China’s second largest pure-play foundry, Hua Hong Semiconductor, is set to acquire equity in its sister foundry Shanghai Huali Microelectronics Corp. (HLMC) to meet the demand for legacy semiconductors.
The move comes as China is seeking to expand its own domestically grown semiconductor offerings in light of continued export restrictions being placed on it by the U.S. and European countries. This includes mature process technology, which China is expected to have a market share of 33% by 2027.
The deal will bolster Hua Hong’s 65 nm and 40 nm semiconductors. The deal could also be due to proposed tariffs being set on China’s semiconductors that would weaken its bottom line.
Hua Hong is second in the foundry business only to Semiconductor Manufacturing International Co. (SMIC), which is continuing to grow its own capacity in mature processes. Simultaneously, SMIC is seeking to invest in state-of-the-art equipment and processes to keep pace with other leading foundries despite export restrictions hindering its progress.
SMIC is expanding not just its technological prowess but its land grab as well as expanding its 12-inch wafer capabilities and packaging.
Making deals
Due to the export restrictions imposed by the U.S., China has been faced with making deals with its western rivals, exchanging rare Earth elements for certain technology acquisitions.
In July, one such deal was completed with the U.S. lifting restrictions on electronic design automation (EDA) exports in exchange for certain rare Earths.
Because these elements will continue to be in high demand for use in semiconductors and electronics, this will be one of many deals made between the companies in the future.
Not flashy
While not as flashy or headline-making as advanced process nodes, which are touted by leading foundries TSMC and Samsung, mature lines are still needed for semiconductors like driver ICs, image sensors, power discretes and more.
Second and third-tier foundries in China and Taiwan are locked in a battle for supremacy over mature process nodes with steep cuts in prices being the main bone of contention, particularly for Taiwanese vendors that can’t match the price pressures put on them by Chinese rivals.
Mature processes are continuing to be in demand for products like:
- Driver ICs
- Image processors
- Power discretes
- RF chips
- MEMS
- Logic
These are typically integrated into a range of sectors like automotive, industrial automation, consumer electronics, aerospace and defense.
