The announcements last week by ARM Holdings PLC and STATS ChipPac Ltd that they planned to increase investment in Taiwan showed the wafer manufacturing process is growing ever more integrated with its upstream design, and downstream packaging and testing sectors, Primasia Investment Consultancy Co said on Friday.
However, the latest development also reflects a growing domestic ecosystem support for Taiwanese foundries, such as Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電), in the face of rising competition from both existing and new players, Primasia said in a note.
Currently, TSMC and UMC are the major “pure-play” foundries with more than a 60 percent global market share, according to IC Insights data, but the two Taiwanese players are facing growing competition from Abu Dhabi-funded GlobalFoundries Inc, which has a market share of about 12 percent, and from other new players, such as South Korea’s Samsung Electronics Co, Intel Corp of the US and Powerchip Technology Corp (力晶科技) of Taiwan.
On Thursday, UK chip designer ARM announced the opening of a design center in Hsinchu to support its advanced processors, graphics and intellectual patents. The move is also aimed at better facilitating the company’s coordination with the major Taiwanese foundries in the wafer production process.
On the same day, Singaporean chip-testing and packaging giant STATS ChipPac Ltd said it had completed the expansion of wafer bump and wafer level chip scale packaging (WLCSP) facilities in Hsinchu County, allowing it to provide gold bumping and associated leading-edge packaging services for 12-inch wafers.
Analysts at Primasia said ARM’s new design center would enable clients to utilize the leading-edge wafer processes offered by TSMC and UMC more quickly and effectively, while the new STATS ChipPac facilities at its Taiwanese subsidiary, STATS ChipPac Taiwan Co (台星科), reflected solid progress in the nation’s foundry ecosystem.
“We believe that these factors will all tend to benefit the continued dominance of the Taiwanese foundries [TSMC and UMC],” against growing competition from GlobalFoundries and Samsung, Primasia said. “However, the new presence by STATS ChipPac does represent an incremental step up in the competitive pressure on local leaders ASE and SPIL.”
Advanced Semiconductor Engineering Inc (ASE, 日月光) is the world’s top chip-packaging and testing firm, while Siliconware Precision Industries Co Ltd (SPIL, 矽品) is the second largest in the field.
Meanwhile, Barron’s praised TSMC for higher margins than its closest peers’ in a report to be issued today, citing the Taiwanese foundry’s “better cost control and higher capacity utilization.”
TSMC is also expanding its margins because of the company’s “exposure to fast-growing segments, such as mobile computing and communications,” despite the current industry downturn impacted by the weakening global economy and supply-chain disruptions due to the floods in Thailand,” Barron’s said in its report.
TSMC told an investors’ conference last month that its gross margin would improve to between 43.5 percent and 45.5 percent this quarter from 42 percent last quarter.
The company’s shares, which closed at NT$74.2 on Friday, have risen 4.51 percent so far this year, according to the Taiwan Stock Exchange data. UMC shares, which closed at NT$12.6 on Friday, have dropped 22.7 percent since the beginning of the year.
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