The disruption of the chip supply chain caused by the pandemic in the past two years, as well as geopolitical flashpoints such as Sino-US trade frictions and the Russia-Ukraine war, have led regional economies worldwide to focus more on the autonomy of local production and supply chains. According to TrendForce research, in terms of 12-inch equivalent production capacity in various regions around the world, Taiwan will account for approximately 43% of capacity by 2025, followed by China at 27%, the United States at 8%, and South Korea at 12%. In terms of advanced process capacity below 7nm (inclusive), Taiwan will account for approximately 69% by 2025, South Korea 18%, the United States 12%, and China 1%. Compared with the landscape in 2022, it is obvious that the United States will increase its proportion of advanced process production capacity in the next three years, while China will focus on mature processes. However, as the U.S. Congress is about to enter its August recess, the Senate and House of Representatives passed “H.R. 4346 The CHIPS (creating helpful incentives to produce semiconductors) and Science Act of 2022”
U.S. CHIPS Act to promote domestic semiconductor development, further restrict Chinese efforts in advanced processes. TSMC remains at head of the table for advanced processes while China settles for mature process development.
However, as the U.S. Congress is about to enter its August recess, the Senate and House of Representatives passed “H.R. 4346 The CHIPS (creating helpful incentives to produce semiconductors) and Science Act of 2022” (aka CHIPS Act) promptly last week and the bill officially enters the final leg of the legislative process and will take effect after it is signed by President Biden. The draft bill not only covers wafer manufacturing R&D and factory construction subsidies, tax incentives, etc., but also proposes additional restrictions. It proposes that companies that receive subsidies from the United States be barred from investing in process technologies below 28nm in China during the subsidy period to ensure that the CHIPS Act protects the competitiveness of the U.S. semiconductor industry. TrendForce indicates that the only semiconductor companies currently investing in expansion/fabs in the US and China are TSMC and Samsung. It is worth continuing to pay attention to how the U.S. CHIPS Act will restrict the Chinese investment of these two companies.
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China earnestly promoting domestic equipment but key equipment for advanced processes is controlled by U.S. allies
Since the U.S. “Entity List” expressly prohibits the sale of U.S. technologies used in advanced processes of 1Xnm and below to enumerated companies, most Chinese foundries have turned to actively expanding mature process technologies of 28nm and above. At the same time, China is also industriously developing domestic semiconductor equipment in an attempt to achieve a fully U.S.-independent manufacturing line. However, TrendForce indicates the U.S.-aligned equipment manufacturers still control certain key semiconductor processing machinery at this stage. U.S.-affiliated equipment is especially crucial in advanced manufacturing processes below 7nm and it is quite difficult to achieve a fully U.S.-independent production line in the short term.