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    Chipmaker says it will ramp up production of older 28nm chips

    Enlarge / A lady watches a masks—an element utilized in wafer conception—at a present room of the 12-inch United Microelectronics Corp (UMC) manufacturing unit in Tainan, southern Taiwan.

    Sam Yeh | Getty

    United Microelectronics Corporation (UMC), the world’s fourth-largest contract chipmaker, is increasing its capability to provide mature know-how chips in trade for monetary ensures, in response to the scarcity gripping the worldwide semiconductor provide chain.

    UMC mentioned it would add capability for manufacturing 20,000 wafers a month at 28 nm, one of the method know-how nodes worst-hit by the worldwide chip scarcity, at an current fabrication plant, or “fab,” in Tainan.

    The funding will drive up the corporate’s capital spending for this 12 months by 53 % to $2.3 billion, however it is made below a deal that commits a number of of UMC’s largest clients to pay deposits upfront and assure sure orders at a hard and fast worth.

    The deal is very uncommon for contract chipmakers. The flexibility to allocate capability to orders from completely different clients has lengthy been a cornerstone of their profitability.

    But that mannequin has come below fireplace as first automakers and now a rising vary of different sectors have been unable to safe sufficient chips from foundries similar to UMC and Taiwan Semiconductor Manufacturing Company (TSMC), the worldwide business chief.

    UMC mentioned the deal was an “revolutionary, win-win” association. “This will strengthen our monetary place to seize the market alternative,” Jason Wang, UMC president, instructed traders.

    TSMC mentioned this month it would make investments $100 billion in new capability over three years. Intel just lately introduced a $20 billion funding program below which it needs to problem TSMC in providing contract chipmaking providers.

    But the worldwide chip scarcity is anticipated to proceed unabatedly. UMC mentioned its capability utilization charge was 100% within the first quarter and would stay there in the meanwhile. The firm expects common promoting costs of its chips to rise 10 % this 12 months in contrast with 2020.

    “There is a supply-demand imbalance in mature nodes,” mentioned Liu Chi-tung, UMC chief monetary officer. “We have seen heaps of capability enlargement in superior nodes, however firms haven’t addressed the mature nodes. There are heaps of crucial parts on these nodes.”

    SK Hynix, the world’s second-largest reminiscence chipmaker, plans to convey ahead some of its deliberate capital expenditure for subsequent 12 months to the second half of this 12 months to fulfill surging chip demand.

    The South Korean firm mentioned on Wednesday that demand was stronger than anticipated and forecast the imbalance in demand and provide to worsen in coming quarters. It expects D-Ram chip provides to stay tight all year long and forecast a sooner than anticipated restoration in demand and costs for Nand reminiscence chips.

    While the UMC deal is geared toward battling the scarcity, it is anticipated to take no less than two years to take form, highlighting the depth of the constraints on the semiconductor provide chain.

    Although the fab devoted for the capability enlargement already exists, mass production is anticipated to start out solely within the second quarter 2023 as a result of key instruments are in brief provide too. “We are working with our suppliers. There is a lead time for tools,” Wang mentioned.

    © 2021 The Financial Times Ltd. All rights reserved Not to be redistributed, copied, or modified in any approach.

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