Chinese semiconductor industry

Alibaba Arm chips being tested with customers. 5nm fab at tsmc

China Rapidly Increasing Semiconductor Manufacturing Equipment Purchase


Semiconductor Equipment and Materials International (SEMI) announced on April 14 that the global semiconductor manufacturing equipment sales added up to US$102.6 billion last year, up 44 percent from a year ago.

By country, China increased its purchase by 58 percent to US$29.6 billion, South Korea increased its purchase by 55 percent to US$24.98 billion, and Taiwan increased its purchase to US$24.94 billion. China’s semiconductor manufacturing equipment purchase, which was US$13.11 billion in 2018, increased for the fourth consecutive year. South Korea’s was US$17.71 billion in 2018 and dropped to US$9.97 billion in 2019.


Last year, Japan’s semiconductor manufacturing equipment purchase was US$7.8 billion and those of North America and Europe were US$7.61 billion and US$3.25 billion, respectively.

These days, semiconductor manufacturing equipment is very hard to come by worldwide. This is because the supply of equipment components is not smooth and orders are increasing rapidly at the same time. At present, the average lead time is more than 10 months.

Pathetic. US is behind even Japan. Or should I say was because I doubt this will continue for next 5 years at least.
Japanese semi industry is dead man walking thanks to lots of stupid bone headed decisions by Japanese companies following US corporate governance model of bean counters and MBAs with no Japanese government intervention to curtail them.

gelgoog said:

Pathetic. US is behind even Japan. Or should I say was because I doubt this will continue for next 5 years at least.
Japanese semi industry is dead man walking thanks to lots of stupid bone headed decisions by Japanese companies following US corporate governance model of bean counters and MBAs with no Japanese government intervention to curtail them

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I won’t read too much into the Wafer Fab Equipment (WFE) spending ranking. This is very dynamic year over year.

For example, Intel didn’t spend much on advanced node WFE in 2021. Most of their $18B CAPEx is on building fab shells. But they are expected to spend most of their25 CAPEx this year in WFE. So the total U.S. WFE spending will be much higher than $7B and higher than Japan in 2022, you also pointed this out in ur comment

tsmc alone has announced it will spend $44B. This will roughly be around $30-35B for equipments. Plus other investments by UMC, and memory fabs, Taiwan WFE spending may reach $40B in 2022.

By the way don’t hold me to the numbers…numbers I provided are estimates/numbers based on my memory. You may fact check it. But I shouldn’t be off to much…maybe by few $B.

Semiconductor companies under the epidemic: upstream and downstream encounter bottlenecks, and some factories shut down

Recently, domestic epidemics have occurred frequently, and static management in Shanghai has continued for half a month. The production and operation of Shanghai's semiconductor industry has also received special attention from the market.

According to statistics from the China Semiconductor Industry Association, in 2020, the output value of Shanghai's integrated circuit industry will account for 23% of the country's total, of which the design industry will account for 25% of the country's total, while manufacturing and packaging and testing will account for 18% and 17%, respectively. In terms of the number of listed companies, among the 94 semiconductor companies currently listed on A-shares, 27 (accounting for 28.8%) have their offices in Shanghai, of which semiconductor design companies are the main ones (22). In addition, several wafer foundries such as SMIC and Hua Hong Grace are located in Shanghai, and the main factories of many semiconductor material and equipment companies such as Shanghai Silicon Industry, China Micro Corporation, and Shengmei Shanghai are also in Shanghai.

According to the first financial reporter, in view of the different production and operation positioning of enterprises, the situation faced by them is obviously different. Some fabs use closed-loop management of factories and dormitories to temporarily ensure production. However, due to logistics bottlenecks, many companies encountered problems in the procurement of production materials, and the inability of personnel to flow resulted in the inability of the Shanghai factory to operate. There are also some companies that are unable to disclose their annual reports on time.

Material procurement may face disruption

The semiconductor industry chain mainly includes wafer fabs, packaging and testing factories, equipment factories, etc., and each situation is different.

As far as fabs are concerned, Minsheng Securities said that there are currently 20 production lines in Shanghai/to be built, and the main fabs are in normal production. At present, both SMIC and Hua Hong Grace are in normal production. Among them, SMIC uses shuttle buses to transport employees to and from work, live in collective dormitories, and adopts two-point and one-line closed-loop management. According to media reports, Hua Hong Grace currently also has 6,000 employees stationed in the factory, and other support departments are working from home.

In addition, the packaging and testing plant is a labor-intensive industry compared with the fab, which is greatly affected by the epidemic. The largest packaging and testing factories in Shanghai include Ankor, Shanghai Kaihong, ASE, Ziguang Hongmao Microelectronics, SanDisk Semiconductor, etc. Currently, there are no A-share listed companies, and most of them are foreign-funded and Taiwan-based companies. Among them, Amkor is the second largest packaging and testing company in the world, and its downstream customers are mainly memory and mobile phone APs. At present, many employees of Amkor Shanghai have been diagnosed, and production and operation have been affected to a certain extent. Shanghai Kaihong and SanDisk are the supporting packaging and testing factories of power/memory IDM companies, and the epidemic may exacerbate the shortage of power devices.

Zou Ming (pseudonym), secretary of the board of a semiconductor equipment company, revealed in an interview with a reporter from China Business News that the company is currently facing many challenges, and material procurement is the first to bear the brunt.

"Our Shanghai factory has been closed due to the epidemic. Due to poor logistics, materials and personnel in Shanghai cannot be relocated to the factory in Anhui without a pass. In addition, nearly 50% of our components are purchased from overseas. , after the customs shutdown, the normal production activities of the factory were affected," he said.

Some funds are sluggish

Given that semiconductor companies are involved in cross-border procurement, funds also have poor circulation during the epidemic.

"The parts used in our semiconductor equipment need to be purchased from overseas regularly. The bank's current counter is closed for overseas fund remittance, and the bank's internal system needs to do customs declaration and internal audit. "Zou Ming said.

The board secretary of another related industry enterprise told reporters: "Some special businesses cannot be handled through online channels, and information needs to be provided to the bank, and the bank's back office must be reviewed by someone before the whole process can be completed, such as large-value foreign exchange exchanges. In addition, if it is necessary to purchase overseas machinery and equipment, the current funds cannot be given to overseas suppliers, because the bank has stricter management of special fund accounts, and must provide relevant information to allow remittance, which may need to be turned over through offshore channels.”

In the past two years, many semiconductor companies have been transforming and upgrading, and there are many companies that have switched from traditional industries to enter the semiconductor industry, which involves accelerating transformation through mergers and acquisitions. According to the reporter's understanding, a semiconductor equipment company has continued to acquire overseas companies or entrepreneurial teams through epitaxial mergers and acquisitions in recent years. The company's board secretary told reporters: "At present, we still have some M&A projects on hand, but all of them are currently suspended. We are faced with the problem that we have signed an investment agreement with the other party but the funds cannot go out. The overseas counterparty cannot understand the current situation." Force majeure', we do not rule out the possibility of considering a plea."

Annual report disclosure will be delayed

In addition to the challenges in the production process, many companies also face the failure to release their annual reports as scheduled, not only in the semiconductor industry.

First Finance and Economics previously reported that factories in some regions were shut down, and the preparation and disclosure of the 2021 annual report of listed companies was delayed. According to information, from mid-March to the end of March, Huida Sanitary Ware (603385.SH), Jingqi Electronics (430387.NQ) and others issued announcements that factories in some areas affected by the epidemic would suspend production. The preparation and disclosure of the 2021 annual reports of many listed companies such as Feile Audio (600651.SH) and Chinese Media (600373.SH) have been delayed.

"Recently, the Shanghai Securities Regulatory Bureau and the Shanghai Stock Exchange have counted Shanghai companies that may not be able to release their quarterly and annual reports before April 30. Many companies have not had time to release their reports in March, and companies originally planned to release in April may now be disrupted. Rhythm, because early April is a critical period for accounting firms to collect correspondence and conduct on-site interviews to prepare audit drafts, but at present accountants and lawyers cannot go to the scene, audit drafts are difficult to produce, and the official seal is also locked in the company and cannot be used.” Zou. Ming told reporters.

A number of business people said that they are currently trying to communicate with the Shanghai Securities Regulatory Bureau and the Shanghai Stock Exchange on whether to delay, but there is no progress.

As early as after the outbreak of the epidemic in 2020, the China Securities Regulatory Commission issued an announcement in early April stating that it will adhere to the principles of quality assurance and disclosure, and strive to disclose the audited annual report before April 30, 2020 as required. Different situations are distinguished, and for some companies that are seriously affected by the epidemic, it is stipulated that the disclosure of annual reports can be delayed, and the main operating results can be disclosed in advance. If the relevant companies and accounting firms delay disclosure and audit due to the impact of the epidemic, which are caused by force majeure, administrative penalties and related processing will not be imposed in accordance with the law.

hvpc said:

I won’t read too much into the Wafer Fab Equipment (WFE) spending ranking. This is very dynamic year over year.

For example, Intel didn’t spend much on advanced node WFE in 2021. Most of their $18B CAPEx is on building fab shells. But they are expected to spend most of their25 CAPEx this year in WFE. So the total U.S. WFE spending will be much higher than $7B and higher than Japan in 2022, you also pointed this out in ur comment

tsmc alone has announced it will spend $44B. This will roughly be around $30-35B for equipments. Plus other investments by UMC, and memory fabs, Taiwan WFE spending may reach $40B in 2022.

By the way don’t hold me to the numbers…numbers I provided are estimates/numbers based on my memory. You may fact check it. But I shouldn’t be off to much…maybe by few $B.

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You're exactly right. Capex is roughly 50% plant construction and 50% fab equipment. But it takes up to 1 year after starting plant construction before it is ready for equipment install. With long lead times for equipment currently, it may take even longer.

AMEC is currently cooperating with customer needs to develop a new generation of etching equipment and etching processes including more advanced Damascus, which can cover more etching requirements below 5nm and more equipment for different key applications. In the manufacturing of 3D NAND chips, the company's capacitive plasma etching equipment can be applied to 64-layer and 128-layer mass production. At the same time, according to the needs of memory manufacturers, the company is developing a new generation that can cover 128-layer and above key etching applications and Corresponding etching equipment and process with extremely high aspect ratio.

european_guy said:

In the manufacturing of 3D NAND chips, the company's capacitive plasma etching equipment can be applied to 64-layer and 128-layer mass production. At the same time, according to the needs of memory manufacturers, the company is developing a new generation that can cover 128-layer and above key etching applications and Corresponding etching equipment and process with extremely high aspect ratio.

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For YMTC totally relying on AMEC for next generation 3D NAND's etching needs would be a big investment in a safe future....IMO it is worth to wait some more months on their roadmap to get fully localized equipment for high aspect ratio etching, that should be the key technology here. Please someone with more technical competence corrects me.

european_guy said:

For YMTC totally relying on AMEC for next generation 3D NAND's etching needs would be a big investment in a safe future....IMO it is worth to wait some more months on their roadmap to get fully localized equipment for high aspect ratio etching, that should be the key technology here. Please someone with more technical competence corrects me.

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How much of YMTC equipment is localised currently?

gelgoog said:

From what I heard Huawei will keep its research labs in Russia operational. They will likely close down consumer facing shops in Russia and stop selling smartphones which would use chips with some amount of US content like Qualcomm chips. Probably will not affect cellphone tower business.

US already carved out exemptions for sales of "Internet" hardware to Russia i.e. so Cisco can have an exemption to continue their sales to Russia. So Huawei can use same loophole to sell backend equipment to Russia.

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On the contrary it says in the linked article:

"One person with knowledge of the matter says that the company has stopped taking orders and is preparing to close its corporate office in Russia, which deals with telecommunications and networking equipment. The Chinese employees of the Russian office and part of the Russian specialists will leave the territory of Russia, and the rest will be on vacation."

"In fact, Huawei stopped the conclusion of new contracts with Russian telecom operators for the supply of network and server equipment."

"For now, there is no change regarding the consumer goods segment, which includes tablets, laptops, smartphones and other smart gadgets."

The source is Forbes, so I don't fully believe it though.