As China’s biggest semiconductor fund, officially known as the National IC Industry Investment Fund, announced on November 23 its plan to invest US$531 million in the new fab of Semiconductor Manufacturing International Corp. (SMIC), China’s leading foundry and also the world’s 5th largest by market share (5%), it marks the latest development of a trend increasingly alarming for some Taiwanese industry observers.
The SMIC fab in question, located in Shenzhen, expects to begin volume production in 2022, and aims for a monthly capacity of 40,000 wafers (300 mm equivalent) in 2023.
♦ Further reading: China’s semiconductor investment at a new juncture
While SMIC lags far behind the industry leader Taiwan Semiconductor Manufacturing Co. (TSMC) – a race further stalled by the U.S. sanctions barring Chinese chip industry from obtaining the EUV lithography machines for advanced processes – China’s new focus on mature process nodes, especially 28 nm, poses a long-term threat to Taiwan’s United Microelectronics Corp. (UMC), currently the world’s 3rd largest by market share (7%).
As Taiwan’s first semiconductor company, preceding TSMC by 7 years, UMC underwent a revolutionary transformation in 2018 by halting at 12 nm node, and turning its attention to develop further on mature fabrication platforms, especially special process technologies. The similar trajectories put UMC and SMIC on a potential collision course, especially as China seeks to boost the share of domestic foundries within its chip industry, eventually achieving full autonomy.
A way forward amidst inevitable competition
In fact, as indicated by the president of the IC Industry Investment Fund, Wenwu Ding, the policy fund doesn’t solely act as an investor, but as a supervisor who ensures that its investee companies will boost the share of domestic equipment and provide domestic manufacturers the chance of product validation.
Moreover, according to an insider from China’s semiconductor industry, Chinese IC design companies can now obtain subsidies if they choose Chinese foundries over non-domestic ones. The policies, in essence, aim to sustain China’s chip manufacturing industry through domestic orders. When SMIC and other Chinese foundries, especially Shanghai Huali Microelectronics Corp. (HLMC), which is widely expected to be the second Chinese foundry bringing 14nm to volume production, are mature enough, UMC is likely to lose its orders to its Chinese rivals.
♦ Further reading: UMC is rumored to add a 300mm fab in Singapore
It is estimated that China accounts for 16% of UMC’s revenues. For now, the foundry’s position is not threatened yet. An UMC official indicated that 70% of UMC’s orders are subjected to long-term contracts lasting between 3 to 6 years. The remaining 30% is, however, left to competitions. The inevitability of growing Chinese competition might be one of the reasons behind UMC’s strategy to diversify its production capability across Asia, including Singapore, where the government has been trying to rejuvenate its semiconductor industry amid changing geopolitical dynamics.
Simultaneously, UMC’s core competence – its speciality technologies – will likely give it an edge against rivals, and it points a way forward for other Taiwanese foundries that might also face Chinese competition in the future.
UMC has a rich portfolio of speciality technologies: for power management ICs, for example, UMC provides a state-of-art Bipolar-CMOS-DMOS (BCD) solution. When it comes to high voltage applications, UMC’s embedded HV technologies offer Field Drift MOSFET (FDMOS) for voltage requirement above 3oV, and Double Diffused Drain MOSFET (DDDMOS) for requirement below 30V. Fore wireless applications, UMC also offers Mixed-Signal/RFCMOS (MS/RFCMOS) technologies