Recently, the Taiwan media reported that several chip foundries in Taiwan, China, such as Lianneng, Li Electromechanical and other global leading enterprises have reduced their prices to compete in the market. As long as customers are willing to place an order, they can negotiate a price reduction of up to 20%, indicating that China’s expansion of chip production has brought pressure on them.
China’s chip capacity expansion has prompted Samsung to cut prices and seize the market, which may be inevitable for TSMC
Samsung is said to be the first to cut prices. In order to seize the market, Samsung lowered the prices of its 14 nm and 28 nm processes by 10%. Samsung has done this because it has been unable to compete with TSMC in terms of advanced manufacturing processes. In order to seize the market, mature manufacturing processes have to reduce prices https://www.slw-ele.com/
Samsung is the second largest chip foundry in the world, and its initiative to reduce prices has triggered a chain reaction. Taiwan, China United Power, and Mechatronics soon felt pressure and chose to follow up. However, the reports of the Taiwanese media pointed out that the price of these chip foundries located in Taiwan, China, Chinese Mainland, was cut even more, up to 20%, surpassing Samsung.
TSMC, the world’s largest chip foundry, did not follow up after news of price cuts and market grabs from Liandian and Hitachi. TSMC seems to be interested in relying on its advanced technology to make profits, while mature technology is to enhance chips through packaging services such as 3D WOW, ensuring market share with differentiated competitive advantages.
The reason why these chip OEM enterprises cut prices to seize the market may also be the impact of the capacity expansion of chip OEM enterprises in Chinese Mainland. In the past two years, China’s chip expansion momentum has been fierce, constantly seizing the mature manufacturing process market. At the same time, China’s chip design industry is also developing rapidly. Considering the security of chip manufacturing, these chip enterprises prefer chip manufacturing enterprises in Chinese Mainland, which puts pressure on Samsung and Taiwan, two Chinese chip foundry enterprises.
China’s chip capacity expansion has prompted Samsung to cut prices and seize the market, which may be inevitable for TSMC
Since 2019, while China has made efforts in chip design and manufacturing, the United States has stimulated the potential of Chinese chips. China’s chip design industry has broken many gaps and made breakthroughs in memory chips, analog chips, CPU chips, and other aspects. However, these chip companies are trying their best to place orders with chip foundry enterprises in Chinese Mainland. For example, the recently popular Godson3A6000 is produced by a chip foundry in Chinese Mainland, which uses a 12 nanometer process.
China is expanding rapidly in the field of chip manufacturing. In just three years, the chip production capacity of Chinese Mainland has exceeded 1 billion, and the chip production capacity has jumped from the top five to the third in the world. Currently, the largest chip manufacturing company in China is still promoting the construction of four factories to further expand chip production capacity.
The chip industry in Chinese Mainland has made great progress, and overseas chip demand has declined steadily. In 2022, the number of chips imported by China will decrease by 97 billion; Since the second half of 2022, the global chip industry has entered a downward phase again, leading chip enterprises outside Chinese Mainland to reduce chip orders. AMD, NVIDIA, Qualcomm, and others have all reported order reductions, leading to overcapacity among Chinese chip foundry companies such as Samsung and Taiwan.
Samsung is now taking the lead in reducing prices, and Liandian and Li Electromechanical are also following suit. The price war for chip OEM has officially started. Although TSMC has not yet made a statement to follow up, it is also difficult to avoid. In 2022, TSMC’s Q4 capacity utilization rate declined. To reduce electricity costs, TSMC has shut down at least four EUV lithography machines, reducing the capacity utilization rate of the 7nm process to 50%, and the 5nm process to 80%. The capacity utilization rate is also declining in the mature process. In the face of price cuts and market grabs by many competitors, TSMC may not have many options but can only follow up on price cuts.
The expansion of Chinese chip production capacity has prompted Samsung to cut prices and seize the market, which may be inevitable for TSMC.
The decline in chip OEM prices may have limited impact on chip manufacturing enterprises in Chinese Mainland. China is the world’s largest chip purchasing country. In today’s environment, Chinese companies generally give priority to domestic chips, and domestic chip manufacturers will naturally be given priority.
Moreover, the cost of chip manufacturing in Chinese Mainland is lower than that of Samsung and Taiwan, which is the advantage of Chinese manufacturing. Even if Samsung and Taiwan, China’s chip foundries cut prices, they cannot be lower than those in Chinese Mainland. Relevant Chinese institutions have also recently expressed their support for chip manufacturers in Chinese Mainland to continue to expand their production capacity, which is more beneficial to Chinese chip manufacturing.
