Intel officially confirmed on February 15 that it will acquire Israeli foundry Tower Semiconductor for nearly US$6 billion, and the deal will likely contribute to the growth of Intel’s foundry business if it reaches a successful conclusion, according to TrendForce’s latest investigations. Tower was 9th place in the global ranking of foundries by revenue for 4Q21 and operates a total of seven production sites across Israel, the US, and Japan. Tower’s foundry capacity in 12-inch wafer equivalents accounts for about 3% of the global total. The majority share of Tower’s foundry capacity is for 8-inch wafers, and Tower’s share of the global 8-inch wafer foundry capacity is around 6.2%. Regarding manufacturing process platforms, Tower offers nodes ranging from 0.8µm to 65nm. It has a diverse range of specialty process technologies for manufacturing products in relatively small quantities. Products that Tower has been contracted to manufacture are mostly RF-SOI components, PMICs, CMOS sensors, discretes, etc. As such, the Tower acquisition is expected to help Intel expand its presence in the smartphone, industrial equipment, and automotive electronics markets.

Although Intel undertook a series of business strategies to compete with TSMC and Samsung, IFS (Intel Foundry Services) has historically manufactured with platform technologies for processors such as CPUs and GPUs. Furthermore, competition still persists between Intel and certain foundry clients that require advanced processes below the 10nm node, such as AMD and Nvidia, which have long histories of developing server products, PC CPUs, GPUs, or other HPC-related chips. Intel’s preexisting competitive relationship with these companies may become a barrier to IFS’ future expansion because IFS will be relatively unlikely to attract them as customers.

Taking the aforementioned factors into account, TrendForce believes that the Tower acquisition will likely expand IFS’ business presence in the foundry industry through two considerations. First of all, the acquisition will help Intel both diversify its mature process technologies and expand its clientele. Thanks to advancements in communication technologies and an increase in demand for new energy vehicles, there has been a recent surge in demand for RF-SOI components and PMICs. Tower’s long-term focus on the diverse mature process technologies used to manufacture these products means it also possesses a long-term collaborative relationship with clients in such markets. By acquiring Tower, Intel is therefore able to address IFS’ limited foundry capabilities and limited clientele. The second consideration pertains to the indigenization of semiconductor manufacturing and supply allocations, which have become increasingly important issues in light of current geopolitical situations. As Tower operates fabs in Asia, EMEA, and North America, the acquisition is in line with Intel’s current strategic aim to reduce the disproportionate concentration of the foundry industry’s supply chain in Asia. As well, Intel holds long-term investments and operates fabs in both the US and Israel, so the Tower acquisition will give Intel more flexibility in allocating production capacities, thereby further mitigating risks of potential supply chain disruptions arising from geopolitical conflicts.

In addition to the aforementioned synergy derived from acquiring Tower, it should also be pointed out that Intel is set to welcome an upcoming partnership with Nuvoton. Tower’s three Japan-based fabs were previously operated under TowerJazz Panasonic Semiconductor, a joint venture created by Tower and Panasonic in 2014, with Tower and Panasonic each possessing 51% and 49% ownership, respectively. After Nuvoton acquired PSCS (Panasonic Semiconductor Solutions Co.) in 2020, Panasonic’s 49% ownership of the three fabs was subsequently transferred to Nuvoton. Following Intel’s Tower acquisition, Intel will now possess the 51% majority ownership of the fabs and jointly operate their production lines for industrial MCUs, automotive MCUs, and PMICs along with Nuvoton. Notably, these production lines also span the range of CIS, MCU, and MOSFET technologies previously developed by Panasonic.

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

Demand in the global foundry market remains strong in 1Q21, according to TrendForce’s latest investigations. As various end-products continue to generate high demand for chips, clients of foundries in turn stepped up their procurement activities, which subsequently led to a persistent shortage of production capacities across the foundry industry.

TrendForce therefore expects foundries to continue posting strong financial performances in 1Q21, with a 20% YoY growth in the combined revenues of the top 10 foundries, while TSMC, Samsung, and UMC rank as the top three in terms of market share. However, the future reallocation of foundry capacities still remains to be seen, since the industry-wide effort to accelerate the production of automotive chips may indirectly impair the production and lead times of chips for consumer electronics and industrial applications.

TSMC has been maintaining a steady volume of wafer inputs at its 5nm node, and these wafer inputs are projected to account for 20% of the company’s revenue. On the other hand, owing to chip orders from AMD, Nvidia, Qualcomm, and MediaTek, demand for TSMC’s 7nm node is likewise strong and likely to account for 30% of TSMC’s revenue, a slight increase from the previous quarter. On the whole, TSMC’s revenue is expected to undergo a 25% increase YoY in 1Q21 and set a new high on the back of surging demand for 5G, HPC, and automotive applications.

In response to increased client demand for 5G chips, CIS, driver ICs, and HPC chips, Samsung will continue to raise its semiconductor CAPEX this year, which is divided between its memory and foundry businesses and represents Samsung’s desire to catch up to TSMC. With regards to process technologies, the Korean company’s capacity utilization rates for the 5nm and 7nm nodes have been relatively high in 1Q21, during which Samsung is expected to increase its revenue by 11% YoY.

In addition to chip demand from the automotive sector, UMC has been keeping up with manufacturing driver ICs, PMICs, RF front-end, and IoT products. The company’s capacity thus remains fully loaded in 1Q21, and UMC is expected to undergo a 14% YoY increase in revenue. GlobalFoundries is similarly experiencing high capacity utilization rates due to the increase in automotive chip demand, as well as the military chips that it has been manufacturing for the U.S. Department of Defense. GlobalFoundries’ revenue is expected to increase by 8% YoY in 1Q21.

SMIC’s revenue for the 14nm and below nodes is expected to decline in 1Q21 as the company was added to the Entity List by the U.S. and subsequently faced constraints in the development of advanced processes. However, with the persistent demand in the foundry market for mature processes above (including) the 40nm node, SMIC’s revenue is projected to stay on a positive trajectory and reach a 17% YoY increase in 1Q21. TowerJazz will spend about US$150 million on a small-scale capacity expansion, but equipment move-in and calibrations will not be finalized until approximately 2H21, after which the expanded capacity will start measurably contributing to the company’s revenue. In 1Q21, TowerJazz’s revenue is expected to be on par with the previous quarter while reaching a 15% increase YoY.

PSMC is primarily focused on manufacturing memory products, DDICs, CIS, and PMICs. At the moment, high demand for 8-inch and 12-inch wafer capacities and for automotive chips has resulted in fully loaded capacity for PSMC. The company’s revenue is expected to increase by 20% YoY in 1Q21. Likewise, VIS’ capacity is fully loaded across all of its process technologies. Driven by increased spec requirements for PMICs and small-sized DDICs, VIS’ revenue is expected to increase by 26% YoY in 1Q21. Finally, Hua Hong is currently placing considerable emphasis on expanding the 12-inch capacity of HH Fab7 in Wuxi. Process technologies for 12-inch production lines, including NOR, BCD, Super Junction, and IGBT, have all passed qualifications, thereby injecting fresh momentum into Hua Hong’s development. Furthermore, given Hua Hong’s fully loaded 8-inch capacities and the fact that its performance in 1Q20 represents a relatively low base period for YoY comparison, Hua Hong’s revenue may likely reach a 42% YoY increase in 1Q21.

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