Discussion Leading Edge Foundry Node advances (TSMC, Samsung Foundry, Intel)

[Ajay]

Utilization rate for Fab18 for N5 family is expected to fall below 70%. This additional to the drop in the utilization rate for Fab14/Fab15 for N7 family.

TSMC may see 5nm capacity utilization drop below 70% in 2Q23

TSMC's capacity utilization for 5/4nm process nodes, which will fall to about 75% in the first quarter of 2023, may drop below 70% in the second quarter, according to industry sources.

www.digitimes.com

TSMC already cut the planned investment of 44B to 36B.

Well, that pretty much tells us all we need to know. The largest foundry in the world facing this degree of retrenchment means the whole semiconductor supply chain it going to see tough times for a while. Wonder how this will affect ASML given their very high book to bill ratio.

 

[Doug S]

Well, that pretty much tells us all we need to know. The largest foundry in the world facing this degree of retrenchment means the whole semiconductor supply chain it going to see tough times for a while. Wonder how this will affect ASML given their very high book to bill ratio.

Nobody is going to cancel ASML orders they already have in the queue. What it probably means for them is the waiting list will become shorter, but we're years away from it going away.

Also remember these "retrenchments" are from the greatly increased levels of investment during the heady days of 2021 and 2022 when it looked like foundries would be fully booked for years and governments were throwing wads of cash at anyone ready to spend a few billion building a fab in their borders. More regression to the mean, in other words.

 

[BorisTheBlade82]

Well, that pretty much tells us all we need to know. The largest foundry in the world facing this degree of retrenchment means the whole semiconductor supply chain it going to see tough times for a while. Wonder how this will affect ASML given their very high book to bill ratio.

Definitely severely. The fact that they are sitting on a monopoly (although a deserved one) might help them sail through it a bit softer - relatively speaking.
I am sure they have some brutal conditions on order cancellation - including being left out in the cold when the market picks up again.

 

[Ajay]

Nobody is going to cancel ASML orders they already have in the queue. What it probably means for them is the waiting list will become shorter, but we're years away from it going away.

Also remember these "retrenchments" are from the greatly increased levels of investment during the heady days of 2021 and 2022 when it looked like foundries would be fully booked for years and governments were throwing wads of cash at anyone ready to spend a few billion building a fab in their borders. More regression to the mean, in other words.

Yep. Everyone forgets about the cyclical nature of the semiconductor market when times are good. Even companies at the core of that market. One would think they would be better at their forecasts by now.

 

[Exist50]

Utilization rate for Fab18 for N5 family is expected to fall below 70%. This additional to the drop in the utilization rate for Fab14/Fab15 for N7 family.

TSMC may see 5nm capacity utilization drop below 70% in 2Q23

TSMC's capacity utilization for 5/4nm process nodes, which will fall to about 75% in the first quarter of 2023, may drop below 70% in the second quarter, according to industry sources.

www.digitimes.com

TSMC already cut the planned investment of 44B to 36B.

I have to think there's something lost in translation here. An actual 70% utilization would be catastrophic. I'd think it's something like "70% of expected" or "70% of expected growth".

 

[Doug S]

Yep. Everyone forgets about the cyclical nature of the semiconductor market when times are good. Even companies at the core of that market. One would think they would be better at their forecasts by now.

Do they forget, or do they know getting board approval for increasing investments by billions can only happen when times are good? Even if they know they will have to cancel some of that investment when the cycle turns, they've got some projects far enough along it is too late to turn back.

If they invested conservatively during good times, that's no guarantee they would be allowed to continue to invest at similar levels when the company is losing money during a bad downcycle.

 

[BorisTheBlade82]

I have to think there's something lost in translation here. An actual 70% utilization would be catastrophic. I'd think it's something like "70% of expected" or "70% of expected growth".

It is not too far fetched...
Will the TAM of 5nm shrink to 70% of what they were planning for capacity in the crazy market of the last 2-3 years? I mean, seemingly everyone was heavily wrong in predicting this decline.
And if you can get some good government money by building Fabs, you might factor in some under-utilization as well.
Heck, in Germany the industry gets huge amounts of tax money in order to keep their employees paid in such situations - this quite likely being an important factor for Intel and TSMC in their decision making process.

Of course you can lower lead times and a lot of TSMC's customers would be happy to get some orders brought forward. But the sensible thing for most in such a situation is to level out throughput over time instead of going full throttle until the cliff.

 

[Exist50]

It is not too far fetched...
Will the TAM of 5nm shrink to 70% of what they were planning for capacity in the crazy market of the last 2-3 years? I mean, seemingly everyone was heavily wrong in predicting this decline.
And if you can get some good government money by building Fabs, you might factor in some under-utilization as well.
Heck, in Germany the industry gets huge amounts of tax money in order to keep their employees paid in such situations - this quite likely being an important factor for Intel and TSMC in their decision making process.

Of course you can lower lead times and a lot of TSMC's customers would be happy to get some orders brought forward. But the sensible thing for most in such a situation is to level out throughput over time instead of going full throttle until the cliff.

I'm still very skeptical... I could see a significant reduction in short term demand, but translating that to fab utilization is tricky. It's been a while since I've heard the numbers, but iirc ~95% is ideal. 70%, they'd be spending hundreds of millions of dollars, if not billions, on maintaining the fabs without any revenue to match. If that number is even close to realistic, TSMC's margins will crater.

 

[maddie]

Some perfect examples of normalcy bias here.

 

[Doug S]

Some perfect examples of normalcy bias here.

Versus exceptionalism - claims that this time things are different, like gold bugs who scream "fiat money is dead hyperinflation is starting!" every time the stock market drops, the dollar is down, or gas prices surge.

 

[maddie]

Versus exceptionalism - claims that this time things are different, like gold bugs who scream "fiat money is dead hyperinflation is starting!" every time the stock market drops, the dollar is down, or gas prices surge.

Yep, except the broken clock is regularly correct. Don't lump all crazy claims in the same bag as you'll always find someone who claims some outrageous future. By the way, a nice trick to discredit opponents, compare them to a crazy and then say "see".

Let's revisit this by year end, if we even remember , and compare present views.

 

[Ajay]

Do they forget, or do they know getting board approval for increasing investments by billions can only happen when times are good? Even if they know they will have to cancel some of that investment when the cycle turns, they've got some projects far enough along it is too late to turn back.

If they invested conservatively during good times, that's no guarantee they would be allowed to continue to invest at similar levels when the company is losing money during a bad downcycle.

Fair point. Thanks.

 

[Doug S]

Yep, except the broken clock is regularly correct. Don't lump all crazy claims in the same bag as you'll always find someone who claims some outrageous future. By the way, a nice trick to discredit opponents, compare them to a crazy and then say "see".

Let's revisit this by year end, if we even remember , and compare present views.

Feel free to mark Jan 24, 2024 in your calendar and tell me "I told you so" if you're right so long as you will also tell me "I was wrong, I admit it" if you aren't

 

[jpiniero]

Remember that Meteor Lake (and who knows what else made by Intel coming out in 2023/4+) is mostly TSMC, even if the CPU tile is still made internally. TSMC said that they expect business to pick up in the second half.... picking up 'share' might be a part of that.

Now how big of a volume Meteor Lake is of course TBD.

 

[moinmoin]

Not sure this sounds good...

https://twitter.com/i/web/status/1627048334694420482

 

[MadRat]

Price not politics drives the progression. They will just move a bit slower while watching for 'cheaters' that move ahead too fast.

 

[jerrytw]

From the Samsung investor forum, Samsung has said their SF2 process offers a 5% density improvement over SF3 with an 8% performance boost or 16% lower power consumption. And only SF2P has BSPDN. For the SF1.4 process, the area will reduce by more than 30% compared to the SF2 process. Any thought?

 

[Doug S]

From the Samsung investor forum, Samsung has said their SF2 process offers a 5% density improvement over SF3 with an 8% performance boost or 16% lower power consumption. And only SF2P has BSPDN. For the SF1.4 process, the area will reduce by more than 30% compared to the SF2 process. Any thought?

Samsung is good at announcing new nodes and making it sound like they are even with TSMC, but they are terrible at delivering working processes ever since EUV arrived.

 

[Geddagod]

From the Samsung investor forum, Samsung has said their SF2 process offers a 5% density improvement over SF3 with an 8% performance boost or 16% lower power consumption. And only SF2P has BSPDN. For the SF1.4 process, the area will reduce by more than 30% compared to the SF2 process. Any thought?

Samsung's own claims of density or performance are often contradictory when comparing their own nodes. Kinda annoying.

 

[Hitman928]

Intel IFS's president is stepping down. Replacement already announced.

Intel shakes up leadership, announces Pann as new foundry leader (INTC)

Intel (INTC) announced several management changes on Tuesday, including Stuart Pann, who will head up the company's foundry business, replacing Dr. Randhir Thakur. Read on for more.

seekingalpha.com

 

[Markfw]

Intel IFS's president is stepping down. Replacement already announced.

Intel shakes up leadership, announces Pann as new foundry leader (INTC)

Intel (INTC) announced several management changes on Tuesday, including Stuart Pann, who will head up the company's foundry business, replacing Dr. Randhir Thakur. Read on for more.

seekingalpha.com

Also of note: another exit and news:
Additionally on Tuesday, Gelsinger said Raja Koduri, who was leading Intel's (INTC) initiative in graphic chips, would leave the company at the end of the month.

Intel (INTC) shares fell more than 3% in mid-day trading on Tuesday, while Taiwan Semiconductor (TSM) and GlobalFoundries (GFS) both saw modest gains.

 

[nicalandia]

Raja was AMD's unwilling Troyan Horse, he set back Intel GPU Division at least 5 years

 

[Exist50]

Intel IFS's president is stepping down. Replacement already announced.

Intel shakes up leadership, announces Pann as new foundry leader (INTC)

Intel (INTC) announced several management changes on Tuesday, including Stuart Pann, who will head up the company's foundry business, replacing Dr. Randhir Thakur. Read on for more.

seekingalpha.com

They announced he'd be stepping down months ago, hence the ready replacement.

 

[nicalandia]

They announced he'd be stepping down months ago, hence the ready replacement.

But Raja was just "Retired" Right?

 

[Hitman928]

They announced he'd be stepping down months ago, hence the ready replacement.

Guess I missed, or just forgot about it.