The CHIPS and Science Act, along with recent bans on exports of advanced semiconductors and chip equipment, will suppress the expansion of both Chinese foundries and multinational foundries in China, according to new data from TrendForce.
This limitation on Chinese and multinational foundries will happen regardless of whether they are advanced or mature process technology fabs, TrendForce said.
Initially, export bans focused on non-planar transistor technology of 16/14 nm and more advanced processes. However, Japan and the Netherlands have joined the export restrictions, meaning deep ultraviolet (DUV) immersion systems used for producing both sub-16 nm and 40/28 nm mature processes.
Restricted investment
The U.S. Department of Commerce (USDOC) released details regarding the investment restrictions on the CHIPS Act. It stipulates that beneficiaries of the investment will be restricted for both advanced and mature processes in China, North Korea, Iran and Russia for the next 10 years.
TrendForce said these restrictions will be far more extensive than previous export bans and will reduce the willingness of multinational semiconductor companies to invest in China over the next decade.
The CHIPS Act will mainly impact Taiwan Semiconductor Manufacturing Co (TSMC), due to its plans to expand into China and the U.S., and foundries that will capture orders that will be rerouted from Chinese foundries, TrendForce said.
These Tier 2 and Tier 3 foundries — such as Powerchip Semiconductor Manufacturing Corp. (PSMC) and Vanguard International Semiconductor Corporation (VIS) — mainly focus on mature processes and have benefited greatly from the export restrictions. TrendForce said the shift in orders will ensure major recovery for foundries currently impacted by inventory adjustment and low-capacity utilization rates the rest of this year and into 2024.
DRAM decline
Due to the CHIPS Act investment guidelines and export restrictions, it is likely DRAM processes will shift away from China to focus on South Korea and the U.S., TrendForce forecasts.
Already SK Hynix and Samsung have discussed selling their Chinese fabs due to the inability to receive advanced equipment in the region. This is even after receiving a one year exemption from the U.S. and lobbying for future chip waivers to continue to receive chip equipment and other items needed to maintain operations of fabs inside China.
SK Hynix said it will establish a new fab in South Korea while Samsung and Micron plans for future expansion in South Korea and the U.S., respectively. Both of those companies currently have no DRAM capacity in China.
Because of this, South Korea’s share of global DRAM capacity will continue to rise while China’s will decline year-over-year, dropping from 14% to 12% by 2025.
Already funding
According to the Semiconductor Industry Association, more than 40 new semiconductor ecosystem projects have already been attracted to the U.S. due to the CHIPS Act to the tune of over $200 billion.
The projects associated with the CHIPS Act, which was signed into law by U.S. President Joe Biden in August, include the construction of new semiconductor manufacturing fabs and expansions of existing sites and facilities that supply the materials and equipment used in chip manufacturing.
The hope is that chipmakers will be wooed into building new sites in America so when another pandemic happens, or a geopolitical issue, or a raw materials shortage, the supply chain will be more resilient.
This has caused a flurry of activity in semiconductor manufacturing in the U.S. including:
- Intel building two new fabs in Ohio.
- TSMC building two fabs in Arizona.
- Samsung building a fab in Tyler, Texas.
- Micron building a new memory fab in Idaho.
- GlobalFoundries is set to build a new facility in Malta, New York.
