Industry News

How Will China's Semiconductor Industry Respond to the Chip Supply Disruptions by Samsung and TSMC?

Update time : 2024-11-13 16:40:31

Recently, according to industry sources, the United States has implemented stricter export control measures on chips with manufacturing processes of 7nm and below. Affected by this, TSMC, the world's leading semiconductor manufacturer, has notified some chip design companies in mainland China that it plans to suspend providing them with chips with manufacturing processes of 7nm or below starting from now, especially in the fields of artificial intelligence and graphics processing units.

This time, the control measures do not completely ban all chip design companies in mainland China from obtaining advanced manufacturing process chips from TSMC.

Reports pointed out that currently, it is mainly AI and GPU-related chip products that are restricted, while the chip supply in fields such as mobile phones and automobiles has not been directly affected for the time being.

Regarding the restricted AI and GPU chips, TSMC is still negotiating specific control details with the U.S. Department of Commerce. In the future, chips that meet specific conditions may still be able to continue to be produced at TSMC by applying for permits. Coincidentally, following TSMC's letter to suspend 7nm and below advanced manufacturing process foundry services for AI chip companies in mainland China, the latest rumors show that Samsung's wafer foundry business department has also sent similar notices to its mainland customers.

However, according to the latest news, although the United States has not yet officially introduced relevant restriction details, it seems that Samsung, like TSMC, has also received notices from the U.S. Department of Commerce.

The market generally believes that this upgraded measure almost ensures that specific AI/GPU and ASIC manufacturers in the Chinese mainland market will be unable to obtain the production capacity of 7nm and below advanced manufacturing processes in the short term. In addition, Intel and its IFS business are also restricted by regulations and cannot provide services for relevant manufacturers.

Looking at the revenue distribution of TSMC's manufacturing processes in the first three quarters of this year, advanced manufacturing processes accounted for about 67%, which is the main source of revenue. Among them, the main customers of 7nm, 6nm, 5nm, 4nm, and 3nm are mainly European, American, and Taiwanese manufacturers. Even if the review becomes stricter and some Chinese customers may be lost, due to the booming demand for AI chips in the market, other overseas customers may quickly fill the production capacity vacated by mainland Chinese manufacturers, and the impact on the utilization rate of TSMC's advanced manufacturing process capacity will be limited.

From the perspective of TSMC's regional revenue proportion, the revenue proportion from mainland China in the whole year of 2023 and the first three quarters of 2024 is mainly between 11% and 13%. If the review of 7nm and below advanced manufacturing processes expands or mainland Chinese customers are included in the Entity List by the United States, it is expected to affect TSMC's overall quarterly revenue by about 5% - 8%.

It is believed that the news of the suspension of foundry services by Samsung and TSMC is undoubtedly a severe challenge for AI and GPU companies in mainland China. Without the support of TSMC's advanced manufacturing process technology, these companies may face greater pressure in terms of product performance and market competitiveness. Meanwhile, this may also prompt chip design companies in mainland China to accelerate the search for new foundry partners to cope with the uncertainties and risks in the supply chain.

How Can Domestic Semiconductor Manufacturers Respond?
In the face of the news released by Samsung and TSMC, domestic substitution in China has become imperative, and accelerating the development of China's semiconductor industry has become the only way to break the situation.

Currently, in order to enhance its technological capabilities and innovation levels, China's semiconductor industry needs to increase investment in basic research and materials science. This can improve the ability of independent innovation and thus reduce dependence on external technologies. At the same time, it also provides a solid foundation for the future development of the semiconductor industry.

Fortunately, in recent years, China's semiconductor equipment industry has achieved many breakthroughs. Some industry insiders said that in the past few years, many domestic equipment enterprises in China have made progress in equipment such as etching, thin films, cleaning, and packaging and testing. Leading enterprises engaged in materials and components have also shown a rapid growth trend and have made progress in radio frequency power supplies, flow meters, manipulators, vacuum pumps, precision quartz, high-purity graphite, high-purity plates, special stainless steel, and fine chemical materials.

As Chinese chip enterprises continue to develop, the market is also expected to see two virtuous cycles. First, the overall quality of the chip sector will improve, including the improvement of corporate profitability and product quality, which will make up for the shortcomings of China's capabilities in the upstream links of the industrial chain and thus accelerate the improvement of the global competitiveness of China's downstream advantageous brands and products. Second, driven by China's domestic demand, more excellent enterprises will emerge in the technology sector and step onto the global competition stage.

SIC believes that the fact that Chinese chip design companies have started to look for new foundries may lead to the restructuring of the supply chain, but in the long run, it may have a positive driving effect on the development of China's chip manufacturing industry. While facing challenges such as supply chain disruptions, technological bottlenecks, and talent shortages, China's semiconductor industry also welcomes development opportunities such as market growth, technological innovation, and policy support.

WLS Hot-selling products:

Previous : Jensen Huang has made a major announcement! NVIDIA and SoftBank are collaborating to build AI infrastructure in Japan, hitting the restart button for

Next : Three major European chip companies have made rare public statements