Demand for Low-end Semiconductors on the Uptick
While Samsung Electronics and TSMC are intensifying their competition in the 3-nm chip market, low-end semiconductors produced using a 28-nm or lower process may cause a bottleneck in the semiconductor supply chain. Some experts argue that China can increase its influence in such a situation.
TSMC CEO Che-Chia Wei attended the TSMC Annual Technology Forum held in Taiwan on Aug. 30 (local time) and pointed out that a shortage of low-priced semiconductors are causing chip supply chain disruptions.
“Low-priced semiconductors in the range of 50 cents to 10 U.S. dollars are slowing down the growth of the global semiconductor industry worth US$600 billion,” Wei said. He added that ASML, a Dutch manufacturer of extreme ultraviolet (EUV) equipment, has difficulty in securing US$10 semiconductors incorporated in the equipment.
Low-priced semiconductors include micro control units (MCUs), which are mainly used for vehicles, and power management integrated chips (PMICs) used for various products such as home appliances and IT devices. They have low profitability as they are produced using a 28-nm or lower mature process and under different production conditions. Naturally, foundry service providers have no choice but to focus on advanced processes that can generate high added value rather than legacy processes.
Under these circumstances, demand for low-end semiconductors is on the uptick. According to IBS, an IT industry consulting firm, the proportion of mature processes over 28 nm in the total foundry market was about two-thirds in 2020. IBS predicted that demand for 28-nm semiconductors will more than triple to US$28.1 billion (29,497.5 billion won) by 2030. Recently, demand for mature processes is on the decline as the utilization rate of 8-inch and 12-inch foundries that produce low-priced semiconductors is falling, but effects inside and outside the market will make a difference in the cycle and long-term demand will be strong.
Some experts assert that China can enjoy a niche effect in a situation where mature processes do not get the attention of major foundry players. Chinese foundry operators such as SMIC cannot import advanced EUV equipment due to US sanctions, so they has a high proportion of mature processes. Due to the nature of China, the largest consumer of semiconductors, it also aims to respond to demand.
IBS predicted that China’s 28-nm semiconductor production will increase from 15 percent (2021) to 40 percent (2025) of the world’s production due to this influence. SMIC also announced in September that it will invest US$7.5 billion in Tianjin, China to build a factory based on a mature process. This explains why some experts are concerned that the expansion of the supply of low-priced semiconductors centered on China could adversely affect the entire world semiconductor supply chain amid the worsening conflict between the United States and China,.
In general, most experts do not expect China’s influence to be significant. “Even if the proportion of China increases, there will be no need to feel a sense of crisis as the proportion of production in other developed countries remains,” said Kim Yang-paeng, a researcher at the Korea Institute for Industrial Economics and Trade