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In 2018, foundries face many challenges. How do giants lay out?
In 2018, the IC industry is expected to grow by 7.1%, reaching a market value of $437 billion. Despite challenges faced by foundries like Jade, major players have made strategic plans. Intel aims to boost its 10nm production, while TSMC anticipates achieving similar success with its 7nm node as it did with 28nm.
GlobalFoundries, Intel, Samsung, and TSMC are transitioning from 16nm/14nm to 10nm/7nm nodes. However, Intel encountered some setbacks in launching its 10nm process during the second half of 2017 and the first half of 2018. Analysts believe that the smoothness of this transition for other manufacturers will be tested over time.
Some foundries are also focusing on 22nm technology, though demand remains unclear. Meanwhile, OEMs continue to see strong demand for 8-inch wafers, which remain in short supply.
Despite these challenges, the foundry sector is not as bleak as it seems. According to Joanne Itow from SemicoResearch, the foundry business is expected to grow steadily by 8% in 2018, matching the growth rate of 2017. Growth drivers include AI, automotive, and sensors. While smartphone sales growth has slowed, the BOM (Bill of Materials) for smartphones remains crucial for foundries, including components like sensors, processors, image sensors, and wireless radios.
High-performance computing, power electronics, and even cryptocurrencies are also driving growth. The Chinese market is particularly notable, with many foundries expanding or building new fabs.
According to TrendForce, TSMC maintained a dominant 55.9% share of the global foundry market in 2017. GlobalFoundries followed, along with UMC, Samsung, SMIC, TowerJazz, Powerchip, Pioneer, Huahong, and East.
The semiconductor market reached $409 billion in 2017, up 20.6% from 2016, driven by higher DRAM prices and strong demand for analog, flash, and logic chips. In 2018, the IC market is projected to hit $437 billion, an increase of 7% from 2017.
Moore’s Law, which predicts that transistor density doubles every 18 months, still holds but faces new challenges. Each new node brings rising costs and complexity, extending the development cycle from 18 months to 2.5 years or more. Designing a 7nm chip now costs around $271 million, compared to $80 million for 16nm/14nm and $30 million for 28nm.
Mobile phones remain the largest market for chips, with mobile IC sales expected to reach $97.3 billion in 2018, up 8% from 2017. PC-related chips are the second-largest segment, forecasted to grow by 5% to $72.6 billion.
Other markets are growing even faster. Automotive IC sales are expected to rise by 16% to $32.4 billion, and IoT-related IC sales are set to increase by 16% to $16.8 billion.
UMC’s Walter Ng noted that more customers are redefining their product portfolios to adapt to the IoT and automotive markets. In automotive, features like infotainment, data security, and advanced driver assistance systems (ADAS) are increasing demand for MCUs that integrate embedded non-volatile memory, RF components, and MEMS sensors.
For IoT, devices often require integrated ICs with multiple communication protocols, such as Wi-Fi, Bluetooth, and Zigbee. Home automation is another area of interest.
To meet these demands, OEMs must develop more varied processes. Gary Patton of GlobalFoundries stated that a single technology platform cannot serve both high-end systems and battery-powered IoT devices. Fabs must increase capital and R&D spending annually, but only a few can afford multiple technologies.
Challenges for wafer foundries include economic and political issues, poor demand in Q1, inventory problems, M&A activity reducing customer bases, silicon availability concerns, and packaging test supply chain shortages.
By 2018, Intel aimed to boost 10nm input, while GlobalFoundries, Samsung, and TSMC began shipping 7nm finFET products. Intel's 10nm is roughly equivalent to other foundries’ 7nm node. Node migration is complex, with some companies facing delays in moving from planar to 16nm/14nm.
FinFETs help solve scaling issues but are more costly to manufacture. Intel delayed its 10nm FinFET process, with analysts noting increased complexity and steps required. GlobalFoundries, Samsung, and TSMC face similar challenges at 7nm, though progress is being made.
TSMC expects 7nm to become a long-lasting node, with potential for expansion. Initial applications will focus on high-end processors and computing, with over 50 tapeouts by year-end.
Not all customers can afford advanced nodes due to high design costs. To fill the gap, GlobalFoundries, Intel, TSMC, and UMC are developing 22nm processes, offering better performance than 28nm and lower costs than 16nm/14nm.
22nm technologies vary: GlobalFoundries uses FD-SOI, TSMC and UMC use high-capacity CMOS, and Intel employs low-power FinFET. Customers choose based on performance, cost, and power requirements.
Despite this, many will continue using 28nm due to its balance of speed, power, and cost. Gartner analyst Wang notes that 28nm will maintain strong demand, generating around $10 billion in annual revenue.
The 8-inch wafer shortage continued into 2018, with tight supply expected. UMC’s Ng noted that 12-inch capacity is following a similar path, prompting more strategic sourcing. Some devices are being moved to 12-inch wafers, which produce high-end chips.
Mature nodes allow for specialized processes like analog, BCD, MEMS, mixed-signal, power management, and RF. With 5G and automotive advancements, professional foundry business is revitalizing.
Power electronics and wireless remain key growth areas. UMC is expanding in BCD power management, driven by new energy sources requiring efficient solutions. The automotive market, though small, is growing rapidly, with foundries competing to expand there.
GlobalFoundries’ Mark Granger noted a turning point in vehicle semiconductor content, especially with ADAS. The automotive field includes body, connectivity, convergence/security, infotainment, and powertrain segments.
OEMs are advancing ADAS and autopilot technologies, aiming to bring safety features to mid-range and entry-level vehicles. Fully autonomous driving is still years away.
5G presents another big opportunity, with faster data transfer rates and new chip demands for infrastructure and mobile devices. TowerJazz’s Racanelli highlighted the need for specialized semiconductors in data centers and RF front-ends for 5G systems.
However, UMC’s Ng cautioned that 5G infrastructure deployment will take time. China remains a significant opportunity, with SMIC and other local foundries expanding. UMC, GlobalFoundries, TowerJazz, and TSMC are building new facilities in China.
The Chinese IC design industry is growing rapidly, with expected growth of 22% in 2017 and 20% in 2018, driven by IoT, AI, and 5G. Emerging applications like biosensors, fingerprint recognition, and AMOLED are also creating opportunities.
China is actively pursuing 5G, Industry 4.0, and smart grid technologies, leading in some areas. The semiconductor industry in China continues to attract attention and investment.