IC Manufacturing, Package&Test


[News] Taiwan’s Chip Act Takes Effect in February, TSMC to Benefit from Historic Tax Incentives

According to a report by TechNews, Taiwan has introduced its largest-ever investment deduction incentives under the “Statute for Industrial Innovation,” often referred to as the “Taiwanese Chip Act.” Articles 10-2 and 72 of the statute came into effect, and the Ministry of Economic Affairs announced that it would accept company applications from February 1 to May 31 this year.

The Ministry of Economic Affairs stated that applications for deductions would be accepted starting February this year. The provided tax incentives include a 25% deduction for research and development expenses and a 5% deduction for expenditures on acquiring new eqipment for advanced processes, all of which can be deducted from the current year’s corporate income tax.

Eligibility criteria include companies with research and development expenses of at least NT$6 billion, a research and development density of 6%, and expenditures of NT$10 billion for the purchase of equipment for advanced processes, with no restrictions on industry category.

The Ministry of Economic Affairs emphasized that as the parent law already specifies an effective tax rate of 12% for the fiscal year 112 and a threshold of 15% from the fiscal year 113 onwards, this measure aims to encourage businesses that do not meet these tax rate qualifications to strive for them and become eligible for tax incentives.

A review panel will be formed to assess whether applying companies meet the criteria for a critical position in the international supply chain and other qualification requirements.

The Ministry of Economic Affairs shared that the application period for Article 10-2 of the Statute for Industrial Innovation is from February 1 to May 31 this year. Companies are required to provide explanatory documents and supporting evidence, including data on products, international market share, rankings, import-export trade, and other statistics, serving as indicators for the assessment of technological innovation and critical positions.

According to the financial reports of publicly listed companies in 2022, including TSMC, MediaTek, Realtek, Novatek, Delta Electronics, Nanya Technology, Phison and Winbond, their research and development expenses and research and development density all meet the application thresholds.

(Image: TSMC)

Please note that this article cites information from TechNews

[News] China’s ICs Imports Decrease in 2023, Chinese Manufacturers Focus on Mature Processes

According to a report by China’s financial media outlet Yicai, in 2023, China’s import quantity and value of integrated circuits experienced a significant decline, influenced by factors such as the overall downturn in the global chip market and the U.S. ban on the sale of chips to China.

The latest data from the Chinese Customs Administration indicates that in 2023, China imported a total of 479.5 billion integrated circuits, a 10.8% decrease compared to 2022, with an import value of $349.4 billion, marking a 15.4% year-on-year decline.

Industry experts suggest that the soft importation of integrated circuits and semiconductor equipment in China reflects the global economic headwinds in 2023, especially the impact of sluggish sales of Chinese smartphones and laptops. Simultaneously, Chinese companies are striving to increase domestic chip production to reduce dependence on imported chips.

Despite the time required for China to achieve mass production in the field of artificial intelligence chips, the push by the Chinese government to establish a more resilient chip supply chain has motivated local manufacturers to actively increase production capacity in mature nodes. These chips are used in devices such as automobiles and home appliances, unaffected by the current U.S. restrictions.

Public information reveals that SMIC, Hua Hong Group, and Nexchip are among the most active in expanding production, focusing on specialty processes such as driver ICs, CIS/ISP, and power semiconductor ICs.

With China’s significant investment in mature nodes, it is positioned at a time when the global chip industry is poised for recovery. According to a recent TrendForce’s data, China currently has 44 operational semiconductor wafer fabs, with an additional 22 under construction. By the end of 2024, 32 Chinese wafer fabs will expand their capacity for 28-nanometer and older mature chips.

TrendForce predicts that by 2027, China’s share of mature process capacity in the global market will increase from 31% in 2023 to 39%, with further growth potential if equipment procurement progresses smoothly.

(Image: SMIC)

Please note that this article cites information from Yicai

[News] TSMC’s Earnings Conference on the 18th, Market Focuses on Eight Key Points

According to Commercial Times, TSMC, the leading semiconductor foundry, will hold its investor conference on the 18th. Market attention will be focused on eight key questions, including the 2024 full-year revenue forecast, advanced process development, and progress in overseas facility expansion.

Key points of interest for investors include: 1. TSMC’s 2024 full-year gross margin trends and changes in the first and second quarter gross margins. 2. Intel’s aggressive pursuit of advanced processes and how TSMC views it. 3. Chairman Mark Liu’s announcement of retirement in 2024 and whether TSMC’s overseas expansion plans will change. 4. Strategies for expanding advanced packaging production capacity. 5. Annual capital expenditures. 6. Views on the semiconductor industry’s recovery. 7. Trends in utilization rates for each process. 8. Full-year revenue outlook.

The market is closely watching TSMC’s first-quarter gross margin. Morgan Stanley semiconductor industry analyst Charlie Chan pointed out that due to the price reduction for 3-nanometer process foundry services provided to Apple, coupled with the recent appreciation of the New Taiwan Dollar against the U.S. Dollar and accelerated depreciation, TSMC’s gross margin for 2024 is under pressure.

According to industry sources, TSMC may slightly slow down the transition from 5-nanometer to 3-nanometer process equipment this quarter. The lowest point in the annual gross margin may fall in the second quarter, rather than the originally estimated first quarter, meaning that TSMC’s quarterly gross margin will not experience a cliff-like plunge.

As for TSMC’s full-year revenue outlook, after Goldman Sachs and UBS Securities expressed optimism about TSMC’s revenue growth exceeding 20% for the year, JPMorgan Securities also noted that, driven by inventory replenishment, AI demand, and the expansion of the 3-nanometer process, TSMC’s revenue is expected to grow by 20% in 2024. The acceleration from AI accelerators and system-on-chip (SoC) for smartphones will lead to better-than-expected capacity utilization rates for the 5-nanometer and 4-nanometer processes.

(Image: TSMC)

Please note that this article cites information from Commercial Times

[News] China’s Chip Production Capacity Reportedly Set to Grow 60% in 3 Years, Doubling in 5 Years

According to a report from IJIWEI, research by Barclays analysts indicates that China’s chip manufacturing capacity is expected to more than double within the next 5 to 7 years, surpassing market expectations significantly. The analysis of 48 chip manufacturers with production facilities in China suggests that 60% of the expected additional capacity may come online within the next 3 years.

TrendForce statistics reveal that, excluding 7 dormant wafer fabs, China currently has 44 wafer fabs, with 25 of them being 12-inch facilities, 4 of them 6-inch, and 15 8-inch wafer fabs/lines. Additionally, there are 22 wafer fabs under construction, with 15 of them being 12-inch facilities and 8 being 8-inch wafer fabs.

Companies like SMIC, Nexchip, CXMT and Silan plan to construct 10 more wafer fabs, including 9 12-inch and 1 8-inch wafer fab, by the end of 2024, bringing the total to 32 large-scale wafer fabs, all focusing on mature processes.

Chinese firms have accelerated the procurement of crucial chip manufacturing equipment to support capacity expansion. According to the previous report from South China Morning Post, the import value of lithography equipment from the Netherlands, a primary exporter, surged by 1050%, reflecting substantial orders for semiconductor equipment from China in 2023.

Barclays analysts suggest that most of the new capacity will be used for producing chips using older technologies. These mature semiconductors (28nm and above) lag behind the most advanced chips by at least a decade but are widely used in household appliances and automotive systems.

While these chips could theoretically lead to a market oversupply, Barclays believes it will take several years, possibly as early as 2026, depending on quality and any new trade restrictions.

Earlier, TrendForce released statistics projecting a global ratio of mature (>28nm) to advanced (<16nm) processes around 7:3 from 2023 to 2027. With China’s mature process capacity expected to grow from 29% to 33% by 2027, driven by policies promoting local production, giants like SMIC and HuaHong Group are anticipated to lead the charge, potentially causing a flood of mature processes into the global market and triggering a price war.

TrendForce notes that as China’s mature process capacities emerge, localization trends for Driver IC, CIS/ISP, and Power Discretes will become more pronounced, leading to risks of client attrition and pricing pressures for second and third-tier foundries with similar processes.

Please note that this article cites information from IJIWEI

[News] TSMC and PSMC Face Dilemma as Overseas Foundry Costs Skyrocket 2.5 to 4 Times

Various countries are actively developing their semiconductor industries, with Taiwan’s semiconductor foundries, including TSMC, UMC, and PSMC, becoming prime targets for local manufacturing facilities. TSMC has established plants in the United States, Germany, and Japan, while PSMC, in addition to its facility in Miyagi-ken, Japan, has recently announced plans to assist India in building a factory.

However, for these Taiwanese semiconductor foundries, expanding overseas may not always prove to be a economical choice.

According to Taiwan’s Economic Daily News, PSMC Chairman Frank Huang revealed that 7 to 8 countries have invited the company to establish manufacturing facilities in their respective regions. However, the costs in these countries are higher than those in Taiwan.

Huang pointed out that, based on the data they have, the cost of building a fab in Japan is 1.5 times higher than in Taiwan, with construction costs being 2.5 times higher and operational costs 50% more expensive than in Taiwan. It would take 7 to 8 years for the combined construction and operation to become profitable, meaning the factory would only start making money three years after its establishment. In contrast, PSMC’s Fab P5 in Tongluo Science Park is expected to break even this year.

PSMC had already disclosed plans to assist India in technology transfer for building a fab in early 2023. Huang explained that because South Korea and the United States are unwilling to teach others how to make semiconductors, neither TSMC nor UMC are offering such assistance, leaving PSMC as the go-to option for those seeking guidance in semiconductor manufacturing.

The countries reported to have sought PSMC’s assistance in building fab include Japan, Vietnam, Thailand, India, Saudi Arabia, France, Poland, and Lithuania.
According to TrendForce research, PSMC is the third-largest semiconductor foundry in Taiwan and ranks 10th globally. It announced its investment in a 12-inch factory in Miyagi-ken, Japan, at the end of 2023.

Similarly, TSMC, the leading foundry based in Taiwan, faces similar challenges when expanding overseas. In early 2023, TSMC executives stated during an earnings conference that due to factors such as labor costs, permits, regulatory compliance, and rising living prices, the cost of setting up a plant in the United States is at least four times higher than in Taiwan.

However, beneath the economic considerations, geopolitical factors play a significant role in these decisions. The ongoing regional shift in the semiconductor industry supply chain is inevitable in the current geopolitical climate.

(Image: PSMC)

Please note that this article cites information from Economic Daily News
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