Vanguard and NXP have announced plans to establish a joint venture in Singapore, reflecting a larger trend of Taiwanese companies expanding overseas to enhance their regional capacity flexibility and competitiveness in response to geopolitical and pandemic-related risks.
- Increased capacity utilization rate for Vanguard's Singapore Fab 3E plant
- Growing demand for Vanguard's capacity, indicating potential support for the new plant's capacity
- Proactive approach towards overseas expansion to enhance capacity flexibility and competitiveness
Vanguard and NXP recently made an exciting announcement, revealing their plans to establish a joint venture called VisionPower Semiconductor Manufacturing Company (VSMC) in Singapore. This move is seen as part of a larger trend in the global supply chain, with companies in Taiwan looking to expand overseas to enhance their regional capacity flexibility and competitiveness.
According to TrendForce, the semiconductor supply chain has been diversifying over the past couple of years in order to mitigate geopolitical and pandemic-related risks. This has resulted in the formation of two major segments: China’s domestic supply chain and a non-China supply chain. Recent tariff increases imposed by the US have further accelerated this shift, leading to an increase in orders from American customers. As a result, Vanguard’s capacity utilization rate is expected to exceed initial expectations, reaching approximately 75% in the second half of this year.
The growing demand for Vanguard’s capacity is not limited to their existing Singapore Fab 3E plant. Inquiries for capacity at the plant have significantly increased, indicating potential support for the new plant’s capacity from customer demand and order transfers.
Currently, Vanguard operates four 8-inch wafer plants in Taiwan and one in Singapore. However, with no significant increase in global 8-inch capacity due to equipment obsolescence and customers transitioning to 12-inch plants, Vanguard is facing intensified competition from cost-effective 12-inch wafer plants in China. This shift has led to a reduction in long-term demand visibility in the 8-inch market, prompting Vanguard to enter the 12-inch Foundry market. Additionally, geopolitical tensions have increased non-China customers’ demand for production sites outside of China, further driving the need for Vanguard’s new Singapore plant.
Geopolitical risks have become a significant concern for foundries, and they recognize that these risks cannot be mitigated in the short term. As a result, there is a growing trend towards supply chain diversification. Customers are adjusting their foundry partnerships and production strategies to prepare for different scenarios, including “China for China” and non-China options. Taiwanese foundries, including TSMC, UMC, PSMC, and Vanguard, are taking a proactive approach to overseas expansion to enhance their capacity flexibility and competitiveness.
TrendForce predicts that the overseas capacity share of Taiwanese foundries will experience significant growth between 2024 and 2027. TSMC’s capacity growth will primarily come from its US Fab 21, Japan’s JASM, and German facilities. UMC will cater to both “China for China” and non-China demands by expanding its capacities at Fab 12X in Xiamen, China, and Fab 12i in Singapore. PSMC plans to increase its presence in Japan through its new JSMC plant and is also considering a facility in India. Meanwhile, VIS expects its new 12-inch plant in Singapore to significantly raise the country’s share of the semiconductor market.
Geopolitical tensions are driving medium- to long-term demand for non-China production sites from customers in Europe, the US, Japan, and South Korea. At the same time, China’s domestic production system is competing with international supply chains, leading to a clear bifurcation between the two segments. Taiwanese companies are strategically establishing overseas plants to establish trade and technology barriers in this evolving landscape.
However, it’s worth noting that while TSMC is focusing on advanced processes at Fab 21, its JASM and Dresden plants are expanding their capacities for mature processes like 28/16nm. Similarly, UMC, PSMC, and VIS are primarily expanding their overseas facilities for mature processes above 28nm. This has raised concerns about a potential oversupply of mature process capacity globally, especially considering the additional costs associated with overseas plant construction and global inflation. The pricing strategies and cost management of these foundries will be crucial factors to monitor in the future.
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Background Information
About NXP: NXP Semiconductors is a global leader in secure connectivity solutions for embedded applications, empowering the world's most innovative companies to create new ways to connect, secure, and power the world. With a rich heritage of technological expertise spanning over six decades, NXP continues to drive innovation in automotive, industrial, IoT, mobile, and communication infrastructure markets. Their commitment to delivering secure, reliable, and efficient solutions has established them as a trusted partner for businesses worldwide.
About TSMC: TSMC, or Taiwan Semiconductor Manufacturing Company, is a semiconductor foundry based in Taiwan. Established in 1987, TSMC is a important player in the global semiconductor industry, specializing in the manufacturing of semiconductor wafers for a wide range of clients, including technology companies and chip designers. The company is known for its semiconductor fabrication processes and plays a critical role in advancing semiconductor technology worldwide.
About UMC: United Microelectronics Corporation (UMC) is a important semiconductor foundry company founded in 1980 by Robert Tsao and others. Headquartered in Hsinchu, Taiwan, UMC has become one of the world's leading semiconductor manufacturing companies, specializing in the production of integrated circuits (ICs) for a diverse range of applications, including consumer electronics, telecommunications, and automotive industries. UMC operates several advanced manufacturing facilities across Taiwan, mainland China, Singapore, and Japan.
Technology Explained
Foundry: A foundry is a dedicated manufacturing facility focused on producing semiconductor components like integrated circuits (ICs) for external clients. These foundries are pivotal in the semiconductor industry, providing diverse manufacturing processes and technologies to create chips based on designs from fabless semiconductor firms or other customers. This setup empowers companies to concentrate on innovative design without needing substantial investments in manufacturing infrastructure. Some well-known foundries include TSMC (Taiwan Semiconductor Manufacturing Company), Samsung Foundry, GlobalFoundries, and UMC (United Microelectronics Corporation).
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