Thanks for posting this. I've been saying these numbers recently. That honestly seems like too much and I think they will end up with too much capacity if Chinese lithography makers ramp up their production even to 100 DUVs a year (which I think is quite possible).
Even next year, basically everyone is cutting Capex (except maybe Chinese ones, lol). It seems unlikely to me that demand for EUV/DUV can double in 4 year when we are entering a major market downturn.
It does make me realize two things.
#1 in the market TSMC -> cut Capex in 2022 from 40 to 44 billion to 36 billion
#3 in the market UMC -> cut Capex in 2022 from 3.6 billion to 3 billion
#4 in the market Globalfoundries -> cut Capex in 2022 from from 4.5 billion to 3 to 3.3 billion
#5 SMIC -> raised Capex in 2022 from 5 billion to 6.6 billion.
Hard to assess Samsung and Intel since they have other businesses, but Intel has cut their Capex also.
So from this, it appears to me that SMIC is pursuing a far more aggressive expansion path in advanced nodes (you don't need to spend much money <$1 billion if you are aggressively growing mature node as evident with Huahong earnings report). So, it looks to me that SMIC is taking delivery slots that its bigger competitors are cutting in order to stock up on ASML Arfi scanners as much as possible. Most of their $1.6 billion additional Capex is going toward ASML.
SMIC is a minnow in the market. If only SMIC is raising Capex, how does that support doubling in demand in 4 years?
It's amazing to me that SCMP continues to write shit like this. They are conflating three things:
1) General downturn in chip demand across the world
2) Too many startup chip firms in China in a short time -> a lot of them will inevitably fail
3) US sanctions
The vast majority of the issues they described in there have nothing to do with 3) and are all about 1) and 2). Like what's happening in NEV industry in China, it's absolutely healthy for tough market condition to force out the weak players in the market.
The fact that SMIC has increased its Capex should be a great indication of how much the sanctions are affecting them. Yes, ASML not being able to sell its latest Arfi scanners to China will actually affect advanced node production in China, but that hasn't happened.
I think ASML CEO is being too optimistic there. China is 50% of the chip market. China will find a way to produce chips. At worst, its products is slightly worse if it's constrained from purchasing certain chips.
Right now, China is undergoing the fastest ever buildup in mature node (especially industrial/auto grade power chips) production. Their domestic rate for mature rate will be very high by 2025. None of these node need ASML scanners. While ASML need to project a sense of confidence to the world/investors, it needs to know inside that these Chinese tools makers can easily chose to buy SMEE machines in the future. And it needs to work hard to keep its customers. Don't let the Dutch gov't be persuaded otherwise.
ASML has a significant role in the Chinese market as long as the Dutch gov't doesn't kneecap them.
As for AI/HPC chips, China has already shown it can build supercomputers with 14nm chips. I think SMIC is getting pushed by Chinese gov't secretively to raise it's advanced node production. Its N+1 process is advanced enough to field HPC/AI chips. Maybe they are going to be as good as Nvidia chips, but it can be close enough or just need more electricity to run. If 70% of HPC/AI chip demand in China ends up being produced by SMIC (due to further US sanctions), then it will be really easy for ASML to lose this market entirely if the Dutch gov't decides to cut China off. At the end of the day, even if ASML machines are better than SMEE machines now, SMEE machines of 2023/2024 are going to be good enough to produce 14nm chips.
I think Chinese gov't is already helping chip makers so much. SMIC is spending $6.6 billion on Capex this year and it's only projecting to generating $7.3 billion in total revenue. It's spending more on Capex than UMC and GlobalFoundries combined! If not for the local gov't footing most of the bill, I don't see how else they can accomplish this. In fact, SMIC only has like 40% ownership of SMSC, which means Shanghai gov't is likely footing all the bills for Capex there.
Similarly, I'm willing to bet that Shanghai gov't is footing most of the bill for HLMC Capex (or maybe all of it). After all, Huahong raises 18 billion RMB from listing itself on Shanghai stock exchange and none of that money is going into HLMC. All of that is going into its own fabs at Wuxi and 8-inch ones in Shanghai. It doesn't even list HLMC performance in its earnings report. I bet the margins on those aren't great.
I think CR micros also go a great deal from Chongqing gov't in paying most of the Capex and still owning 75% of the JVs.
I'd be shocked if this isn't happening to tools makers also.
