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Samsung, Taiwan Semiconductor Manufacturing Co. (TSMC), Micron, SK Hynix, and Kioxia/Western Digital (WD) increased their share of the world’s silicon wafer capacity to a total of 57% by the end of 2021, according to market watcher Knometa Research. That share increased by 1% from 2020 as the industry becomes more top heavy, Knometa said in a report.
“The consolidation of IC manufacturers has contributed to annual volume changes in capacity being less dramatic,” said Knometa founder Trevor Yancey. “The reduction in the number of manufacturers has led to better overall regulation of supply vs. demand. Overcapacity conditions used to be more common and pronounced when there were many manufacturers vying for more market share.”
Consolidation benefits the companies at the top but increases risks for their suppliers, according to Knometa.
“Equipment and materials suppliers probably carry the most potential risk because of the reduction in their customer base,” Yancey said. “Fewer customers mean these companies stand to lose some leverage when it comes to pricing. And, there is the business sustainability risk associated with having to rely on a very small number of customers or maybe even one customer.”
A decade ago, the top five chipmakers accounted for about 40% of production capacity.
Top five global IC wafer capacity leaders (Source: Knometa Research) (Click image to enlarge)
In 2021, Samsung widened its lead as the industry’s largest source of fab capacity. By the end of 2021, Samsung held 19% of total global IC wafer capacity and 44% more capacity than TSMC. Samsung boosted its capital spending 45% in 2020, with a significant increase in available capacity in 2021, according to Knometa. South Korea’s largest company spent most of its capacity expansion budget on multiple 300mm fab lines at its site in Pyeongtaek.
Using the company’s 2017 capacity as a base, Samsung’s output is expected to triple by 2026. Current capacity projects include a new $17 billion fab under construction in Taylor, Texas, that will support the company’s strong push to expand foundry services for leading–edge processes in competition with TSMC.
Strong demand has spurred TSMC to start a huge increase in capacity over the next few years. Most of TSMC’s recent expansion is located at its Fab 18 site in Tainan, Taiwan.
Chip shortages have also driven TSMC to boost output at mature technology nodes, especially 28nm, Knometa said. To meet demand, the company is expanding its Fab 16 facility in China to double the capacity there by mid–2023.
TSMC is currently planning three “greenfield” sites around the globe. The first phase includes construction of a large fab site (Fab 21) in Phoenix, Arizona, which will start production of 300mm wafers in 2024. The $12 billion Fab 21 phase 1 plant will make chips with 5nm technology. In Kumamoto, Japan, TSMC partnered with Sony to build a $7 billion 300mm fab that will open in 2024. In November 2021, the company announced the selection of Kaohsiung, Taiwan, as the site for another fab complex.
Micron has held back on capital spending to focus on upgrading existing capacity for more advanced processing capabilities. Nevertheless, the company made some additional capacity available in 2021 in the form of phase 4 at Fab 15, phase 2 at Fab 16, and an expansion of its legacy products fab in Virginia.
Micron plans to achieve bit supply growth with node transitions through the middle of the decade. The company is focused on new technologies and equipment that will enable it to increase chip production volumes via die shrinks for DRAM and continued 3D scaling for 3D NAND.
As a result, the company will not undertake any major fab expansions in the next couple years, Knometa said. The next big fab project for Micron, announced in October 2021, is the construction of a new 300mm fab at its site in Hiroshima. This fab will open for production in 2024.
SK Hynix boosted its capital spending substantially in 2018 to build new fabs in South Korea and China, but scaled back expenditures in 2019 and 2020, according to Knometa. Fab M15 in Cheongju, South Korea, and Fab C2F in Wuxi, China, started operations in 2019 but ramping of capacity and production at the fabs has been gradual. The company lifted its capex significantly in 2021, and that should translate to a larger increase in capacity for 2022, according to Knometa.
Construction of SK Hynix’s newest fab, M16 in Icheon, South Korea, was finished in early 2021 and the company began operations in the fourth quarter of the year.
In December 2021, SK Hynix took ownership of Intel’s Fab 68 facility in Dalian, China. However, the fab is still used by Intel to fabricate 3D NAND chips, so its capacity at the end of 2021 was not included as part of SK Hynix. The acquisition of Intel’s NAND and SSD businesses by SK Hynix is a multiple–stage transaction over several years and stipulates that Intel can use the fab for wafer fabrication until March 2025, when SK Hynix will complete the purchase.
Capacity jointly owned by Kioxia and WD increased at the lowest rate among the top five companies in 2021. The partners are increasing 3D NAND die production volumes more by 3D scaling advancements than by increasing capacity.
WD is meeting nearly all its product supply needs by converting to new technologies. For 3D NAND, that means increasing NAND layer counts to achieve a greater amount of memory storage per unit area.
Kioxia and WD have a new fab at their site in Yokkaichi, Japan, scheduled to begin operations in early 2023. Like other fabs at the site, the Y7 fab will be built in two phases. In April 2022, the partners started building a second fab at their site in Kitakami. The existing K1 fab started production in 2020 and the new K2 fab is expected to start up in 2024.