Chipper trio

Now has a 5.6% market share

In his State of the Union speech in March, American president Joe Biden waxed lyrical about a “thousand empty acres of land” 20 miles east of Columbus, Ohio. Biden said the vacant real estate represented a “field of dreams” for the United States government, which is trying to incentivise the world’s foundry giants to build fabrication plants for their most sophisticated chips on American soil.

However, that thousand acres of land is still empty after Intel scrapped plans for a groundbreaking ceremony there in July. It cited a lack of progress in reconciling two competing versions of Washington’s $52 billion CHIPS Act in the House and the Senate, both of which are promising tax breaks and other incentives for chip companies investing in America.

“It’s such a pivotal moment if we don’t act now,” pleaded Intel CEO Pat Gelsinger, who says it does not make sense to move forward unless the legislation is passed. “Please don’t dither in Congress over petty partisanship,” he urged.

One issue that normally unites both sides of the political divide is the desire to defend America’s edge over China in many technologies. However disagreements over the final form of the CHIPS legislation have slowed the progress of the bill, with fears that Congress is running out of time before the August recess to get the legislation into law.

While US politicians argue amongst themselves, the most recent TrendForce data shows that China’s three leading foundries are progressing up the global rankings in sales terms. The top three companies – SMIC, Hua Hong and Nexchip – surpassed 10% of global sales for the first time in the first quarter of this year. SMIC leads with a 5.6% market share, followed by Hua Hong on 3.2%. Nexchip on 1.4% (it has also just received approval for a listing on Shanghai’s STAR Market).

SMIC is now threatening to seize America’s GlobalFoundries fifth place spot on 5.9% and potentially even surpass Taiwan’s UMC on 6.9%.

The group has approved $5 billion of capex in 2022 with plans to double the number of fabs operating at the 28 nanometre (nm) production node from three to six. Three new fabs in Shenzhen, Beijing and Shanghai should increase output by a further 240,000 wafers a month, doubling existing capacity at this node based on recent estimates.

Washington’s latest move in trying to hold back the Chinese challenge is to pressure Holland’s ASML into halting shipments of deep ultraviolet (DUV) lithography machines to Chinese clients. Bloomberg reported the lobbying effort earlier this week, following a meeting between Deputy Commerce Secretary Don Graves and ASML CEO Peter Wennink in Veldhoven where ASML is based.

The US has already persuaded the Dutch government to slap an export ban on ASML’s most advanced extreme ultraviolent (EUV) machines, which is helping to slow SMIC’s advance to more advanced 7nm production nodes. A ban on sales of DUV machines would disrupt Chinese efforts at less advanced levels of production too.

China’s homegrown equipment maker SMEE has said that it is capable of manufacturing lithography machines that can produce 90nm chips. What is less certain is whether it has mastered the jump to 28nm. As we reported in WiC572, the Chinese press had been expecting the company to deliver the first machines operating at this node over the summer, but there has been no further news of that since then.

It is probably not coincidental that the leaks about renewed lobbying from the US came a few weeks after ASML announced that it was planning to expand its China-based headcount by 16% and recruit 200 new engineers.

At the most sophisticated end of the chipmaking spectrum, Taiwan’s TSMC and South Korea’s Samsung Electronics are currently battling it out for leadership at 3nm levels. UBS analyst Sunny Lin thinks that TSMC is likely to win out because Samsung is having issues with yields under the new gate-all-around (GAA) technology that allows foundries to make chips at ever smaller nodes.

The Swiss bank estimates that TSMC has three quarters of the market in the world’s most advanced nodes currently (5nm/7nm) and could expand this to 80% in 3nm in 2023 and 2024. TSMC has also allocated colossal sums to capital expenditures – as much as $44 billion for this year alone.

Some of this may be spent on a previously announced plan to build an advanced 5nm fab in Arizona if the CHIPS Act is passed.

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