Recently, Intel and United Microelectronics Corporation (UMC) announced that they will collaborate to develop a 12nm semiconductor process platform to meet the demands of high-growth markets. This news has attracted widespread attention in the semiconductor industry. It’s worth noting that direct cooperation between foundries, which are competitors in the semiconductor industry, is relatively rare. This is because:
Foundries usually compete directly in the market for technological leadership, customer bases, and market shares; furthermore, the semiconductor manufacturing sector involves a large number of patents and intellectual property, and foundries typically place a high value on the confidentiality of their process technology, fearing that collaboration could lead to technology leaks or complex issues with intellectual property; moreover, many foundries have their market positioning and areas of specialization. For example, some companies may focus on high-end process technology, while others may specialize in the mass production of mature processes. This differentiated market positioning reduces the necessity for cooperation; therefore, to maintain and enhance their market competitiveness, foundries often choose to develop independently, enhancing their market position through internal R&D and technological innovation.
So, the collaboration between the two companies will impact each other and the entire foundry landscape in various ways.
01
Why Choose the 12nm Process? Exploring Its Significance in Semiconductor Manufacturing
The 12nm process is one of the advanced semiconductor manufacturing technologies, offering higher transistor density, lower power consumption, and stronger computational performance compared to higher nanometer-level processes. In high-growth markets such as mobile devices, communication infrastructure, and networking, this technology supports more complex, higher-performance chip designs to meet the demand for high-performance, low-power chips. The 12nm process is particularly suited for building chips for Bluetooth, Wi-Fi, microcontrollers, sensors, and a range of other connectivity applications.
In recent years, TSMC’s plans for overseas factories have frequently included the 12nm process. TSMC and Sony’s new “Kumamoto Factory” in Kikuyo Town, Kumamoto Prefecture, Japan, is expected to hold its opening ceremony on February 24, 2024, and aims to introduce 12 to 28nm production lines by the end of 2024.
In August 2023, TSMC announced plans to establish a joint venture semiconductor manufacturing company in Europe (ESMC) with its partners Bosch, Infineon, and NXP, constructing a wafer fab near Dresden, Germany. The new 300mm wafer fab will produce chips using TSMC’s 28/22nm and 16/12nm process technologies, mainly serving automotive manufacturers in Germany and Austria. Construction of the new factory is scheduled to start in the second half of 2024, with the first batch of products expected by the end of 2027.
As early as May 13, 2021, AMD extended its purchase agreement with GlobalFoundries, committing to buy $1.6 billion worth of 12nm and 14nm node silicon wafers from then until December 31, 2024. This essentially locked in the capacity for the 12 and 14nm nodes for the next 3.5 years to support AMD’s leading-edge products (including CPUs, APUs, and GPUs for various markets from PCs to embedded) and I/O chips used in all applications.
The strategic deployments of large semiconductor companies like TSMC and AMD highlight the important position of the 12nm process in the current semiconductor industry. These actions indicate that, despite the industry’s continuous progression towards higher-level nanotechnologies, the 12nm process remains an important part of the market, especially when there is a need to balance cost and performance. Therefore, Intel and UMC are also targeting the market demand for the 12nm process.
02
Intel vs. UMC: Who Wins in the Foundry Collaboration?
For Intel and United Microelectronics Corporation (UMC), competitors in the foundry business, this collaboration offers distinct benefits to each.
Starting with Intel, since Pat Gelsinger became CEO, he has proposed the ambitious IDM 2.0 strategy, emphasizing the expansion of manufacturing operations. Intel Foundry Services (IFS) is a crucial pillar of the IDM 2.0 strategy. Intel has even declared its goal to become the world’s second-largest foundry by 2030. As of the third quarter of 2023, according to TrendForce data, Intel Foundry Services entered the top ten for the first time, ranking ninth. To achieve its goal of becoming the second-largest globally, Intel has a long way to go.
Expanding foundry node coverage: Intel’s foundry process technology offerings are not yet comprehensive. Although Intel possesses a variety of highly customized process technologies for internal use to produce its CPUs and similar products, according to AnandTech, its IFS division offers only three: Intel 16 for cost-conscious customers designing inexpensive, low-power products (including those supporting RF); Intel 3 for those developing high-performance solutions but still wanting to use familiar FinFET transistors; and Intel 18A for developers seeking performance and transistor density without compromise, using RibbonFET gate-all-around transistors and PowerVia backside power delivery.
Despite significant progress in the past year, including establishing solid partnerships with new customers adopting Intel 16, Intel 3, and Intel 18A process technologies, relying solely on these three process technologies is insufficient for Intel to establish a dominant position in the global semiconductor foundry market to meet the growing customer demands.
Last August, Intel’s acquisition of Tower Semiconductor failed, which would have secured Intel’s footing in specialized technology areas such as RF and industrial sensors that Tower focuses on. Although the acquisition did not proceed, Intel continued to collaborate with Tower Semiconductor, planning to produce 65nm chips at its Fab 11X in New Mexico.
Complementary strategy with UMC: The collaboration with UMC is also an important part of IFS’s development. Although Intel and UMC are competitors in the foundry business, their customer bases for their respective processes do not significantly overlap, making this collaboration a complementary strategy. While Intel has deep technical expertise in semiconductor manufacturing, its experience in the foundry market is relatively limited. UMC boasts decades of leading process technology and a history of providing customers with Process Design Kits (PDKs) and design assistance for effective foundry services. Intel approached UMC for licensing the 12nm process, particularly valuing UMC’s advantages in low-power processes, especially in ARM architecture development. Intel is highly focused on expanding its ARM architecture business, having started collaborating with ARM earlier this year, aiming to attract large customers like Qualcomm and MediaTek, and possibly even competing for Apple chip orders.
Collaborating with the experienced UMC allows Intel to quickly enhance its technical capabilities and market position in the foundry sector and better understand and meet customer needs, which is crucial for achieving its 2030 goal.
Risk diversification and capacity optimization: In the current volatile and highly competitive global semiconductor market, collaborating with UMC can help Intel diversify risks and optimize capacity layout. UMC’s production facilities and technical expertise can significantly complement Intel’s foundry business, especially in responding to market demand fluctuations, providing greater flexibility and responsiveness. Essentially, the collaborations with both Tower and UMC enable Intel’s IFS to utilize its fully depreciated fabs. Maintaining high capacity utilization rates and supply chain stability is crucial for foundries in a market characterized by significant fluctuations.
For United Microelectronics Corporation (UMC):
Technology Sharing and Enhancement: Intel has good experience in advanced process nodes, and through this collaboration, Intel will provide design experience with FinFET transistors, offering UMC a more advanced technological platform. This allows UMC to expand its technology coverage. UMC’s highest-level technology currently is the 14nm 14FFC node. By co-developing the 12nm process with Intel, UMC will be able to produce products more advanced than its own 14nm node, helping it attract customers who need higher-performance chips.
Reducing Development Costs and Risks: The collaboration with Intel allows UMC to enter more advanced technology nodes without the need to develop new manufacturing processes or purchase expensive manufacturing equipment on its own.
In this partnership, Intel provides manufacturing capacity, and the new process nodes will be developed and manufactured in Intel’s Ocotillo technology manufacturing plant in Arizona, specifically in Fabs 12, 22, and 32. These Arizona fabs currently can produce Intel’s 7nm, 10nm, 14nm, and 22nm process chips. As Intel launches Intel 4, Intel 3, and Intel 20A/18A products in other factories and gradually reduces production of products based on Intel 7, these Arizona fabs will be free to produce chips on various traditional and low-cost nodes, including the 12nm manufacturing process jointly developed by UMC and Intel. Utilizing the existing equipment in these factories can reduce upfront investment and optimize equipment utilization, providing customers with more efficient foundry services.
This collaboration model significantly reduces UMC’s investment costs and risks in technological development. UMC’s Co-President, Jason Wang, stated in a declaration that the collaboration with Intel could help UMC advance its technology and achieve “cost-effective capacity.”
Market Expansion and Geopolitical Risk Diversification: With the foundry located in the United States, this expands UMC’s potential market, facilitating a smooth transition for UMC’s customers to new nodes. UMC’s production is primarily in Asia, with its core in Taiwan. It also has other factories in mainland China, Japan, and Singapore, including a new factory under construction costing $5 billion. With global trade tensions and geopolitical changes, customers may prefer to diversify their supply chains to reduce risks. Fabs located in different geographical locations might, therefore, gain a competitive advantage.
In summary, this collaboration represents an opportunity for UMC for technological advancement, risk diversification, and market expansion, while also helping Intel optimize its capacity utilization and expand its influence in the foundry market.
03
Will the Foundry Landscape Shift? Unveiling Future Semiconductor Trends
In recent years, the semiconductor industry’s foundry market landscape has been continuously evolving. The collaboration between Intel and United Microelectronics Corporation (UMC), especially in the 12nm technology area, could become a new driving force for this change. This partnership benefits both parties and could significantly impact the entire foundry industry.
Firstly, aside from leading foundries like TSMC, Samsung, and Intel, the number of foundries capable of mass-producing 12nm process technology is relatively small. Second-tier foundry companies such as GlobalFoundries, UMC, SMIC, Hua Hong, and Tower, mostly focus on 14nm or more mature process technologies due to the substantial financial investment and technical accumulation required to pursue more advanced process technologies.
Among these second-tier foundries, GlobalFoundries was the first to develop a 12nm process. In May 2017, GlobalFoundries launched its 12nm Fully Depleted Silicon-On-Insulator (FD-SOI) technology product, 12FDX, followed by the introduction of its 12nm FinFET technology, 12LP, in September of the same year. As mentioned previously, these developments allowed GlobalFoundries to secure a large volume of AMD’s 12nm orders.
The collaboration between Intel and UMC, especially in the 12nm technology field, is expected to further solidify UMC’s competitive position in the second-tier foundry market. This added 12nm process will not only help UMC attract new customers but also encourage existing customers to migrate to the new 12nm technology node. However, the 12nm process under this collaboration is expected to start mass production only by 2027, potentially allowing GlobalFoundries to continue enjoying a market advantage during this period.
This partnership signals a shift in the global semiconductor industry’s collaboration model and may prompt other foundry companies to re-evaluate and adjust their strategies, especially those focusing on mature process nodes. Due to the impact of the Intel-UMC collaboration, competition in the 12nm market might become more intense. However, as more companies enter the competition for 12nm and below process technologies, technological innovation, and product diversification in the market could accelerate.
Overall, for these closely matched second-tier foundries, those that will capture more market share in the future will depend on various factors. Cost control and technical capability remain core factors, and companies that can effectively balance these two will likely gain a market advantage. Additionally, the ability to respond quickly to market demands, a strong customer relationship network, and adaptability to geopolitical changes will also be key in influencing these companies’ market share.
Related:
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