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TrendForce: How US Chips Act limits will isolate China

TrendForce: How US Chips Act limits will isolate China

Opinion |
By Peter Clarke



Along with the subsidies on offer under the US Chips and Science Act come limitations that will reduce investments in the People’s Republic of China for the next decade, observes Taiwan-based analyst TrendForce.

TrendForce said these investment limitations could be of greater significance than some of the current product export controls – but together they will serve to decouple China from the global chip industry.

The CHIPS and Science Act stipulates that beneficiaries of the act will be restricted in their investment activities—for more advanced and mature processes—in China, North Korea, Iran, and Russia for the next ten years.

TrendForce said there is a trend in 1H23 for IC design companies to shift existing and new orders to Taiwanese foundries under pressure from clients as well as their own need to minimize risks. This is producing a benefit for Taiwan foundries Vanguard International Semiconductor (VIS) and Powerchip Semiconductor Manufacturing Co. Ltd. (PSMC) who are receiving orders rerouted from Chinese foundries.

However, the likes of TSMC, Samsung and SK Hynix who had previously put down wafer fabs in China find themselves coming under pressure not to continue developments there.

DRAM

Japan and the Netherlands have announced they intend to follow the US line on export controls for deep ultraviolet lithography as well as extreme ultraviolet lithography (see Japan adds to chipmaking equipment export restrictions). And this implies that China will have problems maintaining production both at sub-16nm and in the mature 40nm to 28nm range.

Such export restrictions also limit wafer fabs’ ability to get spares and consumables for the equipment they own so that minimizing production line downtime becomes more difficult and more expensive. TSMC is hit particularly because it was intending to expand production in both the US and China.

TSMC’s most recent expansion in China began in 2022, with a focus on 28nm processes at Fab 16. However, if TSMC takes the US Chips Act money to support its wafer fab campus in Arizona (see TSMC raises Arizona fabs’ budget to $40 billion) it could mark the end of expansion plans in China for the next decade.

Similarly, in DRAM TrendForce estimates that China’s share of global production will drop from 14 percent to 12 percent as SK Hynix limits investment in its Wuxi wafer fab.

NAND flash

Samsung’s Xi’an fab continues to focus on 128-layer processes and accounts for approximately 17 percent of global NAND flash capacity; the Intel fab in Dalian, which was acquired by SK Hynix, accounts for 9 percent of global NAND flash capacity. However, as 128-layer NAND flash struggles to compete with 200-plus layer NAND flash these fabs will likely atrophy, said TrendForce.

Domestic manufacture of NAND flash will also come under pressure (see YMTC could be out of 3D-NAND by 2024, says TrendForce). As a result China’s share of global NAND Flash capacity is expected to drop from 31 percent to 18 percent by 2025.

Many US companies have begun restricting production regions for memory and storage products or are requiring foundries to move their production facilities out of China to avoid geopolitical conflicts. Most notably Apple which looked at using NAND flash memory from YMTC has decided against that course of action.

TrendForce predicts the formation of two distinctive production regions: Chinese factories that primarily focus on meeting domestic demand, and factories outside China that will serve other markets.

Related links and articles:

www.trendforce.com

News articles:

Japan adds to chipmaking equipment export restrictions

TSMC raises Arizona fabs’ budget to $40 billion

YMTC could be out of 3D-NAND by 2024, says TrendForce

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