Semiconductor Week in Review (Nov 10 - 16): In a week dominated by seismic shifts in the semiconductor landscape, TSMC's suspension of sub-7nm chip supply to Chinese AI firms and postponement of its Arizona fab opening bookended a series of industry-reshaping developments, as geopolitical tensions continue to redraw the global tech supply chain map.
Biden's bold gambit: Proposed Intel-AMD merger faces market skepticism and regulatory hurdles
The Biden administration's reported proposal to merge Intel's chip design division with AMD has sent shockwaves through the semiconductor industry, marking a potential watershed moment in tech history. While the two long-time rivals have shown recent signs of cooperation, including a joint appearance by CEOs Pat Gelsinger and Lisa Su at Lenovo Tech World 2024, market analysts express significant concerns about the viability of such a merger.
Despite their shared challenges from the growing Arm ecosystem, the proposed consolidation faces multiple obstacles: AMD's Ryzen processors have already achieved competitive parity with Intel, making the strategic value questionable; Intel would lose control over future processor development; leadership integration would likely create significant organizational friction; and perhaps most crucially, the combined company's near-monopoly of the x86 market would face intense antitrust scrutiny from global regulators.
The proposal appears to reflect the administration's determination to bolster Intel's position, though market sentiment suggests this particular solution may create more problems than it solves.
Huawei's HarmonyOS NEXT marks bold break from Android; eyes global expansion amid ecosystem challenges
Huawei's ambitious "Songshan Lake Initiative," which began in late 2019 with over 2,000 engineers, has culminated in the launch of HarmonyOS NEXT, marking the company's complete departure from Android dependency and establishing itself as the world's third major mobile operating system. The native OS, featuring AI integration, enhanced security, and improved connectivity, has already captured 17% of China's market share, surpassing iOS domestically, while holding 4% globally.
Despite rapid adoption by major Chinese apps like WeChat and Alipay, Huawei faces significant challenges in building a comprehensive ecosystem, with developers needing to rebuild applications for the new platform substantially. The company's roadmap includes the commercialization of smartphones and tablets in 2024, expansion to smart displays and automotive systems by 2025, and international market entry in 2026, initially targeting Hong Kong, Southeast Asia, and the Middle East.
However, industry experts note that success will hinge on Huawei's ability to attract global partners and develop the extensive app ecosystem needed to compete with Android's 77% and iOS's 19% global market share.
TSMC halts sub-7nm chip supply to Chinese AI firms, sparking supply chain shift amid US restrictions
In a significant escalation of semiconductor tensions, TSMC has suspended its sub-7nm process services to Chinese AI and GPU chipmakers effective November 11, 2024, following a US Commerce Department "informed" directive aimed at restricting China's access to advanced chip technology. The move amid the ongoing Huawei chip controversy has sent ripples through the global semiconductor industry, forcing Chinese firms to seek alternatives primarily through SMIC and Samsung.
However, both alternatives face significant hurdles: Samsung must navigate US export controls on American-origin technology, while SMIC grapples with capacity constraints and technological limitations in its EUV lithography capabilities. The situation is further complicated by new US restrictions on AI investments in China, creating a dual challenge for Chinese AI chip firms facing funding constraints and limited production options.
Industry analysts note that while SMIC's Co-CEO Haijun Zhao positions the company as an "indirect beneficiary" of the AI wave, questions remain about its ability to meet the sudden surge in demand from displaced TSMC customers.
Huawei emerges as China's autonomous driving champion amid US tech restrictions, reshaping auto industry
As US semiconductor restrictions challenge China's autonomous vehicle development, Huawei has stepped into a pivotal role in advancing the nation's self-driving capabilities, leveraging its telecom and smartphone expertise to fill critical technological gaps. Despite automakers' initial reservations about ceding control of vital vehicle functions, market pressures and US restrictions on key components like Nvidia's AI chips have forced a pragmatic embrace of Huawei's solutions.
The shift coincides with a broader transformation in China's automotive landscape, where traditional state-owned manufacturers like SAIC and GAC lose ground to emerging players such as BYD and Geely in the new energy vehicle sector. This transition has been further catalyzed by the State-owned Assets Supervision and Administration Commission's 2024 directive emphasizing "market value" in performance evaluations, effectively encouraging partnerships with Huawei.
With automakers' in-house autonomous driving R&D falling short and government support likely to favor top performers, Huawei's position as a key technology provider appears increasingly central to China's automotive future, particularly as the industry races to achieve technological self-sufficiency.
TSMC greenlights US$15.5B capital injection amid strong Q3 results, boosts 2024 capex outlook
TSMC's board has authorized a substantial US$15.48 billion capital appropriation package, primarily targeting new fab construction, facility systems installation, and advanced technology capacity expansion, while simultaneously approving up to NT$60 billion (US$1.85 billion) in domestic unsecured corporate bonds.
The investment decision comes as the world's largest contract chipmaker reports robust third-quarter performance. Net profits reach NT$325.26 billion on revenues of NT$759.69 billion, exceeding previous guidance and prompting third-quarter earnings of NT$4.50 per share. Looking ahead, TSMC projects a 13% sequential revenue growth for its fourth quarter and has revised its 2024 capital expenditure forecast upward to exceed US$30 billion, signaling confidence in sustained market demand and its technological advancement roadmap.
China's SiC price war sends global substrate market into tailspin, 6-inch wafers hit record lows
A dramatic oversupply crisis has engulfed the silicon carbide (SiC) substrate market in 2024, as aggressive capacity expansion by Chinese manufacturers Tianyu and San'an has triggered an intense price war, driving mainstream 6-inch wafer prices down to US$400-US$450 in the fourth quarter of 2024, well below production costs.
While major international IDMs like Bosch and Infineon leverage their strengthened negotiating position, they maintain established partnerships with traditional suppliers, prioritizing supply chain stability over cost savings. The Chinese government has intervened to prevent similar overcapacity issues in 8-inch wafer production, even as SiC maintains its strategic importance in defense and advanced technology sectors.
Industry observers note that despite current market turbulence, the falling prices could accelerate SiC adoption over traditional IGBT and GaN technologies, with Taiwan's high-reliability production potentially offering a stable alternative amid the market upheaval.
TSMC postpones Arizona fab opening amid Trump's victory, braces for potential policy shifts
TSMC has postponed its December 6 Arizona fab inauguration ceremony, potentially delaying it until after Donald Trump takes office in January 2025, signaling growing uncertainty about US semiconductor policy under the incoming administration. Despite accelerated progress under VP of fab operations Y.L. Wang, who has brought the facility's completion ahead of schedule for 2024 with production starting in early 2025, the world's largest chipmaker faces new challenges beyond its initial hurdles of labor shortages and union resistance.
Industry sources suggest the delay reflects TSMC's strategic caution, particularly given Trump's previous criticisms of Taiwan's semiconductor dominance and potential plans for stricter oversight of TSMC's US operations. While the company proceeds with plans for three advanced fabs in Arizona, questions loom about future subsidies, tariffs, and advanced packaging requirements under Trump's leadership, though analysts note TSMC's unique technological advantages may help maintain its leverage despite political pressures.
