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    Semi Shortage, China fab holdup, Etch Market

      Jun 23, 2021

    VLSIinsiders’ cloudside chat — June 23, 2021

    This week Andrea Lati, Dan Hutcheson, and Risto Puhakka discuss what insiders are saying about …

    • The Status of the Semiconductor Shortage.
      • China: What’s up with the 28nm chip fab cancelation?
      • Where’s Auto?
        • Are dealer car lots filling up?
    • Etch Equipment Market.
      • How big is it?
      • Who’s buying what?

    About VLSIinsiders: Every week our analysts have a cloudside* chat to discuss current events and key issues of concern, while sharing what they’ve heard over the past week from the semiconductor industry insiders.

    * cloudside chat: A fireside chat without the fire and is across the clouds of the internet

     

    Other VLSIinsiders

    Transcript

    VLSIinsiders’ Cloudside Chat — June 23, 2021

    DAN HUTCHESON: So, welcome to this week's VLSIinsiders. This is Dan Hutcheson.

    ANDREA LATI: This Andrea Lati.

    RISTO PUHAKKA: And this is Risto Puhakka.

    DAN HUTCHESON: It's been a while. We've been super busy, huh guys. (Laughing)

    RISTO PUHAKKA: Yeah, it's a Wednesday, it's been taken. Yes. Very much. So, for a few weeks now.

    DAN HUTCHESON: So, aaah…you know, when you look at what's been going on out there, what's, how is the status of the shortage? How is the markets? Are they still booming? Do you see any signs of an end? You know, we got some people saying it's gonna go on forever into the end of the decade. And we got other people worried about next year, Andrea? Anything? Any thoughts?

    ANDREA LATI: Well, we just actually released our monthly updates a couple of days ago. And just to give you some pointers, the equipment industry is still growing at about 32%. We did up our semiconductor forecast to about 21% from 20. So slight increase, so things are going very well there. And we also did increase the units a little bit from 16% to 17% roughly. So again, things are going very well. We are seeing more, you know, capacity coming online at this point. So, I do think that, you know, the momentum has shifted in terms of overall conditions, you know, we're going from that, you know, severe shortages that we saw in some areas to a little bit, you know, of more easiness. I mean, prices are still going higher, but it's just the rate has been actually slowing down. So, I do see a shift in momentum at this point. And of course, this higher prices do change the dynamics, right, because it will be back demand. And I think that, you know, by the years end, things will be a little bit more in balanced because you know, we have more capacity coming online, and that should start catching up with demand.

    RISTO PUHAKKA: Yeah…and it’s…

    DAN HUTCHESON: Go on Risto.

    RISTO PUHAKKA: Yeah. It's very natural. I mean, if you think about when the shortage started in, really started to hit in November last year. We are right now that six months, you know, cycle time at the fab, so three to six months, wafers are coming through at the higher rates, and then you add the packaging and pests on that another month or so. We're, basically, the product is hitting the market and this product happens to be very easy to ship. It doesn't need a big boat, it needs airplanes and that's helping a lot. So I think it's just, we just industry reacting and the cycle times are now finally getting there. So…

    DAN HUTCHESON: Yeah, fabs are running flat out. Wafers are, you know, wafers are at high levels in production. And we're seeing high ASPs on the wafers that the value of the silicon and not the at the sale point of view, the wafers themselves, but when the wafers ship off to customers and sell points are rarely found.

    ANDREA LATI: Yeah, and one more thing, Dan, is that this capacity increases going back there, we're seeing that across the board. Now, it's not really the leading etch. I mean, of course, the leading etch takes, you know, the bulk of it. But we're also seeing an increase at the trailing etch, which historically was always sort of left out. So, this year is really across the board. So that, as I said, should help catch up with demand at the end, you know, by the end of the year, I believe.

    DAN HUTCHESON: Yeah, so speaking of that, Risto, you heard a rumor coming out about a fab cancellation in China? What's up with that?

    RISTO PUHAKKA: It's a, it's really a rumor. I have to be, I have to be very clear that started yesterday, writing on my desk, but it basically refers to TSMC cancel the 28 nanometer fab project in China. And now the rumors what's why it's caused? And there's a lot of chattering that in the Chinese side of the internet and, but, and one thing was that it was claimed that there is no export licenses from US which is not, cannot be true, because there is no export license these ports 28 nanometer equipment from US unless if the entity list company and TSMC is not as simple as…

    DAN HUTCHESON: What do you think? Do you think it's Taiwan or the people you're talking to think it might be the Taiwanese government?

    RISTO PUHAKKA: Yeah, the fingers are now starting to point towards that the project doesn't have approval from the Taiwanese government. So, the gloves are off on that between the governments on that. Again, it's not confirmed. But the interesting thing is that you know, the capacity is canceled, at least for now. It may take an extra month or so to show the proof, and all of that, but I haven't been able to get a direct confirmation of that cancellation but definitely an interesting news that's taking place. And one more thing have to be said is, you know, the Chinese are not happy about TSMC getting into China for 28 nanometer and in taking market share. So, there is a glove off on the market share side also. So, it's a pretty interesting dynamic to follow through here in the next couple days.

    DAN HUTCHESON: Yeah, maybe the Chinese are back, are pushing back. They're the ones that are holding down.

    RISTO PUHAKKA: That could be also. Yes, yes. So...so…

    DAN HUTCHESON: With everything heating up so much and so that could be it.

    RISTO PUHAKKA: It also has a sign that there is the desperate capacity crunch is over, you know. If there had been really desperate capacity crunch, that project would have gotten greenlight somewhere.

    DAN HUTCHESON: Yeah, but remember, last year at this time, you couldn't give away 28 nanometers foundry wafers.

    RISTO PUHAKKA: Oh, yeah. Right now, this time, you know, you could wrap them on a few $500 bills to give them away but the reality is, it's still that the trailing edge tool lead times are very long so you to follow up on that a little bit more.

    DAN HUTCHESON: Yeah. What about Auto? You know, what we've been seeing in semiconductor analytics is signs the auto shortage slowly slowing, but it's still in shortage conditions. And, you know, we started last year and the whole thing went from glut, middle of last year, to shortage pretty quickly by the third and fourth quarter. So, you know, you're talking about you're driving up and seeing the car lots.

    RISTO PUHAKKA: Yeah, I was, I missed an exit this morning going to the gym and ended up driving in Fremont through the outer mall, outer road there. And, I was kind of subtly scan through them the lots there while I was driving and you know, the BMWs, Porsches, Mercedes, and Audis the lots were full, and then Toyota lot was half full. So, I, you know, like Andrea made a comment pricing is a great, you know, equalizer in an assorted situation. So, that was kind of interest. But, on the other side, there was product available, and it didn't, you know, look as dire as I thought it would be.

    DAN HUTCHESON: Yeah, I was looking at the Porsche’s Panorama magazine, and Porsche’s sales are way up over last year, they're up like 50% in some categories. So, it's a, it's not as bad. Although, you know, three weeks ago, when I went down to Monterey, a big place in Morgan Hill, the Porsche’s lot was practically empty. It looked like they are going out there, basically, either going out or out their business. So, but certainly, you know, there's plenty of signs in the next month or so it'll be, you know, it'll be over in terms of ICs, if it's not already over. So, hey, one question, too, is you've been working on this etch equipment market? What's going on there?

    RISTO PUHAKKA: Yeah, it's actually. Yeah, I do twice a year report on etch markets, you know, extra demand. And, you know, they've, it's just interesting, just comments, you know, with the 30% growth rate on the WFE etch, it's about $18 billion market this year. So, and it's like up, it's over five years, six years, it's up 4x, four times from what it was, you know, 2016.

    DAN HUTCHESON: Why do people need all those etches?

    RISTO PUHAKKA: I mean, there's a couple things. Well, right now, the basically, the Logic and Foundry needs most of the etchers because of the complex interconnect in you know, the front, you know, the front end of the line is getting also complex. So, and those etches are getting slower. So, they have the same issues as, as memory. Let me just give you a couple of data points here. TSMC is likely to buy close to $4 billion dollars of etchers this year.

    DAN HUTCHESON: Wow.

    RISTO PUHAKKA: Though, and, you know, again, it's up 4x, you know, almost 4x, 16 and that, you know, you start to see Lam, you know, shipping. I mean Lam probably close to 2 billion, 1.5 to 2 billion of dollars’ worth of etchers to TSMC alone.

    DAN HUTCHESON: So, you remember a year or two ago when everybody was saying that the investment analysts were saying that the market is going to follow this guy was going to follow on the etch and deposition companies because of EUV. Well, EUV is here! So, as you see this as some confirmation that EUV is actually driving etch deposition.

    RISTO PUHAKKA: Oh, EUV is the enabler that you go to three nanometers.

    DAN HUTCHESON: Right.

    RISTO PUHAKKA: So, and, you need those very challenging etches on that. I'm saying with the direct EUV is becoming the enabler to go to one alpha, one beta.

    DAN HUTCHESON: So, goes back to what we've always seen said before, like when that the investments were saying that we were saying we didn't see that because, invariably, when one technology moves ahead, it pulls all the other ones with it and extract.

    RISTO PUHAKKA: It does. And if you look at you know for, you know, our customers of the equipment date, if you take you know, like 20-30 years and look at the ratios between the equipment segments, the changes are extremely slow and gradual. That you know, and you know, and it goes into waves, you know. Lithography, there are periods when lithography gains share WFE and then there are times when it loses share. And now of course, yes, because of EUV, it is gaining share, but the change rate of change is like half a percent, maybe 1% per year. And it kind of happened in 2019, when the first EUV were to, you know, took place then but now it basically looks very equal so all both, you know, all the, you know, LITHO action deposition just grows in sync, very close to sync.

    DAN HUTCHESON: Well, great. Thanks a lot, guys. I really appreciate you taking the time to chat with me this morning and do this recording.

    RISTO PUHAKKA: It was fun as well, we need to just stay on the schedule.

    DAN HUTCHESON: Hahaha…yeah...Well, that could be bad because I mean, our business would be going down. (Laughing)

    RISTO PUHAKKA: Hahaha. Yeah...that’s true.

    DAN HUTCHESON: So anyway, hopefully, we'll get together next week and do this again and talk about what's happening.

    RISTO PUHAKKA: That's good. Thanks Dan.

    ANDREA LATI: Ok. Bye Dan.