Article discussing the state of play on chip sizes.
One view & counter view on supply / demand scenarios esp in the 28nm.
Put your nodes to the grindstone
www.theregister.com
Dear chip designers, if you're struggling to get components made, try 28nm. Supply set to overtake demand
Put your nodes to the grindstone
Agam Shah Fri 4 Feb 2022 // 13:19 UTC
ANALYSIS Amid the semiconductor crunch, there's an interesting cliff forming at 28nm.
While demand for other process nodes exceeds supply, the tech world's need for that mid-level node may drop below available manufacturing capacity, if not already.
Early indications of a potential oversupply at 28nm emerged during an earnings call with UMC, a top contract microchip manufacturer headquartered in Taiwan.
"On the supply side, based on the announced capacity expansion plan, we do see the oversupply situation at 28nm to happen beyond 2023, not before 2023," Jason Wong, president of UMC,
told analysts on the call.
Fabs, such as those owned by UMC, TSMC, and Intel, generally can't churn out chips fast enough to satisfy demand. Microchip makers are adjusting manufacturing capacity accordingly and bringing fresh factories online, raising the possibility of chips flooding the market, with supply eventually matching or outstripping demand.
Analyst firms believe chip shortages will end sometime in 2023, and IDC has
predicted an oversupply scenario emerging.
This oversupply issue may in particular hit the 28nm node, which is used by UMC to make microcontrollers as well as integrated circuits for wireless communications, sensors, and mixed-signal applications. UMC also makes chips on a 22nm node.
Financial analysts on a TSMC earnings call last month probed the biz about 28nm oversupply, which plagued the Taiwanese giant in previous years. There is a concern that TSMC and its peers could end up with a glut in capacity after competing to establish multiple rival plants.
TSMC built the world's first 28nm fab in 2011, and last year invested in a new 22/28nm factory in Japan, and is expanding capacity in Nanjing, China. Rival chip manufacturers are also increasing their 28nm capacity; SMIC last year started building a 28nm fab that will begin operation in 2022.
On his call with analysts, TSMC CEO C. C. Wei admitted that 28nm was problematic before the pandemic: his fab lines for that node had a utilization rate just a little bit above 80 per cent in 2018 and 2019. He said he hopes a repeat of this situation can be avoided as chip supplies normalize.
NAND flash controller house Silicon Motion Technology last week said its supplier TSMC was short on capacity at many nodes, though not for 28nm.
And if Silicon Motion can't get enough dies on non-28nm, it'll rethink how it can use 28nm to get product out the door, it said.
"We are in severe shortage in certain technology nodes, including 55nm and all advanced technology nodes, 16nm, and 12nm. However, I think we are comfortable in 28nm wafer supply," said Wallace Kou, CEO of Silicon Motion Technology, on an earnings call.
"If we cannot get any additional wafer supply from TSMC, it all depends on how we can fully utilize 28nm with a better product mix."
The demand for microchips is expected to
generate $680.6bn in revenue for semiconductor companies in 2022, trending to a trillion dollars in the future with the electrification of cars and companies stuffing more electronics into products.
The age-old pattern
Chip companies, particularly memory makers, have dealt with volatility for decades, and it is considered part of the semiconductor demand and supply dynamics.
The boom and bust cycle for chip makers are exacerbated by macro events, such as economic crises, natural calamities, and over-or-under investments. Historically, the semiconductor market has crashed after events such as the 2007-2008 financial crisis, which halted IT purchasing, drying up demand for chips.
But the COVID-19 pandemic worked in the favor of chip makers. The demand for chips skyrocketed as people worked and learned at home, leading to PC upgrades and cloud players buying in equipment to power remote collaboration and communication. This collided with semiconductor content increasing in electric vehicles, and already high demand for smartphones, laptops, custom silicon, and servers.
Chip companies have cashed in with record revenues, and committed billions to expand manufacturing via facility upgrades or new factories. Most investments are in state-of-the-art nodes for compute-intensive parts such as graphics accelerators and smartphone system-on-chips, and older nodes for cost-optimized chips, from microcontrollers to integrated analog circuits.
'Precarious'
The 28nm node may be snubbed or skipped by fab customers in favor of other nodes that offer more performance or are more cost-effective, which could create an oversupply scenario, said Akshara Bassi, an analyst at Counterpoint Research. "So 28nm could be stuck in that precarious transition cycle, where some products are moving to more-advanced-than-28nm faster than expected," Bassi said.
Certain products, such as memory controllers and I/O dies, could also be in a transition phase from lagging nodes to a "little more advanced matured nodes for better cost savings and to meet environmental, social and governance commitments from OEMs," Bassi added.
Microcontroller chips and other embedded parts are advancing to the 14nm node, STMicroelectronics CEO Jean-Marc Chery said in an
earnings call last week. He signaled that 28nm is standing at an uncomfortable cut-off point for foundries investing billions in factories.
For chip designers, advancing from 28nm to a node like 22nm is a reasonable jump that, for one thing, opens up the possibility of obtaining more dies from fabs and thus increasing profitability, said Brian Matas, vice president of market research at IC Insights, a semiconductor number-crunching firm.
By shrinking a design to a 22nm node, one ought to get more dies on a wafers and ship more finished components, for example.
"You're able to reduce the prices and pass that on to some of your customers, and at the same time, you're still making more money off that smaller process node," Matas said.
UMC and TSMC acknowledged that a correction will be coming as chip momentum slows down, and that the negative impact on 28nm will be a temporary minor blip, while applications emerge to make the process relevant again.
"We do observe that our long-term structural demand at 28nm was to be well supported by multiple specialty technologies such as CMOS image sensor for multi-camera trend and better nonvolatile memory application and other specialty technologies," TSMC's Wei said. "The enrichment in the silicon content in many end devices that develop in recent years helped to support this demand."
UMC's Wong said oversupply on 28nm in 2023 will be mild for his firm, and that ultimately the node will emerge in the future as a sweet spot for many applications. "Then expect the demand will continue to migrate to 28nm and that 28nm demand will continue to grow," he argued. ®
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