Semiconductor manufacturers are banding together and it has become a trend!
Latest update time：2021-08-31 11:52
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More and more manufacturers in different fields of the semiconductor supply chain have begun to sign agreements. Fabless chip design companies have begun to be tied to wafer foundries and upstream material manufacturers. After experiencing the "baptism" of the "chip shortage", downstream car companies have also begun to closely couple with chip design companies. For a long time, the chip design service industry has maintained close cooperation with wafer foundries, both bound and unbound.
Fabless chip design companies are tied to upstream wafer fabs and materials
Binding with wafer foundry factory
This year's global chip shortage has caused all manufacturers to re-examine the problems of the traditional supply chain. At the same time, more and more fabless and IDM companies have begun to tie up with TSMC and other wafer factories, or sign foundry agreements, or build joint ventures to obtain sufficient production capacity allocation in the next few years to avoid the passive situation this year.
In the field of foundry, UMC is the most popular. In mid-to-late May, eight customers won UMC's production capacity for the next six years. UMC will work together with the eight customers to expand the production capacity of the Fab 12A P6 plant in Nanke through a new win-win cooperation model. These eight customers include IC design giants MediaTek, Novatek, Realtek, Himax, E-Lion, Phison, etc., and foreign customers are Samsung and Qualcomm. However, according to foreign media citing industry chain insiders, NXP Semiconductors has also reached a six-year chip foundry agreement with UMC, but whether the news is true remains to be verified.
According to the supply chain, the investment plan of the Nanke P6 plant is expected to increase the production capacity by 27,000 pieces per month. Based on the current eight customers, each is allocated about 3,000 to 4,000 pieces of production capacity. It remains to be seen how much it can bring to customers. The industry estimates that the production capacity guarantee provided by each chip factory should be around 50 to 60 million US dollars. In the future, these customers who have a new cooperation model with UMC will not only have more sufficient production capacity, but also gain price and profit advantages with more stable foundry prices.
Sony is also interested in cooperating with TSMC. According to the Nikkan Kogyo Shimbun, under the leadership of the Ministry of Economy, Trade and Industry of Japan, Sony and TSMC may jointly build a semiconductor factory in Kumamoto Prefecture, Japan. The Ministry of Economy, Trade and Industry will coordinate and make adjustments with related parties. It is estimated that the total investment will be more than 1 trillion yen, centered on the early stage of the project. The factory will also become the first factory in Japan with a level below 40 nanometers (nm).
Beyond that, Cisco said it has put funds in escrow to reserve capacity with an unidentified contract chip maker.
Let's talk about the agreement between Fabless and wafer fabs. What it means is that wafer fabs need to allocate their contracted production capacity to chip companies, and in turn, regardless of whether these chip companies use this production capacity or not, they need to pay for these wafers.
However, whether these Fabless and wafer foundries have agreements to guarantee production capacity or invest in building factories, it does not mean absolute exclusivity, such as AMD. For a long time, GlobalFoundries has been the exclusive chip foundry for AMD's 12nm and larger node manufacturing. However, in May 2021, AMD revised its wafer supply agreement with the US wafer factory GlobalFoundries. Under the terms of the revised Seventh Amendment, AMD will fulfill its existing commitment to use GlobalFoundries until 2024. The agreement also releases AMD from all further exclusive commitments to GlobalFoundries. AMD is now free to use any wafer fab at any process node it wants.
Tight coupling with material factories
In the field of materials, the binding is most intense, especially with silicon carbide materials.
As early as the early stage of the development of silicon carbide, foreign giants such as Infineon and ST have tied up with Cree, a US silicon carbide wafer manufacturer. In February 2018, Cree announced that it had signed a long-term agreement with Infineon, and Cree will supply 150 mm SiC silicon carbide wafers to Infineon; in January 2019, Cree announced that it had signed a multi-year agreement with STMicroelectronics to supply STMicroelectronics with advanced 150 mm silicon carbide bare wafers and epitaxial wafers worth US$250 million; in August 2019, Cree announced that it had signed a multi-year agreement with ON Semiconductor to produce and supply Wolfspeed silicon carbide (SiC) wafers to ON Semiconductor.
In January 2020, ROHM and STMicroelectronics announced a multi-year silicon carbide (SiC) wafer supply agreement with SiCrystal, under which SiCrystal will supply more than $120 million of advanced 150 mm silicon carbide wafers to STMicroelectronics.
On March 17, 2020, GTAT and ON Semiconductor announced the execution of a five-year agreement under which GTAT will produce and supply its CrystX™ silicon carbide (SiC) materials to ON Semiconductor. ON Semiconductor will use GTAT's proprietary 150mm SiC wafers to manufacture its SiC wafers to further accelerate its role as a vertically integrated supplier of the SiC supply chain and maintain its world-class supply. It is critical for them to have high quality and be vertically integrated into the supply chain and have full control over their materials.
Downstream car companies also come to tie up chip manufacturers
With the gradual popularization of new energy vehicles, SiC has become a hot commodity sought after by major car manufacturers due to its excellent properties. However, due to the fact that the production bottleneck of SiC has not been solved, the quality of raw material crystal columns is unstable, there are yield problems, and the cost of SiC devices is too high, the overall SiC market cannot be popularized on a large scale, and SiC still faces a huge production capacity gap.
Data shows that the current global annual production capacity of SiC silicon wafers is about 400,000 to 600,000 pieces. According to a report by "GaN World", if all the SiC that can be used in Tesla is used, then on average two Tesla electric vehicles will require a 6-inch SiC wafer. According to Wedbush Securities analyst Dan Ives, if Tesla's delivery volume may reach 1 million vehicles by 2022, then Tesla alone will consume the total global production of SiC silicon wafers.
In addition to the continued conventional demand, a series of emerging applications derived from the layout of 5G and Wi-Fi 6 will also continue to increase the demand for related SiC components, and there is basically no suspense about the imbalance between supply and demand in the supply chain.
Under such circumstances, many car manufacturers have begun to bind SiC production capacity with SiC original manufacturers.
Cree
, a leading
SiC
company
, said that the automotive business accounts for about half of the company's production line capacity.
At the end of June, Renault Group and STMicroelectronics announced that the two parties have reached a strategic cooperation. STMicroelectronics will ensure that Renault's wide bandgap (third-generation semiconductor) device production needs are met from 2026 to 2030. At the same time, the two parties will also cooperate to develop efficient and appropriately sized SiC (silicon carbide) and GaN (gallium nitride) technologies and products to improve the power performance of electric and hybrid vehicles.
Renault's CEO said that this cooperation has three important meanings: first, it ensures the supply of key components in the future; second, it jointly develops wide bandgap technology, which will help further improve vehicle battery life and charging performance; third, it will help reduce the cost of electric powertrains by 30%, thereby creating lower-cost electric vehicles that are popular with consumers.
In March of this year, Vitesco, a subsidiary of Continental AG, won an order for new high-voltage components worth hundreds of millions of euros. Vitesco Technologies will mass-produce 800-volt silicon carbide inverters for Hyundai Motor Group's new electric vehicle platform for the first time. Vitesco Technologies uses semiconductors made of silicon carbide in 800-volt inverters, which greatly improves efficiency. This technology is the only way to achieve optimal efficiency while fully realizing the potential of the 800-volt high-voltage architecture. As early as June 5, 2020, Vitesco Technologies announced that it had selected Rohm as its preferred supplier of SiC technology and signed a development cooperation agreement on power electronics technology in the field of electric vehicles (effective from June 2020).
On April 21 this year, JAC Motors also signed a strategic agreement with Bosch on silicon carbide inverters and other aspects, and carried out exchanges and cooperation in all aspects of 400V and 800V electric drive systems, silicon carbide inverters and electric drive bridges.
Earlier in 2019, Volkswagen Group and Cree established a close tier one cooperation to provide SiC silicon carbide-based solutions for future Volkswagen Group vehicles through power module supply. The cooperation was officially concluded and announced on May 10, 2019.
At present, as more and more new energy vehicle companies are rapidly introducing silicon carbide technology, it is highly likely that car manufacturers will bind themselves
to large
SiC
production capacity companies.
Chip design service "binding or not binding"
Looking at the chip design service industry, the earliest chip design service companies were mostly tied to a wafer fab. Typical representatives include TSMC's stake in GUC, Faraday-tech, which was spun off from UMC, and Brite Semiconductor, which relies on SMIC. These companies often have inextricable ties with the wafer fabs they are tied to, either through direct or indirect investment, or the continuation of historical relationships. This is also a common way for early design service companies to develop.
There are also advantages and disadvantages to being tied to a foundry. The advantage is that such companies are highly competitive in the services of related foundries, both commercially and technically; but it also limits the possibility of such companies providing services based on other foundry processes. This problem is not obvious at advanced process nodes, especially below FinFET processes; but for mature process nodes above 28nm, such companies can only become suppliers to customers but not partners of customers. The reason is that customers have the need to optimize design choices and do not want to be tied to one foundry, but to compare multiple foundries to select the best solution.
There are also many IC design companies in the market that focus on chip product design and provide design services as a supplement. They are not tied to wafer fabs, such as Broadcom, MediaTek, Marvell, etc. Due to their scale and product IP concerns, these companies generally only serve a small number of specific large customers.
As the design service model is increasingly accepted by the market, more design service companies are not tied to wafer fabs, such as Socionext, VeriSilicon, and Moore's Law.
According to VeriSilicon's official website, VeriSilicon adheres to the principle of wafer fab neutrality and cooperates with many wafer fabs around the world. Based on VeriSilicon's own rich IP reserves and extensive third-party IP partnerships, it provides customers with the most suitable and effective solutions.
Moore Elite, which has risen in recent years, has also chosen a strategy of not binding wafer factories in the field of design services. It connects with dozens of mainstream wafer factories in a one-stop manner to provide customers with
matching solutions that balance risk, cost and quality.
If the market changes or there is a requirement for product process upgrades, it can provide smooth services when it is necessary to switch across foundries
.
It seems that in the field of chip design services, close cooperation with wafer fabs is indispensable, and whether to be "bound" depends on the historical timing, development stage and business strategy.
Summarize
Whether it is Fabless binding itself with wafer foundries for production capacity and signing agreements with upstream wafer materials, or vehicle manufacturers signing multi-year orders with chip manufacturers, or the evolution of chip design services from binding to close cooperation, all of these reflect that this strongly coupled customized cooperation relationship between semiconductor companies and between upstream and downstream of the supply chain has become a trend, and this may gradually become a business model for the semiconductor industry in the future.
Whether this model has advantages and disadvantages for the industry still needs time and market evaluation. If everyone binds, then there is no difference between binding and not binding; if some bind and some do not, then small startups do not have the strength to compete with "big companies" in some specific fields.
But we should also be clear that the number of " big trees
"
that can truly be bound
is always limited. Binding and non-binding are both options under special circumstances. For the vast majority of chip manufacturers, the best way is to strive to build the core competitiveness of their own products.
*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.
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