Chinese mature-node foundries collaborate with the country's domestic IC design firms, including MCU businesses, to provide capacity support and offer competitive pricing, according to industry sources.
Standard business logic cannot be used to interpret China's semiconductor game rules because of the US ban. As China's mature-node fab capacity continues to grow, excess wafer foundry capacity will endure. In addition to engaging in price negotiations for procurement contracts, the Chinese government continues to bolster its support for a small number of local enterprises across a wide range of industries while lavishing wasteful spending, the sources indicated.
MCU specialist Puya Semiconductor, for example, has risen rapidly in recent years and is the most aggressive in price cuts. The Shanghai-based chipmaker has received full capacity assistance from Hua Hong Semiconductor, which is accepting orders while losing money, the sources said.
Puya's dramatic price cuts have put other Taiwanese and international MCU rivals under pressure, particularly those that see China as a major market, the sources noted. Many of them are suffering a great deal during this transition period, compelled to infiltrate areas like Southeast Asia and Europe to counteract the impact of falling sales in China.
Chinese chip ambitions
China remains determined to achieve self-sufficiency in semiconductor manufacturing despite the US attempts to impose greater restrictions, according to industry sources.
In the sub-7nm advanced process segment, the Chinese government fully supports SMIC, Huawei, and other key supply chains, sources said. In the mature node category, China is building over 20 new wafer fabs; at least 10 more fabs are expected to open by 2024, focusing on processes larger than 40nm.
Although the global semiconductor inventory crisis, particularly in China, has improved, terminal demand has yet to rebound significantly. Major semiconductor manufacturers, such as TSMC, are less optimistic about the global economic recovery in the first half of 2024, and the recovery time has been pushed back to the second half of the year, with many factors remaining, including political and economic uncertainties.
There is a prevailing market anticipation that demand will increase during the latter part of this year. However, many industry participants find the consequences of the US export ban against Chinese chipmakers to be entirely unforeseeable. For example, in the wafer foundry industry, overcapacity will worsen due to the Chinese government's strong support for SMIC and Huawei in pushing technology below 7nm and the statewide expansion in production capacity for mature processes measuring 12 inches in diameter.
Furthermore, aggressive pricing and order grabbing by Chinese fabless chipmakers with capacity support from local foundries have driven small Chinese manufacturers out of the market, further reducing large international manufacturers' competitiveness in the mid-to low-end chip market, according to sources familiar with the matter.
Hua Hong supports Puya, allowing the MCU maker to offer pricing as low as US$0.50, as opposed to the standard US$2 price. Puya has snagged business from numerous foreign competitors thanks to its excellent offer, the sources indicated.
Article translated by Jessie Shen
