Amid an Excess Supply of Mature Process Chips, Where Are Chinese Manufacturers Competitive?(AI Translation)
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文｜财新周刊 翟少辉 覃敏
By Caixin Weekly's Zhai Shaohui and Qin Min
人工智能（AI）浪潮之下的先进制程芯片一卡难求、价格飙升，与之“冰火两重天”的是成熟制程芯片的价格战硝烟已在全球弥漫。
Amid the surge in artificial intelligence (AI), advanced process chips are in high demand and their prices are soaring. In stark contrast, a price war over mature process chips is spreading across the globe.
业界普遍将28纳米作为半导体制造工艺的分界线，该节点及以上为成熟制程，技术成熟、良率较高；28纳米以下则为先进制程。
Industry experts commonly consider the 28-nanometer process as the dividing line in semiconductor manufacturing. Processes at this node and above are regarded as mature technologies, characterized by established techniques and high yield rates; processes below 28 nanometers are classified as advanced technologies.
5月9日，中国大陆最大的晶圆代工厂中芯国际（688981.SH/00981.HK）发布2024年一季报，中芯国际联合首席执行官赵海军在次日的财报会上坦言，中芯的12英寸晶圆产线2月以来一直满载，但同业竞争激烈。“公司的很多战略客户，无论机顶盒还是智能手机，市场上如有其他竞争者开出更低价格，它们就可能丢掉单子，几千万元的订单就不见了。我们还是要随行就市，跟客户一起去面对市场竞争。”
On May 9, Semiconductor Manufacturing International Corporation (SMIC) (688981.SH/00981.HK), the largest foundry in mainland China, released its first-quarter report for 2024. At the earnings conference the following day, SMIC co-CEO Zhao Haijun candidly shared that the company's 12-inch wafer production lines have been operating at full capacity since February, but competition in the industry remains fierce. "Many of our strategic customers, whether it be set-top boxes or smartphones, might lose orders if there are competitors in the market offering lower prices. Orders worth tens of millions of yuan can disappear. We still have to adapt to the market and face market competition together with our customers," Zhao said.
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- The semiconductor industry is experiencing contrasting trends: advanced process chips see high demand and soaring prices, while a global price war over mature process chips is intensifying.
- SMIC reported a Q1 2024 revenue of $1.75 billion, up 4.3% QoQ, but faces fierce competition and a trend of increasing shipment volumes and decreasing average selling prices.
- In response to a chip shortage, significant expansions in production capacity are occurring globally, particularly in mainland China, focusing mainly on mature processes, while advanced chips drive demand due to the AI boom.
Amid the surge in artificial intelligence (AI), the demand and prices of advanced process chips are increasing, while a global price war for mature process chips is escalating [para. 1]. The semiconductor manufacturing industry considers the 28-nanometer process as the dividing line between mature and advanced technologies. Processes at this node and above are classified as mature, characterized by established techniques and high yield rates, whereas processes below are considered advanced.
Semiconductor Manufacturing International Corporation (SMIC), the largest foundry in mainland China, released its first-quarter report for 2024, noting fierce competition despite full capacity operations since February. SMIC achieved $1.75 billion in revenue, a 4.3% quarter-on-quarter increase, but with an average selling price per unit falling by 3% [para. 3][para. 4][para. 5][para. 6]. The company predicts continued shipment growth in the second quarter coupled with declining prices [para. 8].
Aggressive competition is pushing prices for mature process nodes down significantly. Prices for 55-nanometer processes have declined by 20% to 30%, previously seen only with 90-nanometer processes [para. 9][para. 11]. The typical annual price drop for mature process technologies ranges from 5% to 10%, with a decline exceeding 20% being rare [para. 13].
Since the second half of 2020, a "chip shortage" spurred the global wafer foundry industry to expand rapidly. Investments in 12-inch wafer fab equipment saw a 7% increase in 2022 and 4% in 2023. Projections for 2024 and 2025 indicate expected growth rates of 1% and 20%, respectively, with the market size anticipated to reach $116.5 billion [para. 15][para. 16][para. 17].
Forecasts suggest global wafer fab capacity will increase annually by 9% to 10% from 2024 to 2027, with mature processes comprising about 70% of this capacity. Mainland China is expected to see a compound annual growth rate (CAGR) of approximately 11% from 2025 to 2029 [para. 20][para. 21]. Major Chinese manufacturers like SMIC and Huahong are expanding production, mainly in mature processes, a strategic choice given U.S. restrictions on advanced processes below 28 nanometers [para. 22][para. 23][para. 25].
Driven by the AI boom, high-end logic chips requiring advanced processes are in demand, while the mature process market remains under strain. Consumer device markets for smartphones, PCs, and home appliances, which use mature process chips, show weak demand. However, sectors like AI and new energy vehicles in China signify potential future growth in demand for mature process chips [para. 29][para. 30][para. 31].
Currently, the competitiveness of mature process technology in mainland China still lags behind leading international players like TSMC but has reached levels comparable to second-tier manufacturers like UMC. Given the ongoing expansion, capacity utilization remains a critical focus [para. 44][para. 47][para. 50][para. 52].
The United States is imposing additional tariffs on Chinese semiconductor imports, signaling geopolitical tensions. By 2025, tariffs on these imports will rise from 25% to 50% [para. 57].
Aggressive pricing strategies are notable, especially among smaller domestic wafer fabs and even leading manufacturers like SMIC and XMC. Mainland Chinese foundries are leveraging price reductions to capture market share, prompting international players like GlobalFoundries to follow suit with significant cuts [para. 60][para. 61][para. 62][para. 63][para. 65][para. 66].
By the first quarter of 2024, the global wafer foundry industry's capacity utilization rate dropped below 80%. Although some recovery is expected, utilization rates are unlikely to revert to previous highs [para. 87][para. 88][para. 89].
Finally, the progress in domestic equipment and materials in China is fostering confidence and potential cost competitiveness in the local wafer foundry industry. Investment in domestic supply chains is critical for reducing costs and maintaining competitiveness [para. 116][para. 117][para. 118][para. 119][para. 120].
- SMIC
中芯国际 - SMIC, China's largest wafer foundry, reported Q1 2024 revenue of $17.5 billion, a 4.3% sequential increase, with an average selling price decline of 3%. The company faces competitive pressures and price reductions, with mature process node chips, especially 55nm, seeing intense price competition. Since being added to the U.S. entity list in December 2020, SMIC has focused on expanding its mature process capacity, notably for the 28nm node and above.
- Hua Hong Semiconductor
华虹半导体 - Hua Hong Semiconductor (688347.SH/01347.HK) is one of China's major chip manufacturers, focusing on mature process nodes. As of the end of 2023, they were expanding capacity and had ongoing construction projects, including recently announced investments in Chengdu for a new wafer fab. They ranked sixth globally, with a market share of 2.0%.
- JHICC
晶合集成 - The article mentions JHICC (Jinhua Integrated Circuit), which is one of China's major wafer foundries. JHICC, along with SMIC and Hua Hong, holds significant market shares in China's semiconductor industry. In the context of a price war in mature process nodes, JHICC has been one of the aggressive players, lowering prices to maintain competitiveness and secure customers.
- C-ROC Microelectronics
华润微电子 - The article does not mention C-ROC Microelectronics specifically. It focuses on the global semiconductor industry, particularly the challenges and developments in the mature process chip market, including price wars and production expansions. For specific information on C-ROC Microelectronics, additional sources would be needed.
- Guangdong Semiconductor
粤芯半导体 - Guangdong Semiconductor, through the Guangdong Semiconductor and Integrated Circuit Industry Investment Fund and GAC Capital, led a 4.5 billion yuan financing round for a capacity expansion at粤芯 (Yuexin) in 2022. The funding also included strategic investors like SAIC, BAIC, and Guangzhou Industrial Investment Fund, underscoring broad support from both national and industry players.
- ASML
荷兰光刻机企业ASML - ASML is a Dutch company known for its photolithography machines, crucial in semiconductor manufacturing. Despite geopolitical tensions, ASML's Q1 2024 report showed that China accounted for 49% of its sales, up from 39% in Q4 2023. This is partly driven by Chinese firms stockpiling equipment to mitigate future restrictions.
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