Recently, TSMC announced that it would increase its capital expenditure in 2021 from USD 25-28 billion in January to USD 30 billion, of which 80% will be used for advanced processes such as 3/5/7 nanometers, 10% will be used for advanced packaging technologies, and 10% will be used for advanced packaging technologies. Used for special techniques. In the earnings conference call for the first quarter of 2021, TSMC reiterated that because customers are optimistic about the development of the semiconductor industry and promised to purchase, the company will spend $100 billion to expand production capacity from 2021 to 2023. This means that the compound annual growth rate of USD income in 2020-2025 will reach 10-15%.
But both TSMC and Intel emphasized that the supply-demand imbalance in the semiconductor industry will continue until the end of 2022, and capacity expansion will not be able to keep up with the surge in demand, especially for certain mature processes. In short, the semiconductor industry is undergoing a major demand-side structural adjustment. Therefore, major foundries and customers have increased their inventory levels to cope with uncertainty.
Slow capacity expansion and surge in demand have pushed up foundry costs. Recently, many chip foundries have announced capacity expansion plans. For example, TSMC expanded its 28-nanometer plant in Nanjing, UMC’s 28-nanometer plant in Tainan increased production, and Vanguard acquired a 200-mm plant in Hsinchu.
Counterpoint predicts that, driven by these semiconductor manufacturers, the production capacity of mature processes will increase significantly. In the past few years, the migration from 200mm to 300mm has been very slow, unable to eliminate the risk of tight supply of mature processes. Now, foundries are getting less and less support from 200mm equipment manufacturers. Production capacity cannot keep up with the surge in demand in the short term, so prices are rising. The price of some processes has even increased by 30-40%, which does not count the additional cost of chip designers that usually exceed 10%. Prices will rise in 2021. In order to ensure production capacity in 2022, chip design manufacturers are negotiating with foundries. It is expected that prices will increase by at least 10-20%.
Intel is also very optimistic about the prospects of the industry and predicts strong market demand in the future. Intel is betting on huge computing needs, IDM 2.0 strategy and continuous technology investment, hoping to return to its leading position in the industry. Intel also announced a planned capital expenditure of US$20 billion in 2021, a year-on-year increase of 35-40%. The funds will be used to build two chip factories in Arizona (a total of 20 billion U.S. dollars).
5G mobile phones, HPC and the automotive industry promote the active expansion of foundries. In terms of growth drivers, Counterpoint believes that, driven by the tide of 5G smart phone replacement, smart phones will continue to be an important driving force for at least the next three years. However, in recent years, the growth of smartphone shipments has slowed down, which is not enough to support the aggressive capital expenditure plans adopted by foundries, nor can it guarantee strong sales growth prospects.
Counterpoint believes that emerging AI applications, connected devices, virtual reality/augmented reality, and smart manufacturing require super computing power in communication infrastructure and cloud data centers. Therefore, HPC will develop rapidly and consume a large amount of new additions in the next few years. Capacity. Intel said that almost all applications now introduce artificial intelligence and machine learning capabilities. Global hyperscale data center providers and cloud solution providers have invested a lot of resources to expand production capacity. This will continue to improve computing power to meet the rapidly increasing demand for HPC.
In other industries, with the surge in demand for semiconductors in the automotive and V2X ecosystem, automotive-related industries such as electric vehicles, autonomous driving, and charging equipment are expected to consume a large amount of semiconductors. Although TSMC’s automotive business revenue only accounted for 4% of total revenue in the first quarter of 2021 (smartphones accounted for 45%, HPC accounted for 35%), TSMC has made the automotive market a priority in the next few years.
The 2021 chip foundry cost increase has basically come to an end, but there will be a new round of price increases in 2022. Chip designers are negotiating with chip manufacturers for foundry costs and capacity allocation. The imbalance between demand and supply is expected to continue for another year, and prices will rise by at least 10-20% in 2022.
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