Since the founding of Semiconductor Manufacturing International Corp (SMIC) in 2000, silicon foundry has immediately become the mainstay of the development of the mainland semiconductor industry. Through studying the silicon foundry business model of Taiwan Semiconductor Manufacturing (TSMC), which symbolizes the development of the semiconductor industry in Taiwan, the construction of the mainland semiconductor industry chain and the improvement of the upstream and downstream industrial clusters are highly anticipated.
The mainland's semiconductor industry has become the world's second-largest silicon foundry production base next to Taiwan, with the active investment of semiconductor makers such as SMIC, the largest domestic silicon foundry company. The global market share of the mainland silicon foundry industry reached 13.3% in 2006. However, after years of recession, by 2010, the global market share has dropped to 10%. IEK predicts that it will fall below 9% in 2011. In Taiwan's silicon foundry industry, TSMC's global market share in 2010 exceeded 50% to 50.3%. Taiwan’s overall silicon foundry industry’s market share is as high as 68%. IEK predicts that in the absolute competitive advantage, the market share of TSMC in 2011 will further increase to 50.8%.
In 2011, SMIC had a dispute over management rights that had a huge impact on the company's operations, leading to a general instability in the company. Prior to this, SMIC's development could be said to be a model for the mainland's silicon foundry industry. The difficulties that SMIC has encountered can also be regarded as topics that many other mainland silicon foundry companies will face in the future. Why is it that the mainland silicon foundry cannot succeed? What are the reasons for the low competitiveness? What is more important is whether the mainland's silicon foundry companies can seize the opportunity to make a comeback. This article will analyze the rise and decline of the mainland silicon foundry industry in the past 10 years and look forward to the future development trend.
The global market share of China's silicon foundry industry continued to slump. In the 2004-2010 mainland silicon foundry industry, SMIC’s market share exceeded 50%. Therefore, the change of SMIC's performance has brought a huge impact on the overall silicon foundry industry in mainland China. 2004 is an important watershed for the mainland silicon foundry industry. Since 2004, the share of the mainland's silicon foundry industry in the global market has begun to slow. After 2008, competitiveness and market share began to decline.
The growth rate of sales of major silicon foundry companies in the mainland is shown in Table 1. Table 1 lists the average annual growth rate (CAGR) of sales between 2006 and 2010 when the global market share of the mainland silicon foundry industry ushered in the peak. In addition to the high growth of 18.5% in China's Central Semiconductor Manufacturing Corp (CSMC), which ranks fifth among mainland Chinese silicon foundry companies, the growth rate of other companies is lower than the average annual growth rate of global silicon foundry companies. The rate is 6.7%. The largest SMIC growth rate is only 1.5%. The silicon foundry industry in mainland China has undergone tremendous changes in the past 10 years.
The key to the success of the silicon foundry industry – capacity, technology, and capital For silicon foundries, there is a direct correlation between sales growth and capacity expansion. Therefore, increasing capital expenditures means that capacity will be expanded in the future, which will in turn affect potential sales growth. From 2004 to 2010, Taiwan's TSMC and UMC (United Microelectronics Corp.: UMC) and the three SMIC's silicon foundry companies' capacity trends are shown in Figure 1.
After 2004, the production capacity of the 300mm wafer fab in the global silicon foundry market increased significantly. As a result, leading companies in manufacturing technology and silicon foundry capacity in the 300mm factory have achieved significant growth compared to other competing companies. At the end of 2010, TSMC’s capacity increased by 127% over 2004. UMC increased by 34%. However, SMIC’s capacity began to shrink after peaking in 2007.
The main reason is that the 300mm plant of SMIC initially focused on operating revenue and advanced DRAM production. The silicon foundry production business was transferred to a 200mm factory. Although the proportion of DRAM's total sales reached more than 30% of SMIC's overall sales in one fell swoop, DRAM's production capacity was small compared to other major global competitors, and it failed to exert its "scale economy" effect.
Therefore, SMIC has racked its brains to expand DRAM production capacity. However, regarding SMIC's current capital and financial status, it is difficult to bear the potential risks caused by changes in the economic situation to the DRAM business. Since DRAM market conditions have turned sharply since 2007, the situation is very unfavorable to SMIC. In the end, SMIC withdrew from the DRAM business and began to adjust the foundry business that 300mm factories used to undertake logic ICs.
Looking at it now, it was not the best policy for SMIC to withdraw from the DRAM market. After such a toss, there was a gap in the silicon foundry capacity of the 300mm plant, which affected the company's operating profit. SMIC has delayed development in this process of “running aroundâ€.
Next from the technical aspects of analysis. The sales of 65nm to 40nm products of the global silicon foundry company in 2010 are shown in Figure 3. In the 65nm to 40nm product market that requires a high level of manufacturing technology, TSMC Taiwan holds the highest share, reaching 63.5%. Followed by the United States GLOBALFOUNDRIES. GLOBALFOUNDRIES is a silicon foundry company separated from AMD, a well-known American CPU company. The company is engaged in the manufacturing of CPUs for cutting-edge manufacturing processes owned by AMD and succeeded as a silicon foundry company with higher professional manufacturing technology.
The SMIC's operating revenue from its 65nm to 40nm products is far behind the top three of the global silicon foundry companies. In 2010, the supply of 65nm to 40nm products accounted for only 1% of the global total. Although the cutting-edge manufacturing process was introduced in an idle 300mm factory in response to an order from a fabless IC design company, the operating rate of the production line was not high. As a result, not only failed to obtain high profits through cutting-edge manufacturing process orders, but also triggered an order price war outside the high-end products.
The backwardness of this manufacturing technology and the inadequacy of indirect orders has led to a reduction in sales and profits. Once a deficit occurs, it will also have an impact on future manufacturing technologies and capital expenditure capacity aimed at expanding production capacity. This is the vicious circle of business environment that SMIC is now experiencing. In the silicon foundry industry, the trinity of production capacity, technology, and capital is a prerequisite for success. All three are indispensable.
In addition, it can be clearly seen from Table 1 that the combination of silicon foundry manufacturing process technology and production capacity will affect orders and operating income. The customer's trust in the overall service of the silicon generation industry directly affects the order, which is related to the smooth progress of the business.
SMIC's dispute over the right to operate between new and old shareholders in 2011 has led to a reduction in the reliability of delivery time and product quality, and the reliability has been questioned by customers. In addition, although SMIC has adjusted its product lines and product technology in the last three years, the production capacity of finer than 65nm accounts for about 20% of the total. However, due to the low operating rate of the production line, sales have not grown and have not been achieved. expected result. Among them, the orders of major customers, Texas Instruments (TI) and Broadcom of the United States, were taken away by Taiwan's silicon foundry companies. As a result, the silicon foundry capacity of SMIC's 300mm plants fell below 40%.
In addition, equipment depreciation and loan interest at the 300mm plant also placed a huge burden on SMIC's cash flow in 2011. It also seriously affected the capital expenditure capacity in 2012. From Table 2, TSMC and GLOBALFOUNDRIES have successfully maintained a long-term relationship with large customers, and have obtained huge excess profits in cutting-edge manufacturing processes below 65 nm. Moreover, it also maintains a certain level of standards for future capital investment. The three giants of TSMC, UMC and GLOBALFOUNDRIES have further expanded their relationship with SMIC.
SMIC needs to initiate new challenges in the future. That is, after 45nm etching process competition. SMIC has 32nm, 28nm, and 22nm technology development capabilities after 40nm and competitive, reasonable, low-cost manufacturing processes. The issue is how to provide customers with high performance and low power consumption products.
SMIC's 45nm manufacturing technology was imported from the Common Platform of IBM. In addition, we are currently providing customers with 40nm manufacturing process services through continuous research and development. However, SMIC had previously relied on IBM's technology transfer and lost in the patent infringement lawsuit brought by TSMC, which was very unfavorable for market competition and the acquisition of talents and funds.
Like other mainland Chinese silicon foundries, SMIC’s lack of investment in EUV (ultraviolet light) manufacturing processes means that SMIC may only provide non-mainstream multi-vendor design services to the market in the future (second-source service). ).
Three-dimensional LSI Brings Consolidation of Value to Service Integration Including SMIC, mainland China's silicon foundry companies still follow the SoC (System on a Chip) professional foundry service model.
Taiwan's two major silicon foundry companies, TSMC and UMC, have transformed the company’s operating model into a business model of vertically integrated component manufacturing service providers (Integrated Device Manufacturing & Service Provider). It is actively working to supply IP providers, design tools and suppliers, and ASIC service providers. In addition, it is more important to increase the research and development of three-dimensional SiP (System in Package). Among them, three-dimensional LSI and TSV (through-silicon vias) are the top priorities. The development of three-dimensional LSI will promote the reconstitution of the upstream and downstream professional structures of the Taiwan semiconductor industry, which will affect the value of the current semiconductor industry.
The functions and specifications of electronic products have diversified and become more and more complicated. At the same time, factors such as commodity form and energy consumption must be considered. In future electronic product design and development, in order to achieve the best combination of hardware and software, can we optimize the combination of important semiconductor components? In addition, it is of utmost importance to maintain the highest level in terms of the functions and energy consumption of the entire electronic system. In the LSI products, the functions and power consumption of high-speed arithmetic processors, media processors, and memories using advanced manufacturing processes are important.
In the near future, electronic products will continue to improve their functions, computing speed will be further accelerated, and the amount of information transmitted will further increase. Among them, the overall energy consumption of the system must be controlled within a certain range. The three-dimensional LSI technology is a powerful solution. For example, in memory, three-dimensional LSI is the key to achieving high-speed bandwidth and low power consumption.
In the future, downstream electronics manufacturers need semiconductor manufacturers that have three-dimensional LSI technology and can provide customized and integrated services. Taiwan's two major OEM companies, TSMC and UMC, will cooperate with electronics manufacturers to increase their opportunities in the future. This will create value for the semiconductor industry. In an ecosystem of SoC vendors, memory vendors, and packaging and post-test process companies, the two companies will use three-dimensional LSIs to provide system-level integrated services. TSMC and UMC will launch a large number of three-dimensional LSI, which is fully consistent with the expectations of electronics manufacturers.
IEK predicts that the application and mass production of memory LSIs and logic LSIs using three-dimensional LSIs and TSVs will be greatly expanded in 2013. High-performance cloud computing services will be actively adopted, and high-end smart phones will gradually become popular. This trend will change the business model of TSMC and UMC.
Including silicon foundry companies, the mainland's semiconductor manufacturing industry has not basically stepped into the three-dimensional LSI business. At this stage, it is only following the SoC foundry business model built in Taiwan. With the development of 3D LSI, the distance between the mainland semiconductor manufacturing industry and the leading global silicon foundry companies will further expand. (Special Contributor: Yang Ruilin, Manager, IC and Process Research Division, IEK System, Industrial Technology Research Institute)
The mainland's semiconductor industry has become the world's second-largest silicon foundry production base next to Taiwan, with the active investment of semiconductor makers such as SMIC, the largest domestic silicon foundry company. The global market share of the mainland silicon foundry industry reached 13.3% in 2006. However, after years of recession, by 2010, the global market share has dropped to 10%. IEK predicts that it will fall below 9% in 2011. In Taiwan's silicon foundry industry, TSMC's global market share in 2010 exceeded 50% to 50.3%. Taiwan’s overall silicon foundry industry’s market share is as high as 68%. IEK predicts that in the absolute competitive advantage, the market share of TSMC in 2011 will further increase to 50.8%.
In 2011, SMIC had a dispute over management rights that had a huge impact on the company's operations, leading to a general instability in the company. Prior to this, SMIC's development could be said to be a model for the mainland's silicon foundry industry. The difficulties that SMIC has encountered can also be regarded as topics that many other mainland silicon foundry companies will face in the future. Why is it that the mainland silicon foundry cannot succeed? What are the reasons for the low competitiveness? What is more important is whether the mainland's silicon foundry companies can seize the opportunity to make a comeback. This article will analyze the rise and decline of the mainland silicon foundry industry in the past 10 years and look forward to the future development trend.
The global market share of China's silicon foundry industry continued to slump. In the 2004-2010 mainland silicon foundry industry, SMIC’s market share exceeded 50%. Therefore, the change of SMIC's performance has brought a huge impact on the overall silicon foundry industry in mainland China. 2004 is an important watershed for the mainland silicon foundry industry. Since 2004, the share of the mainland's silicon foundry industry in the global market has begun to slow. After 2008, competitiveness and market share began to decline.
The growth rate of sales of major silicon foundry companies in the mainland is shown in Table 1. Table 1 lists the average annual growth rate (CAGR) of sales between 2006 and 2010 when the global market share of the mainland silicon foundry industry ushered in the peak. In addition to the high growth of 18.5% in China's Central Semiconductor Manufacturing Corp (CSMC), which ranks fifth among mainland Chinese silicon foundry companies, the growth rate of other companies is lower than the average annual growth rate of global silicon foundry companies. The rate is 6.7%. The largest SMIC growth rate is only 1.5%. The silicon foundry industry in mainland China has undergone tremendous changes in the past 10 years.
The key to the success of the silicon foundry industry – capacity, technology, and capital For silicon foundries, there is a direct correlation between sales growth and capacity expansion. Therefore, increasing capital expenditures means that capacity will be expanded in the future, which will in turn affect potential sales growth. From 2004 to 2010, Taiwan's TSMC and UMC (United Microelectronics Corp.: UMC) and the three SMIC's silicon foundry companies' capacity trends are shown in Figure 1.
After 2004, the production capacity of the 300mm wafer fab in the global silicon foundry market increased significantly. As a result, leading companies in manufacturing technology and silicon foundry capacity in the 300mm factory have achieved significant growth compared to other competing companies. At the end of 2010, TSMC’s capacity increased by 127% over 2004. UMC increased by 34%. However, SMIC’s capacity began to shrink after peaking in 2007.
The main reason is that the 300mm plant of SMIC initially focused on operating revenue and advanced DRAM production. The silicon foundry production business was transferred to a 200mm factory. Although the proportion of DRAM's total sales reached more than 30% of SMIC's overall sales in one fell swoop, DRAM's production capacity was small compared to other major global competitors, and it failed to exert its "scale economy" effect.
Therefore, SMIC has racked its brains to expand DRAM production capacity. However, regarding SMIC's current capital and financial status, it is difficult to bear the potential risks caused by changes in the economic situation to the DRAM business. Since DRAM market conditions have turned sharply since 2007, the situation is very unfavorable to SMIC. In the end, SMIC withdrew from the DRAM business and began to adjust the foundry business that 300mm factories used to undertake logic ICs.
Looking at it now, it was not the best policy for SMIC to withdraw from the DRAM market. After such a toss, there was a gap in the silicon foundry capacity of the 300mm plant, which affected the company's operating profit. SMIC has delayed development in this process of “running aroundâ€.
Next from the technical aspects of analysis. The sales of 65nm to 40nm products of the global silicon foundry company in 2010 are shown in Figure 3. In the 65nm to 40nm product market that requires a high level of manufacturing technology, TSMC Taiwan holds the highest share, reaching 63.5%. Followed by the United States GLOBALFOUNDRIES. GLOBALFOUNDRIES is a silicon foundry company separated from AMD, a well-known American CPU company. The company is engaged in the manufacturing of CPUs for cutting-edge manufacturing processes owned by AMD and succeeded as a silicon foundry company with higher professional manufacturing technology.
The SMIC's operating revenue from its 65nm to 40nm products is far behind the top three of the global silicon foundry companies. In 2010, the supply of 65nm to 40nm products accounted for only 1% of the global total. Although the cutting-edge manufacturing process was introduced in an idle 300mm factory in response to an order from a fabless IC design company, the operating rate of the production line was not high. As a result, not only failed to obtain high profits through cutting-edge manufacturing process orders, but also triggered an order price war outside the high-end products.
The backwardness of this manufacturing technology and the inadequacy of indirect orders has led to a reduction in sales and profits. Once a deficit occurs, it will also have an impact on future manufacturing technologies and capital expenditure capacity aimed at expanding production capacity. This is the vicious circle of business environment that SMIC is now experiencing. In the silicon foundry industry, the trinity of production capacity, technology, and capital is a prerequisite for success. All three are indispensable.
In addition, it can be clearly seen from Table 1 that the combination of silicon foundry manufacturing process technology and production capacity will affect orders and operating income. The customer's trust in the overall service of the silicon generation industry directly affects the order, which is related to the smooth progress of the business.
SMIC's dispute over the right to operate between new and old shareholders in 2011 has led to a reduction in the reliability of delivery time and product quality, and the reliability has been questioned by customers. In addition, although SMIC has adjusted its product lines and product technology in the last three years, the production capacity of finer than 65nm accounts for about 20% of the total. However, due to the low operating rate of the production line, sales have not grown and have not been achieved. expected result. Among them, the orders of major customers, Texas Instruments (TI) and Broadcom of the United States, were taken away by Taiwan's silicon foundry companies. As a result, the silicon foundry capacity of SMIC's 300mm plants fell below 40%.
In addition, equipment depreciation and loan interest at the 300mm plant also placed a huge burden on SMIC's cash flow in 2011. It also seriously affected the capital expenditure capacity in 2012. From Table 2, TSMC and GLOBALFOUNDRIES have successfully maintained a long-term relationship with large customers, and have obtained huge excess profits in cutting-edge manufacturing processes below 65 nm. Moreover, it also maintains a certain level of standards for future capital investment. The three giants of TSMC, UMC and GLOBALFOUNDRIES have further expanded their relationship with SMIC.
SMIC needs to initiate new challenges in the future. That is, after 45nm etching process competition. SMIC has 32nm, 28nm, and 22nm technology development capabilities after 40nm and competitive, reasonable, low-cost manufacturing processes. The issue is how to provide customers with high performance and low power consumption products.
SMIC's 45nm manufacturing technology was imported from the Common Platform of IBM. In addition, we are currently providing customers with 40nm manufacturing process services through continuous research and development. However, SMIC had previously relied on IBM's technology transfer and lost in the patent infringement lawsuit brought by TSMC, which was very unfavorable for market competition and the acquisition of talents and funds.
Like other mainland Chinese silicon foundries, SMIC’s lack of investment in EUV (ultraviolet light) manufacturing processes means that SMIC may only provide non-mainstream multi-vendor design services to the market in the future (second-source service). ).
Three-dimensional LSI Brings Consolidation of Value to Service Integration Including SMIC, mainland China's silicon foundry companies still follow the SoC (System on a Chip) professional foundry service model.
Taiwan's two major silicon foundry companies, TSMC and UMC, have transformed the company’s operating model into a business model of vertically integrated component manufacturing service providers (Integrated Device Manufacturing & Service Provider). It is actively working to supply IP providers, design tools and suppliers, and ASIC service providers. In addition, it is more important to increase the research and development of three-dimensional SiP (System in Package). Among them, three-dimensional LSI and TSV (through-silicon vias) are the top priorities. The development of three-dimensional LSI will promote the reconstitution of the upstream and downstream professional structures of the Taiwan semiconductor industry, which will affect the value of the current semiconductor industry.
The functions and specifications of electronic products have diversified and become more and more complicated. At the same time, factors such as commodity form and energy consumption must be considered. In future electronic product design and development, in order to achieve the best combination of hardware and software, can we optimize the combination of important semiconductor components? In addition, it is of utmost importance to maintain the highest level in terms of the functions and energy consumption of the entire electronic system. In the LSI products, the functions and power consumption of high-speed arithmetic processors, media processors, and memories using advanced manufacturing processes are important.
In the near future, electronic products will continue to improve their functions, computing speed will be further accelerated, and the amount of information transmitted will further increase. Among them, the overall energy consumption of the system must be controlled within a certain range. The three-dimensional LSI technology is a powerful solution. For example, in memory, three-dimensional LSI is the key to achieving high-speed bandwidth and low power consumption.
In the future, downstream electronics manufacturers need semiconductor manufacturers that have three-dimensional LSI technology and can provide customized and integrated services. Taiwan's two major OEM companies, TSMC and UMC, will cooperate with electronics manufacturers to increase their opportunities in the future. This will create value for the semiconductor industry. In an ecosystem of SoC vendors, memory vendors, and packaging and post-test process companies, the two companies will use three-dimensional LSIs to provide system-level integrated services. TSMC and UMC will launch a large number of three-dimensional LSI, which is fully consistent with the expectations of electronics manufacturers.
IEK predicts that the application and mass production of memory LSIs and logic LSIs using three-dimensional LSIs and TSVs will be greatly expanded in 2013. High-performance cloud computing services will be actively adopted, and high-end smart phones will gradually become popular. This trend will change the business model of TSMC and UMC.
Including silicon foundry companies, the mainland's semiconductor manufacturing industry has not basically stepped into the three-dimensional LSI business. At this stage, it is only following the SoC foundry business model built in Taiwan. With the development of 3D LSI, the distance between the mainland semiconductor manufacturing industry and the leading global silicon foundry companies will further expand. (Special Contributor: Yang Ruilin, Manager, IC and Process Research Division, IEK System, Industrial Technology Research Institute)
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