China’s SMIC will build GigaFab for $ 8.87 billion: a response to shortages

Because it found itself on the U.S. entity list, SMIC’s blacklist caused problems in the company in developing and implementing the latest manufacturing technologies. As a result, it has been forced to focus on mature nodes, which still have plenty of use in long-life parts for the electronics and automotive industries. On Friday, the company announced plans to build China’s first GigaFab, a 300mm production facility with a planned capacity of about 100,000 wafer launches per month (WSPM). The factory will cost almost 8.87 billion dollars.

Capacity building for mature nodes

The new factory will be located near Shanghai, in the Lingang Free Trade Zone (FTZ), and will be built as a partnership between SMIC and the Shanghai Municipal People’s Government. Fab will process 300 mm tiles using mature manufacturing technologies, such as 28 nm and above. These nodes are commonly used for a variety of chips with a very long life cycle, and are now in short supply. In recent months, various leading computer manufacturers have complained about the lack of inexpensive components such as IR display drivers (DDICs) or Wi-Fi controllers, and these chips are made using 28 nm and larger nodes. Other industries, such as the automotive industry, have been crying out for new stocks – given China’s rather large car market, there is an increased demand for more sources of basic electronic components.

SMIC has not indicated when it expects the new factory to go online, but it is reasonable to expect it to become operational two or three years later. Despite thisthe company also did not increase its CapEx of $ 4.3 billion for 2021 from the number it announced earlier this year, which may indicate that this will be a project in 2022 when it starts.When this happens, SMIC will be able to make a significant contribution to the global supply of semiconductors produced using mature manufacturing processes.

The new factory will be the only Chinese GigaFab for logic semiconductors (there are several for DRAM, which is considered separate). Here we use TSMC’s terminology for ‘GigaFab’, which is a 300 mm factory with productioncapacity of 100,000 or more wafer runs per monthth.

Earlier this year, SMIC began a project to build a 300mm plant near Shenzhen for $ 2.35 billion. This plant will eventually achieve a production capacity of about 40,000 wafer runs per month and use 28 or more production technologies. This smaller plant will sometimes start operating in 2022, as the demand for semiconductor capacities by local companies in China grows.

In an effort to equip both factories, SMIC must inevitably use equipment manufactured by U.S.-based manufacturers such as Applied Materials, Lam Research, KLA and Axcelis. All of them applied for export licenses to supply SMIC because the foundry was on the entity list of the US Department of Commerce earlier this year. Although we don’t know if they are approved, the very fact that SMIC is announcing a factory with unprecedented capacity (for China and SMIC) suggests that it believes it can equip its manufacturing facilities with the right equipment, either from the US or anywhere else.

As always, SMIC will share ownership of the plant with the authorities, in this documenta special case in the Lingang free trade zone with co-investors. SMIC will own a controlling 51% stake, the Shanghai Municipal People’s Government will own less than 25%, and the remaining 24% will be controlled by other investors that SMIC and local authorities will “jointly find”.

Right on time

Mature process technologies, such as 40/45 nm, 55/65 nm and 150/180 nm were the means of SMIC life, so the capacity expansion for processes is based on 300 mm (anything from 28 nm to 45 nm – larger process nodes tend to be on 200 mm boards) makes a lot of sense to the company. Furthermore, the company is investing extra money in 200mm factories that use specialized nodes (90 + nm) to produce chips for mixed signals and RF, MEMS and PMIC applications.

Based on SMIC’s financial report for the second quarter of 2021, demand for its 28 nm technology has fluctuated in recent quarters, while demand for its 14 nm FinFET technology has remained fairly low. It is worth noting that SMIC is not the main 28nm player in China here – TSMC and UMC lead the market. But as more apps move to this node, demand for the chips grows, and SMIC’s 28nm will make up the bulk of revenue, which grows despite the constraints.

The utilization rate of SMIC factories has always been quite high, but rose to 100.4% in the second quarter of 2021, which essentially means that the company had to shorten its expected maintenance time and focus more on production. This is a risky decision, so to avoid such moves in the future, SMIC has to expand its capacity, and with two brand new factories it does so quite aggressively.

SMIC has a 14nm process node with FinFETs, and extends this as well. In the first half of 2020, the capacity of the SMIC with 14 nm was around 4,000 WSPM (based on the company’s data at the time). So far, this capacity has been increased to 15,000 WSPMs, according to a CnTechPost story, which the company itself has not verified.

I’m not alone

SMIC is definitely not alone with its plans to expand production capacity – GlobalFoundries, TSMC and UMC are also funding additional capacity for mature processes. TSMC is investing in its factory near Nanjing, China. GlobalFoundries is expanding its Fab 8 in upstate New York and installing new equipment in its Fab 1 near Dresden, Germany to increase its capacity.

But with such high demand for chips, it is inevitable that foundries will withdraw an incredible amount of money to fund their future development, which is exactly what SMIC is doing.

Related reading

  • SMIC will build a new 28nm plant in Shenzhen: production begins in 2022
  • SMIC describes its N + 1 process technology: 7nm performance in China
  • SMIC begins volume production of 14 nm FinFET chips: China’s first FinFET line
  • SMIC: 14nm FinFET in production risk; The first Chinese FinFET line that will contribute revenue by the end of 2019
  • SMIC will begin 14nm mass production in the first half of 2019

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Naveen Kumar

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