Act to provide $52 billion in semiconductor sector subsidies. Similarly, the Indian government approved a $10 billion proposal to kickstart its domestic microelectronics production.  

Ironically, these initiatives, created to address the vulnerabilities highlighted by the global chip bottleneck, are driving another kind of shortage.

Related: Sourcengine’s Semiconductor Industry Lead Time Report

Eightfold, a talent intelligence provider, estimates the United States needs to increase its IC sector workforce by 70,000 to 90,000 people to meet its critical application semiconductor needs. Moreover, it believes the country needs 300,000 new component production experts to achieve self-sufficiency. America is not the only region that must significantly increase its chip industry labor force to address post-pandemic demand.

The Wall Street Journal reported Taiwan, a global leader in microelectronics production, is facing a similar challenge. 104 Job Bank, a human resources company, found the area’s components segment had a 27,700-worker shortfall, up 44 percent year-over-year. Notably, its labor shortage has surged even though wages have reached a decade high.

Some of the world’s leading chipmakers have also highlighted the shallowness of the skilled labor pool recently.

Related: The Sourcengine Engineer’s Scholarship

Intel EVP Ann Kelleher told Congress that the U.S. needs to expand its semiconductor workforce to staff its new fabs appropriately. ASML, a Dutch manufacturer of cutting-edge microelectronics production equipment, anticipated staffing needs will grow by 10 percent annually amid rising demand. GlobalFoundries, a leading contract manufacturer, expects the already competitive American labor market will remain tight for several years.

Thankfully, the industry is taking action to rectify its labor issues.

Last spring, Taiwanese leaders passed legislation to support the area’s technology sector, which led to multiple universities launching IC-focused colleges. In Mainland China, several higher education institutions, including Peking University, created chip-centric colleges as part of a national push toward digital sovereignty. And the America COMPETES Act sanctions billions of dollars in federal spending on training and STEM education.

Currently, demand for skilled semiconductor industry workers dramatically outstrips supply. Hopefully, the last two years have convinced the world’s governments and chipmakers that supporting the sector long-term is a global priority.

An automotive production line

February 8, 2022 - Update

AlixPartners, a consulting firm, estimated that the global chip shortage cost the automotive industry $210 billion in lost revenue last year. The component crush forced the sector’s most prominent providers to shutter their factories because they could not complete their vehicle assemblies.

Recently, several leading automakers have detailed how the ongoing bottleneck will impact their operations in 2022. Across the board, the segment’s top companies believe the shortfall will affect their business in the short term. But they also share a belief that a major turnaround is coming.

Toyota Wants to Stage a Major Comeback in 2022

Toyota announced plans to roll out 11 million automobiles in the 2022 fiscal year, a 20 percent annual increase.

The Japanese corporation intends to ramp up production as time goes by, aiming to produce a record 1 million units in April. It expects to make more personal transports by working with its suppliers to create more extensive IC stockpiles. Though an innovator of the just-in-time model in the vehicle space, it changed tactics following the 2011 Fukushima disaster.

Unfortunately, Toyota’s reach may exceed its grasp.

Nikkei Asia revealed its output would decline by 20 percent this month because adequate IC quantities are not available. The publication also noted one of its midsize suppliers is grappling with a worker shortage. The manufacturer’s labor force has diminished due to rising COVID infection rates, and national entry restrictions are preventing its overseas recruitment efforts.

Although Toyota admitted reaching its production goal would be “extremely difficult,” its plans are not unfeasible.

The corporation sold more cars in the U.S. than any other company, a feat no foreign provider had ever achieved. If any vehicle manufacturer can set a sales record amid a historical materials shortage, it would be Toyota.

Volkswagen Cuts Shifts at Main Auto Plant

Volkswagen decided to slash almost all night shifts at its main plant in Wolfsburg, Germany, due to the component shortage.

The motor company will initiate the cutback in the second quarter on three of the facility’s four assembly lines. It made the change because the bottleneck previously forced it to lay off staffers or abruptly curtail production work. Last January, it furloughed 10,000 workers due to a lack of in-stock microelectronics.

In addition, a recent COVID-19 flare-up in China exacerbated VW’s sourcing difficulties.

The firm operates two factories in Tianjin with FAW Group, one for cars and another for chips. It closed the facilities on January 10 after both recorded new cases of the respiratory illness. Two weeks later, the complexes reopened as their respective workers had completed coronavirus testing.

VW said it anticipates that the chip shortage will last through 2022 but will ease by mid-year. It anticipates creating better forecasts in 2023 as additional production capacity will have come online.

The corporation’s projections dovetail with its plans to capitalize on the demand for electric vehicles in the world’s largest auto market.

Last year, VW sold 70,625 battery-powered vehicles in China, a big miss of its 80,000 to 100,000 sales goal. Its growth in the region suffered due to COVID-19 and chip crunch-related assembly problems. But by 2023, the company and its partners will operate three plants with a total annual throughput of 1 million units in the country.

Ford Cutting Vehicle Production At Eight Factories

Ford declared it would cut production at eight of its North American factories in response to insufficient IC supplies. However, despite its current situation, it expects to do strong business in 2022.

The automaker suspended vehicle assemblies at its Chicago, Michigan, and Cuautitlan, Mexico facilities on February 7. It paused the production of its iconic F-150 pickup trucks at its Kansas City complex and is ramping down work at its Dearborn and Oakville, Canada plants, as well as both of its Louisville sites.

Related: Global Electronic Component Shortage - February 2022 Update

On the plus side, Ford anticipates increasing its vehicle rollouts in 2H22 to address healthy consumer interest in its EV fleet.

The firm has taken 275,000 orders for its F-150 Lightning pickup trucks, Mustang Mach-E crossover SUVs, and Transit vans. Consequently, its long-term strategy involves betting big on the electrification trend. It wants to make 600,000 EVs annually by 2023, doubling its current capacity.

The manufacturer also recently tapped contract chipmaker GlobalFoundries to produce its parts alongside TSMC, its existing service provider.  

Hyundai Aiming for 12 Percent Growth in 2022

Hyundai took a significant financial hit from a global chip shortage last year, but it sees a recovery on the horizon in 2022.

The company aims to grow its business by 12.1 percent this year, even with the lingering effects of the component crunch. In tandem with its subsidiary Kia, it intends to move 7.47 million automobiles in 2022. Its roadmap to that destination includes stabilizing its supply chain, boosting its yields, and enhancing its EV fleet.

That outlook represents a significant change from 2021; it sold 6.67 million units last year, 3.7 percent less than planned. Its procurement issues contributed to its Q4 2021 profits dipping by 50 percent from the year prior.

Related: Sourcengine Q1 2022 lead time report highlights

The South Korean giant stated Omicron variant-related disruptions would continue disrupting its operations in the first quarter. But it anticipates the chip crunch becoming less intense in Q2 and a return to supply-chain normalcy in Q3. Its leaders believe those developments will enable it to boost its annual sales by 20 percent in its primary market, North America.

Further out, Hyundai reportedly intends to bolster its component ecosystem through a new partnership with Samsung.

The corporation sourced memory modules for its vehicles from the conglomerate in the past. But in the future, it might contract the chipmaker to fabricate other automotive-grade ICs using its advanced nodes. As of this writing, neither firm has publicly confirmed plans to form a new alliance.

Even so, OEMs, CMs, and EMS providers should be aware that change is coming to the semiconductor industry.

EVs require around 2,000 microelectronic devices to function, roughly double the amount of gas-powered cars. As more top automakers push to electrify their fleets, they will increase their component purchases. That means their suppliers will consume more production line space to fill their orders, making procurement more challenging for companies in other sectors. Professional buyers should prioritize supply chain diversification as soon as possible to stay ahead of the curve.

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inside a chip fab

January 31, 2022 - Update

The global chip shortage happened because demand for electronic components vastly exceeds available production capacity. Thankfully, the industry’s leading chipmakers are working to address that problem by building new factories as quickly as possible.

Even better, many national governments are pushing to bring fabs to their countries, making the microelectronics supply chain more diverse. That development is important because recent COVID-19 flareups highlighted the risks of concentrating too many manufacturing clusters in one region. Even before the shortage began, rising international trade tensions showed the importance of launching new facilities in new areas.

Along those lines, leaders and companies in mainland China and India are taking steps to make their regions prominent IC production hubs.

China’s Rapidly Expanding Chip Ecosystem

According to the South China Morning Post, microchip production by Chinese companies surged by 33 percent year-over-year in 2021. The East Asian country chipmakers fabricated 359.4 million electronic parts at their domestic and overseas plants. As a result, the superpower ranked as the world’s third-largest seller of components behind America and South Korea.

China’s massive 2021 component output spike is a huge milestone for its public-private drive to establish semiconductor independence. That said, it still is a long way to go to reach that goal.

For one thing, none of the region’s microelectronics manufacturers can produce cutting-edge ICs. Because its component technologies are lagging edge, it is still highly dependent on foreign providers to meet its needs. Last year, the nation imported $432 billion in chips, up 23.6 percent from 2020. Its semiconductor spending will remain significant until it establishes a greater, more advanced chip manufacturing ecosystem.

However, Beijing’s efforts to develop robust domestic chip resources are paying off better than the Cincinnati Bengals drafting Joe Burrow.

Related: What the Global Semiconductor Supply Chain Could Look Like in 2030

The national government’s cash grants, tax abatements, and land discounts have seeded fertile ground for local and international entrepreneurs. Over the last 12 months, 105,000 semiconductor sector businesses opened up shop in the country. Alibaba and Tencent, two of its national technology champions, recently unveiled their first self-designed hardware. Plus, it launched 28 fab construction projects last year, supported by $26 billion in funding.  

Industry experts estimated China produced 9 percent of the world’s IC in 2020 and that its market share would reach 17.4 percent by 2024. Just a few years ago, that projection felt almost overly enthusiastic, but today it seems too cautious.

India Invests $10 Billion in Its Future

India is another region that recently moved to better its position in the global semiconductor ecosystem.

In mid-December, New Delhi approved a ₹760 billion ($10.1 billion) package to incentivize chipmakers to create local production nodes. The fund will cover half the cost of establishing front-end capacity in-country, like new wafer fabs. It also offers financial support to cultivate new local talent and firms looking to set up back-end manufacturing facilities.

Moreover, India’s microelectronics program includes creating domestic industrial parks that feature ample water, energy, and transportation resources. That is especially crucial as Nikkei Asia reported a lack of production infrastructure stood as a significant obstacle to attracting leading component manufacturers.

But the South Asian republic is pushing to overcome that hurdle with the power and grace of Cincinnati Bengals wide receiver Ja’Marr Chase.

That said, the Indian government correctly views building the national semiconductor ecosystem as a complex, multi-year process.

Luckily, New Delhi’s efforts are resonating with local businesses. Vedanta, a natural resources conglomerate, recently declared its intention to break into the microelectronics field. The corporation aims to begin fabricating 28mm and 65mm wafers at a volume of 40,000 units per month in its home market by 2026.

Vedanta is investing in older manufacturing processes because that is where it sees the market potential in India. AvanStrate, a glass substrate manufacturer and a Vedanta subsidiary, is spearheading its parent company’s semiconductor initiative. It intends to fabricate ICs with applications in the consumer electronics and automotive segments.

At present, India is 100 percent dependent on outside vendors for its microelectronic. But China’s success in developing a vibrant domestic electronic components ecosystem proves that what India wants is achievable. Like the Cincinnati Bengals heading to the Super Bowl, India is ready to show the world the impossible can become doable.

We're experiencing supply issues board

January 24, 2022 - Update

Earlier this month, ASML Holdings disclosed that a fire broke out at its Berlin, Germany factory that could affect its equipment deliveries. But like John Wick in the third act of the movie, the corporation is driven to make a comeback.

The equipment manufacturer revealed it would greatly expand its headcount to better address the impact of the global chip shortage on January 19.

In more expensive news, ASML announced plans to supply Intel with a next-generation lithography machine that costs over $380 million.

ASML to Add 3,500 Employees by Year’s End

During a recent interview, ASML CEO Peter Winick discussed the firm’s outlook on the components sector.

He explained that the manufacturer aims to hire 3,500 new workers to meet chip shortage prompted demand. Last year, it added 6,000 people to its headcount for the same reason. It also started delaying its testing procedures to expedite its deliveries. The corporation anticipates its army of workers will correct that imbalance in two to three years.

ASML’s chief executive also offered new details on the blaze that hit its Berlin factory. Though the fire affected 200 square meters of the plant, it will not “significantly impact” its 2022 production schedule. OEMs should not see significant delays in their sourcing of next-generation microelectronics, thanks to its efforts.

However, Winnick warned that the semiconductor industry’s push to expand capacity could create an oversupply glut by the middle of the decade.

Relatedly, DigiTimes recently estimated global fab equipment revenue would hit a record $98 billion in 2022, up 10 percent year-over-year. While a lot of money is being poured into expanding production capacity, demand remains incredibly strong. Market intelligence firm Gartner recently reported electronic components sales hit $583.2 billion last year.

The semiconductor market’s robust continued growth suggests the post-COVID digitalization wave will not crest until the third Robert Pattinson Batman movie hits theaters.

ASML and Intel Team Up to Advance Chipmaking Technology to Infinity and Beyond

In addition, ASML announced that Intel had arranged to purchase its next-generation extreme ultraviolet lithography (EUV) machines. The manufacturer pledged to deliver a High NA TWINSCAN EXE:5200 system to the chipmaker in 2025. The new tool features a more precise aperture, decreased complexity, and reduced energy usage and cycle time than current generation EUV machines. It is also a productivity beast capable of fabricating more than 200 silicon wafers per hour.

In practical terms, the TWINSCAN EXE:5200 offers enhanced chip performance, faster throughput, and better production yields.

Intel intends to begin mass production using the system in 2025.

The Dutch corporation has had a consistent partner in the American chipmaker in its quest to advance EUV tech. In 2018, it sold the firm a TWINSCAN EXE:5000 system, its next-gen lithography system prototype. The manufacturer stated it would deliver the high-end equipment to its customers in 2023.

Reuters revealed ASML, the sole vendor of EUV tools, is charging a premium rate for its new products. The firm’s current generation machines retail for around $169.5 million, and the EXE:5000 sells for about $339.1 million. ASML CTO Roger Dassen said the EXE:5200 units cost “significantly” more than $384.3 million.

Although the cost of innovation is high, Intel has a significant incentive to pay the manufacturer’s eye-watering fees. Though it is still the world’s leading IDM, its East Asian rivals have developed far more advanced production tech. Its inability to make advanced hardware led it to book space in TSMC’s 3nm production lines.

However, if Intel can utilize ASL’s innovative High NA equipment to its full potential, it could regain its standing as the semiconductor industry’s top provider. Plus, since the corporation is pursuing a dominant position in a half a trillion-dollar market, a $384 million investment makes sense.

How ASML’s Factory Fire Could Undermine the Global Chip Shortage Recovery

ASML is the sole manufacturer of state-of-the-art lithography machines chipmakers use to create sub-7nm components. The corporation’s technology enables the world’s tech giants to make components for their bestselling smartphones and computers. Last year, it posted record revenues as chipmakers and foundries spent an estimated $87.8 billion to buy new semiconductor production equipment, expenditures driven by the global chip shortage.

Unfortunately, a recent fire at ASML’s Berlin, Germany plant could undermine the industry’s recovery efforts.

The Dutch company revealed the blaze disrupted the fabrication of its deep (DUV) and extreme ultraviolet (EUV) lithography machines. It anticipates the production of its DUV tools will not be impacted but is unsure of its EUV equipment output. Potentially,  the firm’s deliveries could be delayed and curtail its customers’ capacity expansion plans.

Consequently, OEMs, CMs, and EMS providers might struggle to source certain premium processors and memory chips later this year.

That said, ASML maintains an extensive manufacturing network, so it could use another facility to fill the affected orders. Plus, TrendForce reports that it takes 12 to 18 months to make its EUV machines, meaning the fire might only minimally affect its supply chain. Hopefully, this incident will only be a bump in the road chip’s sector recovery. At this point, the entire industry is overdue for a win.

TSMC to Give Major Chipmakers a Manufacturing Boost in 2022

With the bad news out of the way; TSMC, the world’s biggest contract foundry, will make next-generation products for AMD and Intel later this year.

AMD CEO Dr. Lisa Su revealed the chipmaker would begin selling Zen 4 chipsets made using TSMC’s 5nm node in 2022. She also noted its products would be made with bleeding-edge manufacturing and packaging processes to enable high-performance computing. DigiTimes reported the firm would utilize the foundry’s 3D SoC tech for its recently announced Ryzen 7 5800X3D desktop processors at its Chunan, Taiwan-based factory in 2H22.

Ideally, AMD will be able to keep its new hardware consistently in stock with TSMC’s robust support.

In addition, TSMC plans to commence mass production with its N3 node in Q4 2022. The corporation’s 3nm process can make components with 70 percent greater logic density, 30 percent lower power consumption, and 15 percent more processing speed than its 5nm chips. This year, it will deploy its technology to serve Apple, its biggest client, followed by AMD, Broadcom, MediaTek, and Nvidia in 2024.

TMSC also plans to use its 3nm node to make products for Intel before year’s end, likely because the firm is its second-largest customer. The contract manufacturer is also converting production space at a Hsinchu plant to fabricate chipmaker’s offerings. The former research and development facility site can put out 20,000 silicon wafers per month.

Together, AMD, Intel, and TSMC are opening up the bottleneck that has gripped the semiconductor industry since late 2019.

But wait, there’s more!

Intel’s Plans to Establish a European Chip Ecosystem

Although Intel is outsourcing its next-gen hardware, it is also working on expanding its manufacturing resources.

Last month, Reuters reported the chipmaker and the Italian government are “intensifying talks” about building a chip plant within the country. Once operational, the $9 billion plant will use advanced packaging technology to produce high-performance components.

Bloomberg noted Intel is looking at Sicily as a potential building site. The corporation intends to establish a large-scale fab in Germany, with Saxony-Anhalt and Bavaria as possible locations. It also wants to create a new research and development facility in the French cities of Paris or Grenoble.

Intel CEO Pat Gelsinger declared that his corporation would create a $94 billion European semiconductor ecosystem over the next decade. Gelsinger previously said public funding would expedite its capacity expansion. But the firm’s high-level government negotiations and $28 billion planned capital expenditure suggest it is eager to break ground sooner rather than later.

The world’s foremost IDM would benefit in multiple ways from creating a leading-edge chip supply chain in Europe.

The chipmaker would become more competitive with Samsung and TSMC by establishing new advanced labs and factories. It would also appeal to component companies and OEMs that want geographically diffuse supply options. The U.S.-China trade war, the global chip crunch, and disruptive COVID-19 outbreaks have highlighted why it is a monumentally bad idea to concentrate most of the world’s chip factories in one region.

Plus, the coffee over there is infinitely better than the brews produced in the United States.

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