The US' escalation of the chip war with China has prompted more companies to shift their orders to Taiwan-based pure-play foundries. However, contract prices provided by TSMC and other Taiwanese foundries for orders transferred from Chinese counterparts are highly stiff, with many requesting long-term contracts, a specific scale, and even "designation fees," according to industry sources.
Europe- and US-based chip vendors including fabless firms and automotive IDMs have gradually shifted their foundry orders from China to Taiwan over the last year, the sources said. Recently, China-based companies have also begun to diversify their foundry sources in order to spread risk.
Dell, for example, has already informed its chip suppliers that it will no longer use Chinese-made chips, causing the chip partners to progressively transfer orders away from Semiconductor Manufacturing International (SMIC) and TSMC's Nanjing fab, the sources noted. Apple and Hewlett-Packard (HP) are apparently planning to follow suit and have begun investigating the viability of shifting production from China, the sources said. Qualcomm has also reduced wafer starts at SMIC significantly while moving more orders to Taiwan-based foundries.
TSMC, United Microelectronics (UMC), and Vanguard International Semiconductor (VIS) have benefited the most from this round of order transfers, the sources indicated. Powerchip Semiconductor Manufacturing (PSMC) has also captured a portion of the order transfers.
Taiwan-based foundries intend to accept orders transferred from Chinese peers on a conditional basis in order to safeguard their long-term commercial interests, the sources said. The majority of the orders are urgent and unclear, and are intimately related to trade concerns between the US and China.
VIS has gained more order commitments, particularly those for power management ICs from Europe- and US-based vendors including Analog Devices (ADI), Monolithic Power Systems (MPS), and Qualcomm, the sources said. Nevertheless, the specialty IC foundry intends to give priority to long-term contracts.
VIS has also seen a ramp-up in orders from China's fabless chip sector, and may see sales generated from the orders grow as a proportion of total wafer revenue to 10% by the end of this year, according to the sources.
UMC has received orders transferred from Chinese peers by Qualcomm and numerous IDMs, with its fabs in Taiwan, Singapore, and Japan all obtaining a significant rise in orders, the sources noted. TSMC is still the clear favorite in this round of order transfers despite the foundry's price stance, the sources said.