According to a report by TrendForce, China's share in mature process capacity (processes greater than 28nm) is predicted to reach 29% in 2023 and rise to 33% by 2027. This growth can mainly be attributed to policies and incentives promoting local production and IC development within China. Companies such as SMIC, HuaHong Group, and Nexchip are leading this charge. In contrast, Taiwan's share is expected to consolidate from 49% to 42%.
The expansion in China's mature process capacity is primarily targeting specialty processes like Driver ICs, CIS/ISPs, and Power Discretes. In the Driver IC sector, the focus is on high voltage (HV) specialty processes. Currently, UMC is leading in the production of 40/28nm HV processes, followed by GlobalFoundries. However, SMIC's 28HV and Nexchip's 40HV are expected to begin mass production in the near future, narrowing the technological gap with other foundries. Competitors with similar capabilities like PSMC and those without twelve-inch factories, such as Vanguard and DBHitek, may face challenges due to this trend.
In the CIS/ISP sector, the mainstream processes involve a 3D CIS structure with a logic layer ISP and CIS pixel layer. The logic layer ISP typically operates at around 45/40nm, while the CIS pixel layer, along with FSI/BSI CIS, primarily uses processes of 65/55nm and above. TSMC, UMC, and Samsung are currently leading in this technology, but Chinese players like SMIC and Nexchip are catching up quickly. This progress is fueled by Chinese smartphone giants such as OPPO, Vivo, and Xiaomi. Additionally, Chinese CIS companies like OmniVision, Galaxycore, and SmartSens are benefiting from local production shifts driven by government policies.
In the Power Discretes sector, which includes products like MOSFETs and IGBTs, Vanguard and HHGrace have been involved for some time and have a more comprehensive process platform and vehicle certification compared to many others. However, Chinese contenders supported by national EV and solar initiatives are ready to compete, intensifying global competition in this sector. This includes mainstream foundries like HHGrace, SMIC, Nexchip, and CanSemi, as well as smaller Chinese IDMs and foundries like GTA and CRMicro. If China significantly ramps up its production capacity, it could not only lead to price wars among local businesses but also impact the order books and clientele of Taiwanese companies.
As China actively attracts both global and domestic IC designers to strengthen its local manufacturing presence, the massive expansion in mature processes could potentially flood the global market and trigger a price war. TrendForce suggests that as China's mature process capacities continue to grow, the localization trends for Driver ICs, CIS/ISPs, and Power Discretes will become more pronounced. Second and third-tier foundries with similar capabilities might face risks of losing clients and experiencing pricing pressures. Taiwan's industry leaders known for their specialty processes, such as UMC, PSMC, and Vanguard, will find themselves in the midst of this competition. The upcoming battle will depend on technological expertise and efficient production yields.
