Newsletter from 4 to 11 June 2023

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TSMC targets Germany for a plant in Dresden

Taiwanese chipmaker TSMC is continuing talks with Germany about setting up a components factory there. The factory is expected to be built in Dresden if the German subsidy proposals are sufficient for TSMC. TSMC, which dominates more than half of the chip market, has responded to calls from certain countries to locate production lines in China and Japan, and recently in Arizona in the United States. The semiconductor leader has also announced the first phase of production of a 2 nanometre chip, involving a unit of 1,000 researchers in Taiwan, as reported by TechNode. South Korea’s Samsung has also indicated that it is working on this new technological process, with the aim of being able to supply the market by 2025. Meanwhile, Europe has just earmarked €21 billion for an “important project of common European interest” for the semiconductor industry. This week, the French ministry of Finance signed a cheque for €7.5 billion to build a STMicroelectronics gigafactory in France.

German finance minister refuses to give Intel more subsidies for its future gigafactory

According to the Financial Times, German Finance Minister Christian Lindner said there was no money in the budget to meet Intel’s demands for increased subsidies for its new €17 billion factory in eastern Germany, dampening hopes of a deal. The US chipmaker was due to receive €6.8 billion in government aid for its manufacturing plant, or fab, in Magdeburg, but is now demanding around €10 billion, citing rising energy and construction costs.

ST Microelectronics and Sanan Optoelectronics invest USD 3.2 billion in a joint venture in Chongqing to produce silicon carbide (SiC) components

On 7 June, ST Microelectronics and Sanan Optoelectronics announced the creation of a joint venture (JV) to produce silicon carbide (SiC) semiconductors on 200mm wafers. Located in Chongqing, this plant will represent an investment of $3.2 billion, including $2.5 billion in capital expenditure (CAPEX), and will benefit from financial support from the local government. It is expected to come on stream in 2025. These components will be produced using ST Microelectronics technologies and will be sold under the French company’s brand. However, the SiC substrates (47% of production costs) will be supplied by a separate plant, to be built and operated by Sanan Optoelectronics. These components should enable the company to respond to the growth of the Chinese market in the automotive (electric vehicles) and industrial applications sectors. New generation” (III-V) semiconductor materials, such as gallium nitride (GaN) and SiC, have physical properties that optimize performance in power electronics, optoelectronics and radio frequency processing. The potential applications for these new components are therefore very promising in industry, energy and the automotive sector. Unlike logic or memory chips (NAND, DRAM), where the technological competition is mainly based on the mastery of increasingly advanced etching techniques, the main challenge in developing the SiC sector in China lies in the industrialization of existing techniques to meet the demand of a growing market.

China: 16% of global demand for Sic components by 2025

By 2025, China could account for 16% of global demand for SiC components, up from 7% in 2019. The historical players in SiC are foreign: these include integrated manufacturers such as ST Microelectronics, as well as NXP (Netherlands), Infineon (Germany) and Onsemi (United States). However, this technology has also been the subject of a great deal of interest in China over the last few years, with support measures at national and local level, as well as numerous academic research projects. In March 2021, the mention of III-V semiconductors in the 14th Five-Year Plan made it clear that this technology was a priority. That year, 10 fab projects or production lines for SiC or GaN substrates were already planned (launched or completed). By 2020, Sanan had invested CNY16bn (EUR2.1bn) in its own integrated plant for the production of SiC chips in Changsha (Hunan), with a production capacity of 400,000 wafers a year, including 200mm wafers. Historically, Sanan was a player in the optoelectronics sector, specializing in the production of LED components.

The municipality of Shenzhen in China announces new support measures for semiconductor companies

The municipality of Shenzhen has announced new support measures for semiconductor companies. The measures include rental subsidies and direct grants of up to CNY10 million (USD1.4 million) per company. The Futian municipal district is even going so far as to grant subsidies to companies in the sector, reducing by 60% the cost of renting land for which it is responsible. Subsidies are also planned to support R&D activities across all companies in the value chain (design, EDA, manufacturing, materials). The provincial authorities in southern China are among the most active in their support for the industry. The vice-governor of Guangdong province, Wang Xi, said on Tuesday 18 April 2023 at the annual conference on integrated circuit manufacturing in China that some forty major semiconductor projects were being built or planned in the province, where Shenzhen is located. The cumulative value of these investments is estimated at 500 billion yuan (USD 74 billion).

TSMC: annual general meeting of TSMC group shareholders under the banner of increased production capacity

The TSMC group held its annual general meeting on 6 June in Hsinchu, in the presence of Chairman Mark Liu and CEO C. C. Wei. At the meeting, the group announced an increase in production capacity for 3nm chips in Tainan, as well as the production of 2nm chips in Hsinchu and Taichung (2025), and in the longer term the production, also in Taiwan, of 1.4nm chips currently under development. Mark Liu spoke of the Group’s potential in the artificial intelligence (AI) sector, and in particular the growing influence of ChatGPT. With regard to CAPEX expenditure, previously set at between $32 and $36 billion for 2023, the Chairman said that we were probably heading for the low end of the $32 billion range, while the CFO announced a likely increase in dividends for shareholders. On the subject of energy, CEO C.C. WEI stressed that by 2025, the Group expected its electricity consumption to rise, and was planning to increase its use of renewable energy sources. He added that while it was hoped that companies would continue to invest in Taiwan, the government would have to adopt a new method to remain competitive with the United States and Europe. For example, TSMC would not be able to achieve carbon neutrality in 2030, but rather between 2030 and 2050.

TSMC’s role as a “stabilizer” in global geopolitical tensions

Mark LIU emphasized TSMC’s role as a “stabilizer” in the current context of global geopolitical tensions. With regard to value chains, he mentioned that certain equipment was currently assembled in Singapore and South Korea, and certain spare parts produced in China. He called on the government to take steps to ensure that these steps could be carried out locally.

The plan to set up in Germany was also discussed, particularly as regards the talent aspect, with the introduction of student exchanges. As far as subsidies were concerned, discussions were still ongoing. TSMC has indicated that it would like to hold a majority stake in the future joint venture.

Nvidia-TSMC partnership: Nvidia confirms that TSMC will remain its supplier

Taiwanese Jensen Huang, CEO of US company Nvidia, has confirmed that TSMC will remain Nvidia’s supplier of next-generation chips. This confirmation comes as a clarification after rumours of diversification by Nvidia in this respect, while TSMC is facing growing security risks for Taiwan that have already led Warren Buffet to sell his shares in the Taiwanese group. What’s more, Jensen Huang praised TSMC’s qualities, saying that it is a company with “immense capacity” and “extreme agility”, while assuring us that he feels “perfectly safe” about Nvidia’s dependence on the Taiwanese group. In response, TSMC’s share price rose by 2% from 31 May to 2 June, reaching TWD 562 (EUR 17).

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