Semiconductor Industry: TSMC 12-inch Wafer Fab in Singapore

In the midst of a sluggish consumer electronics market, the semiconductor industry has entered an adjustment phase. However, this does not hinder the expansion and global presence of semiconductor foundries. Recently, there has been news of a new development in a 12-inch wafer fab.

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Focusing on 12-Inch Wafers

In recent times, it was reported in the Japanese media that TSMC, the world’s leading semiconductor foundry, is planning to establish its first 12-inch wafer fab in Singapore. This factory is primarily intended to meet the demand for automotive chips, with an investment of at least $2 billion.

① TSMC’s Current Landscape

TSMC currently operates 5 eight-inch wafer fabs, with 4 located in Taiwan, China, and 1 in Singapore. The estimated production capacity for eight-inch wafers this year is 3.35 million wafers.

② TSMC’s Expansion Plans

Previously, TSMC’s chairman, Mark Liu, mentioned that the company was considering the construction of a new 12-inch fab in either Taiwan or Singapore, although a specific timeline for this decision was not provided. In August of this year, media reports suggested that TSMC had agreed to invest in a 12-inch wafer fab to be established by TSMC in Singapore. This Singapore facility is expected to produce 28-nanometer chips, with the earliest completion date possibly in 2026.

③ Industry Implications

In response to this development, the industry believes that if TSMC establishes a 12-inch fab in Singapore, it would mean that the four major semiconductor foundry companies, including TSMC, UMC, GlobalFoundries, and TSMC, would all have 12-inch fab capabilities, with plans to build such fabs overseas. Among them, TSMC is expanding in the United States and Japan, UMC and GlobalFoundries are both in Singapore, and TSMC is planning to build fabs in Japan in collaboration with local partners.

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Eight-Inch Wafers Facing Challenges

Currently, the main wafer sizes are 8-inch and 12-inch. Looking at the historical development of wafer sizes, 12-inch wafer fabs began stable growth after 2000 and surpassed 8-inch wafer fabs in capacity in 2008. The gap between the two has continued to widen. Compared to 8-inch wafers, 12-inch wafers offer advantages in terms of low cost and high capacity, making them favored by wafer foundries. This is one of the reasons why semiconductor foundry companies still plan to construct 12-inch fabs in the challenging semiconductor industry.

① Challenges for Eight-Inch Wafers

At the same time, due to the impact of the downturn in the semiconductor market, eight-inch wafer fabs have continued to face challenges in the latter half of this year.

② Trends in Eight-Inch Wafer Production

According to TrendForce, a global market research firm, a survey in October 2023 indicated that the utilization of eight-inch wafer production capacity in the first half of 2023 was mainly driven by sporadic inventory replenishment orders resulting from the second quarter’s demand for Driver ICs. In the latter half of the year, due to the ongoing economic situation and inventory issues, the expected peak season effects in the supply chain did not materialize as initially anticipated.

③ Factors Contributing to the Downturn

Additionally, the inventory for automotive and industrial control applications gradually accumulated after the demand was met, leading to a slowdown in demand. Furthermore, the price competition for Power-related products from Texas Instruments (TI), a leading player in global PMIC, along with the ramp-up of IDM factories’ in-house new production capacities, led to a significant reduction in orders for wafer foundries in the latter half of the year. As a result, the utilization rate of eight-inch wafer production capacity continued to decline to 50-60% in the latter half of the year, and the performance of Tier 1 and Tier 2/Tier 3 eight-inch wafer foundry manufacturers was worse than in the first half of the year.

④ Outlook for Eight-Inch Wafers

In anticipation of a challenging economic environment in 2024, the overall recovery of eight-inch wafer foundry production capacity utilization is expected to be difficult. It is predicted that the utilization rate of eight-inch wafer production capacity in the first quarter of 2024 will remain similar to that of the fourth quarter of 2023, or even slightly lower, with a clear lack of signs of recovery. Starting from the second quarter of next year, TrendForce believes that, despite the uncertainty in end-demand due to economic conditions, as inventory gradually falls to a healthier level, the supply chain is expected to gradually resume sporadic inventory replenishment. The estimated average production capacity utilization rate for eight-inch wafers in 2024 is about 60-70%, and it is expected to remain below the levels of previous years in the short term.

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Conclusion

The semiconductor industry is at a crossroads, with the expansion of 12-inch wafer fabs becoming a key strategy for foundries. TSMC’s investment in a 12-inch wafer fab in Singapore reflects the industry’s commitment to meeting the demand for advanced chips. However, the challenges faced by eight-inch wafer fabs also highlight the dynamic nature of the market. As we move into 2024, the industry will continue to adapt to the ever-changing landscape.

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Frequently Asked Questions (FAQs)

Related:

1. $7.8B Wafer Plant to Boost Singapore Semiconductor
2. Why 16 Inch Laptops Are Gaining Popularity: Here’s Why

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