TrendForce’s latest investigations indicate that China has recently announced two additional investments funded via phase two of the CICF (China Integrated Circuit Industry Investment Fund, better known as the “Big Fund”). The first of these investments was announced on June 8, 2021 and totaled CN¥1.65 billion, which has been used to establish a joint venture called Runxi Microelectronics, co-funded with CR Micro and the Xiyong Micro-Electronics Industrial Park.

Runxi will operate a semiconductor fab specializing in 12-inch wafer fabrication, with a production capacity of 30K/M (that is, 30,000 wafer starts per month). The second investment, announced on July 2, 2021, will total about CN¥2.5 billion and be put towards AMEC’s efforts to raise capital for establishing an industrial center, a headquarter located in the Shanghai Lin-Gang Special Area, and an R&D headquarter.

Now that the Big Fund Phase 2 has invested in semiconductor equipment for the first time, more equipment suppliers are expected to receive investment capital from Big Fund Phase 2 going forward

Established in October 2019, Phase 2 of the Big Fund consists of CN¥204.15 billion in capital, some of which was subsequently invested into 12 companies across the IC design, IC fabrication, package testing, and equipment sectors, as of July 5, 2021. In terms of funding allocation, IC fabrication take the lion’s share with 78.2% of the aforementioned investment, followed by IC design at 11.6%, equipment at 7.7%, and package testing at 2.6%. To date, about CN¥36.6 billion of the Big Fund Phase 2 has been invested.

Investment in AMEC marks the first time that the Big Fund Phase 2 has purchased shares in domestic suppliers of semiconductor fabrication equipment. As fabrication equipment is the key determinant of whether China can achieve its goal of semiconductor independence, suppliers that previously received Phase 1 funding (including Naura, ACM Research, Piotech, Sky Technology Development, and Shanghai Wanye Enterprises), as well as those that have yet to receive investment from the Big Fund (including SMEE and Hwatsing), are likely to receive Phase 2 funding for their expansion projects going forward.

China’s Big Fund provides the domestic semiconductor industry considerable leverage against US sanctions as AMEC receives financing unaffected by US blacklist

As a major supplier of semiconductor etching equipment in domestic China, AMEC specializes in substrate etching technologies. The company provides products which are used for 8-inch/12-inch wafer fabrication and are compatible with 65nm-5nm process technologies. In addition, AMEC has also been actively developing CVD (chemical vapor deposition) equipment, making it an indispensable part of the Chinese semiconductor supply chain.

AMEC effectively had its overseas financing sources cut off after being blacklisted by the US Department of Defense in January 2021. Now that the Big Fund Phase 2 has infused AMEC with CN¥8.207 billion of investment capital, the company is no longer threatened by its inclusion on the economic blacklist. Hence, the substantial Big Fund Phase 2 has also become an important instrument in China’s fight against US sanctions amidst a persistent trade war currently taking place between the two countries.

（Cover image source: Unsplash）

Some of the advantages of third-generation semiconductors SiC and GaN include their ability to operate under high voltages, high temperatures （for SiC）, and high frequencies（for GaN）. Not only do these advantages allow manufacturers to significantly reduce the physical sizes of chips, but peripheral circuit designs can also be simplified as a result, thereby further reducing the sizes of modules, peripheral components, and cooling systems. That is why SiC and GaN have become important strategic focuses of the global semiconductor industry.

As part of its ongoing goal of semiconductor independence, China has been accelerating the development of third-generation semiconductors in recent years

From the perspective of substrate development, countries find it difficult to procure SiC substrates due to the lack of production capacities worldwide. Hence, the ability to control the supply of SiC substrates equals having more influence in the semiconductor industry. The current ranking of geographical regions that control the supply of SiC substrates is, in order, the US （Cree and II-VI）, Japan （Rohm）, and Europe （STM）.

It should be pointed out that China’s overall standing in the third-generation semiconductor industry is hindered by its insufficient supply of substrates. Hence, Chinese companies are slightly lagging behind other global companies in this industry. At the moment, both TankeBlue and Shanxi Shuoke have successfully developed 8-inch SiC wafers, though their scale of mass production is yet to catch up to global leader Cree.

Despite the vast majority of GaN substrate suppliers being Japanese and European companies, Chinese companies have been making an aggressive push to enter this market. Regarding substrates, Nanowin, Sino Nitride, and Eta Research are all currently investing in R&D and mass production, though their current focuses are limited to 2-inch and 4-inch wafers. Regarding epitaxy, Enkris, GLC, and Genettice have been similarly making progress on R&D and mass production.

Furthermore, Chinese companies are farther ahead in the development and manufacturing strategies for GaN substrates compared to SiC substrates. For the GaN RF segment, Chinese companies span the entire supply chain, including IDM（CETC, Aofengyuan, Chengchang, Dynax, Innoscience, Bofang Jiaxin）, foundries（HiWafer and San’an）, and fabless IC design companies（GaXtrem）.

（Cover image source: TSMC）

In recent years, China has been aggressively pursuing the build-out of an independent semiconductor supply chain as it attempts to eschew dependence on foreign suppliers. The key to China’s success is whether it can establish domestic suppliers of semiconductor equipment.

Looking at the current state of China’s semiconductor independence, it should be pointed out that Chinese suppliers of semiconductor equipment have been making the greatest progress on the CMP, etching, and cleaning fronts, while lagging behind in terms of deposition, ion implantation, and photolithography.

CMP equipment is used for polishing silicon wafers and metallic/non-metallic thin films. TrendForce estimates that about 26% of all such equipment procured by Chinese foundries in 2020 was sourced from domestic companies. CMP equipment manufactured by Chinese brands can support process technologies as advanced as the 14nm node, which is sufficient for meeting the current demand of Chinese foundries.

An indispensable aspect of silicon or dielectric etch applications, about 24% of all etching equipment procured by Chinese foundries in 2020 was sourced from domestic companies. Chinese-manufactured etching equipment can currently support process technologies as advanced as the 5nm node.

Used for cleaning wafers after the deposition process, CMP process, etching process, and ion implantation process, about 23% of all cleaning equipment procured by Chinese foundries in 2020 was sourced from domestic companies.

Cleaning equipment manufactured by Chinese brands can support process technologies as advanced as the 14nm node. Remarkably, more Chinese companies have been entering this market segment compared to other semiconductor equipment, while some Chinese suppliers are already able to compete with major foreign suppliers in terms of market shares.

Used for PVD, CVD, and ALD processes, about 10% of all deposition equipment procured by Chinese foundries in 2020 was domestically sourced. Chinese-manufactured deposition equipment can support process technologies as advanced as the 14nm node. However, as the technological barrier for manufacturing these products is relatively high, Chinese suppliers are still in the process of catching up to their global competitors in terms of technology. Hence, it remains difficult for Chinese suppliers to continue raising their market shares in the short run.

Likewise, as the technological barrier for manufacturing ion implantation and photolithography equipment is relatively high, equipment from Chinese suppliers is unlikely to support advanced process technologies in the short run despite these suppliers’ aggressive R&D efforts. In terms of self-sufficiency, about 5% and 1% of all ion implantation equipment and photolithography equipment, respectively, procured by Chinese foundries in 2020 was domestically manufactured.

（Cover image source: Unsplash）

As infections among employees from semiconductor backend testing leader KYEC make news headlines, the company suspended operations for two days and undertook facility-wide disinfections starting on June 4, although at the moment KYEC’s facility has yet to resume operations at full capacity. In the vicinity of KYEC are packaging and testing operator Greatek and networking device manufacturer Accton, both of which have since been affected by the spread of the disease.

Not only have the confirmed cases in KYEC generated worries about possible disruptions to the semiconductor supply chain, but the semiconductor industry is also anxious about whether continued infections will spread to other semiconductor companies.

As a leading chip tester (as well as the 8^th largest IC package and testing companies globally), if KYEC were to halt its operations altogether due to the continued spread of COVID-19 infections, the semiconductor supply chain would be considerably impaired as a result. Not only would upstream clients (including fabless companies, IDMs, and foundries) have their schedules disrupted, but lead times of downstream end-products will be prolonged as well, causing far-reaching impacts throughout the entire semiconductor industry.

According to KYEC’s publicly disclosed information, the distribution of its clientele is as follows: fabless companies (76%), IDMs (22%), and foundries (2%). In particular, of the 50 largest semiconductor companies globally, more than 30 currently make use of KYEC’s testing services.

According to TrendForce’s latest investigations, the packaging and testing industry has been impacted in the short run by KYEC’s two-day suspension and low-capacity operation resumptions successively. As such, MediaTek, Novatek, and STMicroelectronics, which are major clients of KYEC, are all notably experiencing impacts from the spread of the pandemic within KYEC’s ranks.

Although the above companies have already transferred some of their orders to ASE, Sigurd, and ChipMOS to make up for disruptions in KYEC’s operations, these orders are too numerous to be fulfilled completely at the present. Therefore, the tight capacity of chip testing services is expected to intensify going forward.

（Cover image source: Pixabay）

Intel has outsourced the production of about 15-20% of its non-CPU chips, with most of the wafer starts for these products assigned to TSMC and UMC, according to TrendForce’s latest investigations. While the company is planning to kick off mass production of Core i3 CPUs at TSMC’s 5nm node in 2H21, Intel’s mid-range and high-end CPUs are projected to enter mass production using TSMC’s 3nm node in 2H22.

In recent years, Intel has experienced some setbacks in the development of 10nm and 7nm processes, which in turn greatly hindered its competitiveness in the market. With regards to smartphone processors, most of which are based on the ARM architecture, Apple and HiSilicon have been able to announce the most advanced mobile AP-SoC ahead of their competitors, thanks to TSMC’s technical breakthroughs in process technology.

With regards to CPUs, AMD, which is also outsourcing its CPU production to TSMC, is progressively threatening Intel’s PC CPU market share. Furthermore, Intel lost CPU orders for the MacBook and Mac Mini, since both of these products are now equipped with Apple Silicon M1 processors, which were announced by Apple last year and manufactured by TSMC. The aforementioned shifts in the smartphone and PC CPU markets led Intel to announce its intention to outsource CPU manufacturing in 2H20.

TrendForce believes that increased outsourcing of its product lines will allow Intel to not only continue its existence as a major IDM, but also maintain in-house production lines for chips with high margins, while more effectively spending CAPEX on advanced R&D. In addition, TSMC offers a diverse range of solutions that Intel can use during product development (e.g., chiplets, CoWoS, InFO, and SoIC). All in all, Intel will be more flexible in its planning and have access to various value-added opportunities by employing TSMC’s production lines. At the same time, Intel now has a chance to be on the same level as AMD with respect to manufacturing CPUs with advanced process technologies.

(Cover image source: Taiwan Semiconductor Manufacturing Company, Limited )

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com