In the semiconductor industry, every change is very important, and it is difficult to judge the direction of the next change in the semiconductor industry. For the new generation of chip technology, in the face of super high cost pressure and interest temptation, whether to give up or insist, only after the choice can we know right or wrong.

Two years ago, the cost pressure and technical pressure faced by the development of a new generation of processes made the foundry fall into a gamble – whether to bite the bullet or find another way out. At that time, UMC, the world’s third largest wafer foundry, made a sensational choice to stop the research and development of advanced processes below 12nm.

Two years later, TSMC and Samsung’s pursuit of 3/5nm advanced processes has attracted the attention of the entire industry, but according to the latest survey results of the Tuoji Industrial Research Institute in August this year, we found that UMC is in the foundry industry. The status of the industry is still stable (in 2018, the top three foundries in the world were: TSMC, GlobalFoundries, and UMC. In the past two years, although Samsung, a dark horse, has broken into the top three, but from the business Looking at it, UMC’s status has not changed).

But in terms of growth, UMC’s 23% year-on-year growth is enough to outshine other foundries. And in this momentum, there is also a faint taste of winning with stability.

After 18 years of catching up, UMC stopped the research and development of advanced processes below 12nm

1. The 18-year chaser, between UMC’s thoughts

In 2018, UMC made a decision – stop the research and development of advanced processes below 12nm, and no longer compete for technology in the foundry market, but pay more attention to the return on investment and make money first.

The idea of ​​UMC also means that he will end his 18-year chaser status.

In 2000, UMC, as the second wafer foundry, closely followed TSMC, and the two sides were once comparable in foundry technology. But 28nm changed the situation – TSMC took the lead in mass production of 28nm, and its production capacity and technology maturity were far ahead of UMC. As a result, in the following year, TSMC’s 28nm revenue quickly climbed from 2% to 22%, and TSMC dominated the competition.

Since then, UMC has been chasing TSMC. UMC, which tried to surpass it by developing more advanced processes, failed to achieve this goal for 18 years. According to relevant reports, due to excessive investment in advanced manufacturing processes, UMC has to achieve a capacity utilization rate of more than 90% in each production in order to make a profit, and such a revenue method obviously cannot last for a long time.

As a result, UMC adopted a major market strategy adjustment, faded out of the competition of advanced processes, turned to take advantage of mainstream logic and special process technology, and strengthened the development of mature and differentiated process markets.

At that time, UMC said that in the 12nm and above process foundry market, UMC’s market share is only 9.1%, and the revenue scale is about 5 billion US dollars. Once the market share increases to 15%, there is still 60% of the market space to grow. , revenue will reach more than 8 billion US dollars.

Analysts at Morgan Stanley believe that UMC’s move this time is putting the money in the right place.

This is indeed the case. According to UMC’s latest financial report for the third quarter of 2020, UMC achieved a revenue of NT$44.87 billion in the quarter, which also hit a new high since the second quarter of 2004. It is worth noting that in the third quarter, UMC’s 28nm revenue accounted for 14%, a quarter-on-quarter increase.

After 18 years of catching up, UMC stopped the research and development of advanced processes below 12nm

Second, UMC still has chips in its hands

If it is said that UMC made a small profit by choosing a mature technology, then the sharp increase in the demand for 8-inch wafers is a market position, and UMC has made a fortune.

8-inch is mainly based on mature processes. Power devices, power management ICs, image sensors, fingerprint identification chips and Display driver ICs all need the support of 8-inch wafers. At the end of 2015, as the end market began to change, wave after wave of new booms, the industry began to have enthusiasm for 8-inch fab chips.

According to the research report of GF Securities, chips used in automotive electronics and the Internet of Things, including advanced assisted driving systems and sensors, automotive current control ICs, and Internet of Things MCUs, have been put into mass production in 8-inch fabs. In the second half of the year, the production volume of 8-inch fabs increased rapidly.

At the beginning of 2018, power management, image sensors, fingerprint recognition chips and driver ICs drove the demand for 8-inch foundry. But at the same time, 12-inch wafer foundry has gradually become the darling of the market, but this requires a lot of investment by related companies, and the resulting huge cost, as well as the long time to build a factory and the difficulty of expanding new customers, etc. Many factors make the advancement of 12-inch wafer foundry still a long process. Therefore, 8-inch wafer foundry is still the first choice for many devices.

In 2019, the market demand for 8-inch wafers has once again set off a peak. According to a report from China Securities Journal, Zheng Biyu, an analyst at Sinolink Securities, believes that this round of 8-inch wafer capacity shortage started in 2019 when multi-camera mobile phones drove the increase in demand for CMOS image sensors. Affected by the epidemic, the increase in working from home and online education around the world has increased the demand for notebook computers and tablet products, thereby driving the growth in demand for driver chips and other semiconductor products. The third quarter is the peak season, making the current round of 8-inch wafer foundry boom. more than in previous years.

According to the market situation, this situation of short supply has continued until 2020. At UMC’s latest financial report meeting, Wang Shi also pointed out that driven by the demand for panel driver ICs and power management chips, the tight 8-inch production capacity will continue into next year.

UMC’s 8-inch production capacity in recent years can also reflect this market demand. According to the research report of GF Securities, according to the data disclosed in the 2017 annual report, UMC’s 8-inch wafer production capacity currently accounts for about half of the total production capacity.

According to UMC’s latest financial report, in the third quarter of 2020, UMC’s shipments reached 2.25 million, which is equivalent to 8-inch wafers, and the foundry capacity of 8-inch wafers is still tight. Wang Shi, co-CEO of UMC, said that this mainly reflects the trend of working from home and learning from home, which will continue to bring stable demand from the end market, such as smart phones, wireless connections in high-speed I/O controllers of computer equipment, and power management ICs and other applications. .

(UMC quarterly production capacity in the third quarter of 2020)

Market conditions in short supply have also led to a rise in the value of 8-inch wafers.

According to public information, UMC has decided to launch a “one-time price increase” plan at a shareholders’ meeting in 2018. According to relevant reports, at that time, its 8-inch factory was fully loaded with orders, and due to the obvious increase in the price of silicon wafers, which led to an increase in costs, UMC has raised the price of 8-inch foundry since June.

Today, two years later, while the market demand for 8-inch wafer capacity is still unabated, UMC has once again announced a price increase plan. According to UMC’s content at its latest earnings conference, due to the current strong demand for 8-inch and the continued shortage of production capacity, UMC has discussed product pricing in 2021 with customers. It is expected that the price of 8-inch will increase in 2021, while the price of 12-inch will increase will remain stable.

UMC also stated that the foundry capacity of 8-inch wafers is very tight, and UMC will continue to benefit from the price increase. At the same time, its 28-nanometer process has also been affirmed by many customers, which is expected to drive the demand for 12-inch wafers to increase. Its 2020 performance New highs are expected.

3. The layout of UMC’s 8-inch wafer foundry

The first 8-inch fab was born in 1990, and most of the existing 8-inch fabs were built for 10 years or more. Not giving up and not giving up has also made the 8-inch wafer foundry usher in new growth under the outbreak of new applications after experiencing a trough.

According to the report of the Core Thought Research Institute, there are a total of 7 UMC 8-inch foundries. Since 1995, UMC has put a lot of effort into 8-inch wafers.

In July 1995, UMC cooperated with Alliance and S3 to establish United Semiconductor Corp. (USC), which is now the FAB 8B factory.

In August 1995, UMC cooperated with seven companies including Trident, ATi and ISSI to establish United Integrated Circuits Corporation (UICC), which is now the FAB 8D factory.

In September 1995, UMC and two IC design companies jointly established United Silicon Incorporated Corp. (USIC), which is now the FAB 8C factory.

In September 1995, UMC’s 8-inch fab (formerly UMC3, now FAB 8A) started production.

In April 1998, UMC acquired the 8-inch fab (now FAB 8E) of Holtek Semiconductor (now Holtek).

In May 1998, UMC UMC5 (now FAB 8F) started construction.

In July 2004, UMC acquired the 8-inch wafer fabrication plant of Silicon System Semiconductor, which is now the FAB 8S plant.

In March 2013, UMC completed the acquisition of Hejian Technology, which is now the FAB 8N factory.

Among them, Hejian in Suzhou is also one of the important roles of UMC’s 8-inch wafer foundry, and UMC has also frequently deployed the factory. At the end of 2018, UMC announced that it would invest more than 6 billion yuan to expand its eight-inch and twelve-inch production capacity. According to the plan, the production capacity optimization of the 8-inch factory will be mainly based on the subsidiary Suzhou Hejian Technology, which is expected to expand by 10,000 pieces. Before, the monthly production capacity of Hejian was 60,000 pieces. After the expansion, this number will increase to 70,000 pieces.

Recently, there have been rumors in the market that UMC intends to spend less than NT$10 billion to acquire Toshiba’s 8-inch wafer fab in response to the strong demand for 8-inch foundry and expanding its operating scale. In this regard, UMC said that it would not respond to market rumors, emphasizing that it is open to mergers and acquisitions.

In addition to the acquisition of factories, UMC’s investment in 8 inches is also reflected in investment. According to public information, UMC’s capital expenditure budget in 2020 is US$1 billion to meet the needs of medium and long-term customers and the market. UMC will also continue to enter new markets and expand existing markets. UMC’s core competitiveness in process technology and world-class wafer engineering services will further strengthen its industrial position in logic and special process solutions.

In its latest quarterly report, UMC pointed out that in terms of capital expenditures, UMC will maintain its annual budget of $1 billion, that is, $150 million for 8 inches and $850 million for 12 inches.

4. Oversized 12-inch wafer foundry layout

The market demand for 8 inches has made UMC a lot of money. At the same time, we also see that UMC is stepping up its layout of 12-inch wafer foundry projects. This may also be one of UMC’s chips in the future.

One of the reasons for the booming demand for 8-inch foundries is that most of the 8-inch fab equipment has been depreciated and fixed costs are lower. Most fabs are now fully depreciated, so 8-inch wafer products are very cost-competitive to operate. However, the expansion of silicon wafer size will indeed lead to cost reduction. With the maturity of future production lines, 12-inch wafer foundry is bound to become a trend. Therefore, this has also caused foundries to step up their layout. .

At present, UMC has four 12-inch foundry production lines, namely Fab 12A in Tainan, Fab 12i in Baisha Wafer Technology Park in Singapore, Leadcore FAB12X in Xiamen, China, and USJC in Mie County, Japan.

Among them, UMC cooperated with the Xiamen Municipal Government in 2014 to invest in the establishment of a 12-inch wafer fab in Xiamen Torch High-tech Zone, which started production in 2016. UMC holds more than 60% of the shares. An important base for the foundry, the 40/55nm process is the main process in the initial stage, and the 28nm process technology has been introduced.

In February this year, UMC announced that the company will increase capital in Xiamen Lianxin (12-inch wafer fab) through its subsidiary Suzhou Hejian, with a total amount of RMB 3.5 billion (approximately NT$14.987 billion, the following are all in RMB). calculation), to assist Lianxin to expand production. At UMC’s latest financial report meeting, the company also stated that it will maintain the expansion plan of Xiamen Lianxin’s 12-inch factory, with the goal of increasing from about 20,000 pieces to 25,000 pieces per month around mid-2021.

In the layout of the 12-inch wafer foundry, UMC was also approved in September last year to acquire all the shares of Japan’s Mie Fujitsu Semiconductor (MIFS), a joint venture between the company and Fujitsu Semiconductor (FSL), for 54.4 billion yen. According to related reports, the move will expand UMC’s 12-inch wafer foundry capacity.

UMC, which previously gave up advanced processes below 12nm, finally chose the first rate of return in the wafer foundry market. However, UMC, which is now earning a lot of money in the 8-inch market, finally chose to use 12-inch wafer foundry as a bargaining chip in the future.

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