Low-Cost Semiconductor Shortage... Is the Supply Chain at Risk?

TSMC CEO "10-Dollar Semiconductor to Impact $600 Billion Semiconductor Market"
Increasing Demand for Low-Cost Semiconductors Amid 3nm Foundry Industry Competition

Semiconductor image / Source=Pixabay

[Asia Economy Reporter Kim Pyeonghwa] As competition intensifies in the foundry (semiconductor contract manufacturing) market centered on Samsung Electronics and Taiwan's TSMC for 3-nanometer (nm, one billionth of a meter) processes, concerns are being raised that low-cost semiconductors with processes of 28 nm or larger could cause bottlenecks in the semiconductor supply chain focused on ultra-fine processes. While major foundry operators concentrate on high value-added businesses, the increasing demand for low-cost semiconductors may lead to supply shortages.

According to the semiconductor industry on the 14th, Wei Zhaojia, CEO of TSMC, pointed out at the TSMC Annual Technology Forum held in Taiwan on the 30th of last month (local time) that "low-cost semiconductors priced between 50 cents (677 won) and 10 dollars (13,531 won) are slowing down the $600 billion (811.86 trillion won) global semiconductor industry." He also mentioned that the Dutch company ASML, which manufactures extreme ultraviolet (EUV) equipment used in ultra-fine processes, is experiencing difficulties in securing $10 semiconductors included in their equipment.

EUV is a next-generation lithography technology used in the process of engraving circuit patterns on semiconductor wafers. Since semiconductor performance depends on how finely the circuits are drawn, the use of EUV equipment is essential for ultra-fine processes. ASML is the only producer of this EUV equipment, leading to fierce competition among foundry operators to secure the equipment. One of the main reasons Samsung Electronics Vice Chairman Lee Jae-yong visited the Netherlands during his European trip in June was to secure EUV equipment. Although Samsung Electronics and TSMC recently ushered in the 3 nm process era, low-cost semiconductors have become a stumbling block.

Low-cost semiconductors include microcontroller units (MCUs) mainly used in vehicles and power management integrated circuits (PMICs) included in various products such as home appliances and IT devices. These are produced using mature processes of 28 nm or larger and have different production conditions depending on the product, resulting in low profitability. Naturally, foundry operators tend to focus on advanced processes that can generate higher added value rather than legacy processes.

In this situation, demand for low-cost semiconductors is growing. According to IBS, an IT industry consulting firm, mature processes of 28 nm or larger account for about two-thirds of the entire foundry market (2020). IBS forecasts that demand for 28 nm process semiconductors will increase more than threefold to $28.1 billion (29.5 trillion won) by 2030. Although there are recent projections that demand for mature processes is declining due to lower utilization rates of 8-inch and 12-inch foundries producing low-cost semiconductors, experts evaluate that long-term demand will remain solid, with only cyclical fluctuations caused by internal and external market factors. This implies that another case similar to the automotive production disruption caused by MCU supply shortages could occur.

Kim Yangpaeng, a senior researcher at the Korea Institute for Industrial Economics and Trade, said, "Since semiconductors are used for temperature control even in electric rice cookers we use, demand for low-cost semiconductors will inevitably continue, and supply shortages may occur from time to time."

This content was produced with the assistance of AI translation services.