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Chinese language foundries, resembling Semiconductor Manufacturing Worldwide Corp (SMIC) and Hua Hong Semiconductor Group, are ramping up capability amid fears of extra US tech sanctions, in line with an business report.
Whereas the nation’s chip makers lag behind gamers resembling Taiwan Semiconductor Manufacturing Co (TSMC) and Samsung Electronics in chip-processing know-how, they’re “actively” growing funding in new capability to accommodate the demand for legacy chips utilized in purposes resembling automobiles and client electronics.
The full capability of China-based foundries will develop 15 per cent to eight.9 million wafers per 30 days this yr, and 14 per cent to 10.1 million subsequent yr, exceeding the typical international development of 6 per cent and seven per cent for a similar interval, in line with a report from SEMI, a US-based business affiliation.
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Consequently, China is predicted to account for about 30 per cent of the world’s complete wafer capability subsequent yr, SEMI mentioned.
A wafer fab clear room at a Hua Hung Semiconductor facility. Photograph: Handout alt=A wafer fab clear room at a Hua Hung Semiconductor facility. Photograph: Handout>
“Regardless of potential dangers, China is actively growing funding to ramp up foundry capability, partly as a consequence of its efforts to alleviate the impression from [US] export controls,” the affiliation mentioned within the report. Chinese language chip makers together with Nexchip, SiEn (Qing Dao) Built-in Circuits Co, and reminiscence chip maker ChangXin Reminiscence Applied sciences, are all increasing.
The funding tempo has already triggered overcapacity considerations, with Washington firing the primary salvo. The Biden administration will apply tariffs to US$18 billion value of Chinese language imports, together with a 50 per cent hike on semiconductor imports from China beginning subsequent yr, to guard the native US chip business.
“Chinese language producers had been stockpiling [chip-making] instruments in 2023,” Boris Metodiev, a senior semiconductor manufacturing analyst at TechInsights, mentioned throughout a latest webinar. “Unprecedented demand in China meant that wafer fab tools gross sales in China hit an all time excessive.”
Metodiev famous that gross sales of semiconductor wafer fab tools in China final yr surged 48 per cent towards a worldwide development charge of 1 per cent. “This implies if you happen to exclude China from the equation, all the opposite areas really declined 15 per cent,” he mentioned.
The growth comes after China’s semiconductor sales dropped for 2 years in a row amid a sluggish financial restoration after Beijing abruptly ended its draconian zero-Covid-19 coverage in late 2022.
Analysts have warned that China’s ongoing growth plans will result in manufacturing overcapacity over the following two years, doubtlessly undercutting costs if Chinese language fabs begin promoting on the worldwide market.
Prior to now, China relied on imports for many of its chip wants, however amid a relentless self-sufficiency drive and elevated US sanctions, the state of affairs has modified. China imported 479.5 billion built-in circuits (ICs) in 2023, a ten.8 per cent year-on-year lower, with an import worth of US$349.4 billion, equal to a 15.4 per cent decline over the earlier yr, in line with information from the Chinese language Customs Administration.
A employee inspects a silicon wafer at TankeBlue Semiconductor Co in Beijing, Jan. 24, 2024. Photograph: Xinhua alt=A employee inspects a silicon wafer at TankeBlue Semiconductor Co in Beijing, Jan. 24, 2024. Photograph: Xinhua>
Chinese foundries like SMIC and Yangtze Reminiscence Applied sciences Corp are already benefiting from the nation’s localisation drive. Business experiences point out that native foundries have skilled a quicker restoration in capability utilisation – a measurement of fab manufacturing exercise – in comparison with their international friends as a consequence of China’s home substitution insurance policies for ICs and different tech merchandise.
Hua Hong Semiconductor, China’s second largest foundry centered on mature and speciality applied sciences, has seen its capability utilisation operating at most ranges and is predicted to lift costs 10 per cent within the second half of the yr, in line with a notice from US funding financial institution Morgan Stanley printed final week.
Some traces at Chinese language foundries are already working at full capability as a consequence of excessive buyer demand, in line with a TrendForce analysis notice printed on Wednesday. It mentioned the normal peak stock stocking season within the second half might lengthen the tight capability state of affairs till the top of the yr, with the value changes reflecting efforts to alleviate revenue strain quite than a full restoration in demand.
This text initially appeared within the South China Morning Post (SCMP), probably the most authoritative voice reporting on China and Asia for greater than a century. For extra SCMP tales, please discover the SCMP app or go to the SCMP’s Facebook and Twitter pages. Copyright © 2024 South China Morning Submit Publishers Ltd. All rights reserved.
Copyright (c) 2024. South China Morning Submit Publishers Ltd. All rights reserved.
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