The global foundry market is dominated by TSMC, which captured 69.9% of global foundry revenue in 2025, but beyond the glitz and glamor of the leading edge sit a tier of foundries that collectively manufacture the chips found in cars, power supplies for AI servers, RF front-end modules, display drivers, industrial controllers, and defense systems. GlobalFoundries, UMC, and SMIC posted a combined 2025 revenue of roughly $24 billion and hold approximately 13.5% of the global foundry market between them.

Each is pursuing a fundamentally different strategy shaped by geography, regulation, and technology choices. GlobalFoundries is becoming a U.S. and European specialty foundry, backed by $1.575 billion in CHIPS Act funding and a $3.1 billion Department of Defense contract.

Meanwhile, UMC is bridging from pure mature-node services into 12nm FinFET territory through a manufacturing partnership with Intel, and SMIC is China's de facto national champion, expanding mature-node capacity at enormous scale while pushing the limits of what DUV lithography can achieve under tightening export controls. We break down each of these trailing-edge foundries to see what might be coming up next.

GlobalFoundries

GlobalFoundries (‘GF’) exited leading-edge development in 2018 when it canceled its 7nm program and has since repositioned as a specialty foundry focused on differentiated process platforms. That strategy produced FY2025 revenue of $6.79 billion (up 1% year-over-year), with Q4 gross margin of 27.8% and full-year operating cash flow of $1.73 billion. The company's automotive segment hit a record $1.4 billion, up 17% year-over-year, according to its SEC filing.

Its current node portfolio runs from 12LP FinFET down to 180nm and spans several specialty platforms. The company's flagship is 22FDX, a 22nm fully depleted silicon-on-insulator (FD-SOI) process targeting ultra-low-power IoT, automotive radar, millimeter-wave 5G, and microcontrollers with embedded MRAM support. Meanwhile, 45RFSOI is the dominant global platform for 5G RF front-end modules. Below those sit 28nm, 40nm, and 55nm logic nodes, alongside BCD for power management, SiGe BiCMOS for high-frequency analog, and a ramping GaN-on-silicon platform at its Vermont facility.

Two recent acquisitions, however, have expanded GF beyond pure-play manufacturing. It bought Singapore-based Advanced Micro Foundry last year, making it one of the world's largest silicon photonics foundries, and acquired MIPS (for RISC-V CPU and AI inference IP) along with Synopsys' ARC and RISC-V processor IP portfolio. The company now offers customers pre-built compute IP alongside fabrication, a model no other trailing-edge foundry currently can.

GF operates five manufacturing sites. Fab 8 in Malta, New York, is its most advanced 300mm facility and holds Trusted Foundry Category 1A accreditation from the U.S. Department of Defense. A new fab at the Malta site, funded partly by a $1.587 billion CHIPS Act award, will triple the site's capacity over the next decade as part of a $16 billion, 10-year U.S. investment plan.

Fab 1 in Dresden is Europe's largest semiconductor fab, with a €1.1 billion expansion underway to push output toward 1.5 million wafers per year by the end of 2028. Fab 7 in Singapore opened in September 2023 after a $4 billion build-out, adding 450,000 wafers per year. The two remaining sites are both 200mm facilities in the U.S.: Fab 9 in Burlington, Vermont, which is targeted for the company's first high-volume GaN production line.

The company's 2026 capital expenditure guidance of 15% to 20% of revenue represents a sharp jump from 8% in 2025, driven by what management described as oversubscribed demand in silicon photonics, 22FDX, and SiGe. That investment will compress free cash flow margins in the near term, but GF has said customer prepayments and long-term agreements underpin spending.

Reports surfaced in 2025 of an internal assessment dubbed "Project Ultron" exploring a potential takeover of UMC that would create a mature-node foundry with roughly 28% combined market share. UMC denied active merger talks, and, in any case, the regulatory barriers across Taiwan, China, and the U.S. are more than likely insurmountable.

UMC

UMC reported Q1 2026 revenue of NT$61.04 billion (approximately $1.93 billion), with net income surging 107.9% year-over-year to NT$16.17 billion. Gross margin was 29.2% and capacity utilization stood at 79%, with Q2 guided to the low-80% range and wafer shipments expected to rise by high single-digit percentages.

The 22nm node is UMC's primary growth driver. Revenue from 22nm grew 93% year-over-year in 2025 and now accounts for 14% of total revenue, up from single digits the prior year. Combined, 22nm and 28nm represent 34% to 36% of quarterly wafer revenue.

UMC dominates small-panel display driver IC (DDIC) production at 28nm, holding over 90% market share in that segment, and launched an advanced 22nm embedded high-voltage (eHV) platform in 2024, targeting next-generation smartphone OLED displays. Specialty processes extend across embedded non-volatile memory (eFlash from 350nm to 28nm), RFSOI, RF CMOS, and BCD for analog and power applications down to 55nm.

UMC operates 12 fabs with combined capacity exceeding 400,000 12-inch-equivalent wafers per month. The newest, Fab 12i Phase 3 in Singapore, opened in April last year after a $5 billion investment and will start 22/28nm volume production this year, with an initial capacity of 30,000 wafer starts per month and with space reserved for a second phase.

The most significant item on UMC's roadmap is its 12nm FinFET node, co-developed with Intel and targeted for mass production in 2027 at Intel's fabs in Chandler, Arizona. The process offers 10% higher performance, 20% lower power, and roughly 10% area reduction compared with UMC's existing 14FFC, with three fewer mask layers.

UMC's CFO Chi-Tung Liu confirmed last May that the majority of UMC's R&D spending is now directed at this node. The partnership gives UMC its first U.S. manufacturing footprint and a FinFET node at scale, while Intel gains mature-node foundry volume through what are largely depreciated fabs.

SMIC

SMIC posted record full-year 2025 revenue of $9.33 billion, up 16.2% year-over-year, according to the company's annual results. Full-year utilization averaged 93.5%, a jump of eight percentage points from 2024, and wafer shipments rose 20.9% to roughly 9.7 million 8-inch-equivalent wafers.

Annual capex, meanwhile, ran at over $7 billion, reflecting an aggressive capacity build-out that is compressing margins: full-year gross margin was 21%, and the company guided Q4 2025 gross margin to 18% to 20% as depreciation from new fabs weighed on profitability even at near-full loading.

SMIC's production stack officially spans 350nm to 7nm, but the vast majority of output sits at 28nm and above. 28nm HKMG and PolySiON variants serve smartphones, networking, and DDICs. Nodes from 40nm through 180nm cover analog, power management, RF, image sensors, and microcontrollers.

At the advanced end, SMIC's N+2 process (7nm-class) is in production for Huawei's Kirin 9000S, 9020, and Ascend 910C, with an estimated 20,000 WSPM of capacity. N+3, confirmed on the Huawei Kirin 9030 in December, extends 7nm-class scaling using DUV multi-patterning, though TechInsights characterized it as firmly 7nm/6nm-equivalent in absolute terms rather than a true 5nm node.

Four major new 12-inch fabs are under construction or recently completed, in Shanghai (Lin-Gang), Shenzhen, Beijing, and Tianjin, including an $8.87 billion facility, collectively targeting approximately 340,000 wafer starts per month of new 28nm-and-above capacity.

Export controls from the U.S., the Netherlands, Japan, and Taiwan constrain SMIC's ability to scale its advanced nodes. The company has been on the U.S. Entity List since December 2020, blocking access to ASML EUV scanners and progressively tightening DUV and etch equipment supply.

Taiwan added SMIC and Huawei to its own export-control blacklist in June 2025, requiring permits for high-tech equipment shipments. Although it was reported back in August that SMIC planned to double its 7nm capacity in 2026, the company remains constrained by tooling access: analysts estimate SMIC's advanced-node capacity will remain in the low tens of thousands of wafer starts per month rather than the hundreds of thousands that an unconstrained buildout would target.

SMIC's pricing reflects the competitive pressures in the mature-node segment, with the company having reportedly cut 28nm wafer prices by roughly 40% in early 2025, dropping from approximately $2,500 to $1,500 per wafer, before reversing course with a roughly 10% increase later in the year as utilization exceeded 95%.

Pricing and demand

After two years of price declines driven by Chinese capacity additions, the mature-node segment is reaching a floor. TrendForce reported in March that UMC, VIS, Powerchip, and Nexchip were preparing price increases of up to 10% from April through June this year, with the latter confirming a 10% hike effective from June.

One big factor is tightening supply alongside the cyclical recovery: TSMC has been reallocating 40-90nm production capacity toward CoWoS advanced packaging and silicon interposer fabrication for AI accelerators, reducing the available mature-node wafer supply from the world's largest foundry.

Demand from automotive (GF's automotive revenue alone is on track for $1.5 billion in 2026), power management ICs for AI servers (typically manufactured on 28-55nm BCD processes), DDICs, and embedded flash microcontrollers continues to grow.

Whether these three foundries remain independent is an open question. The Project Ultron reports suggest that at least one party has considered consolidation, and the logic for doing so, at least in terms of economics, grows as margins compress and capex requirements grow.

While SMIC's expansion is state-backed and largely insulated from commercial return calculations, GF is tied to U.S. industrial policy and defense spending, and UMC's future hinges on whether 12nm FinFET with Intel can deliver the revenues that pure mature-node services cannot.

Global semiconductor revenue reached $298.5 billion in the first quarter of 2026, up a whopping 25% from the previous quarter, according to the Semiconductor Industry Association (SIA). The SIA believes that the industry is on track to top $1 trillion in sales this year.

That nearly $300 billion of total revenue accounts for sales of logic, memory, analog, mixed signal and other types of chips. In March 2026, monthly revenue stood at $99.5 billion, which represents a 79.2% increase from $55.5 billion recorded in March 2025 and 11.5% higher from February 2026 levels. These monthly figures are calculated as a rolling three-month average by World Semiconductor Trade Statistics.

The Semiconductor Industry Association represents 99% of semiconductor revenue generated by U.S.-based companies and nearly two-thirds of chip firms headquartered outside the U.S., which means that actual sales of chips by various makers was higher than $300 billion in Q1 2026.

Unfortunately, the actual total revenue of semiconductor makers across the world is hard to estimate accurately, as privately owned companies do not share their financial results with the public.

Some companies are partially integrated and sales of their semiconductors cannot be accurately estimated (e.g, Apple, Bosch, Huawei, Sony, and Tesla). Numerous companies from China tend to fly under the U.S. radar and are therefore reluctant to share sales data with the SIA.

On a regional basis, March 2026 sales compared to the same month a year earlier increased by 108.5% in Asia Pacific, 83.1% in the Americas, 74.8% in China, 46.5% in Europe, and 7.4% in Japan. Sequentially, March sales also grew across all key markets, including 13.3% in Americas, 12.7% in China, 9.8% in APAC, 8.4% in Europe, and 7.1% in Japan.

"Global chip sales remain on track to reach $1 trillion in 2026, with Q1 sales significantly exceeding sales in Q4 2025," said John Neuffer, SIA president and CEO. "Strong sales across the Asia Pacific region, the Americas, and China drove global semiconductor market growth, highlighting broad and robust demand for semiconductors and the countless tech products they enable."

Given the current AI-driven semiconductor supercycle and predictions of years-long shortages of critical chip types, total revenues across the industry seem sure to continue their sharp rise, and manufacturers of chips of all types will likely be able to continue cashing in on the AI bonanza with every chip they can make.

GlobalFoundries this week announced that it had reached a definitive agreement to acquire Processor IP Solutions business from Synopsys, its second acquisition of a CPU IP business in less than a year, and its fifth major acquisition in one-and-a-half years. Synopsys's portfolio of ARC and RISC-V processor IPs will complement GloFo's technologies obtained with the MIPS acquisition. This will enable the company to broaden its offerings across automotive, embedded, industrial, wearables, and other emerging applications, which benefit from standard CPU IP and customized accelerators.

GlobalFoundries gets more CPU IP

As a result of the deal, GlobalFoundries will take over processor IP assets that include ARC-V (RISC-V), classic ARC CPU cores, DSP, and NPU IP that use the ARC framework. It will also benefit from the associated software ecosystem, such as the ARC MetaWare development toolkits. The acquisition also includes Synopsys's ASIP Designer and ASIP Programmer toolchains, which automate the development and deployment of application-specific instruction-set processors (ASIPs) that integrate base CPU cores with bespoke instructions, pipelines, or accelerators immediately supported by a compiler.

The terms and conditions of the deal, expected to be closed in the second half of the year, have not yet been disclosed. Both companies have committed to a coordinated transition plan to ensure existing Processor IP customers continue to receive uninterrupted support, so Synopsys's customers will not be forced to migrate to other technologies due to the acquisition.

Upon closing the transaction, all the assets that are part of the Synopsys Processor IP Solutions (we will call it 'ARC' for the sake of simplicity) as well as 'expert teams' will become a part of MIPS, which operates like a separate company within GlobalFoundries (e.g., it can work with other foundries and license IP to companies that do not use GF's manufacturing services).

As a result, MIPS will control a vast range of IPs, such as MIPS RISC-V cores, as well as IP from Synopsys, which includes ARC-based CPU, DSP, and NPU cores, as well as ARC-V offerings featuring the RISC-V instruction set architecture (ISA).

RISC-V & ARC

With RISC-V, GlobalFoundries can offer an extensible ISA, open-source software, and compatibility with a growing ecosystem. The value of ARC lies in its configurability, which enables developers to build ASIPs, processors with a custom ISA and features. Building system-on-chips (SoCs) with RISC-V general-purpose cores and bespoke ARC accelerators could provide an edge for GlobalFoundries' customers, as the technology benefits from burgeoning market penetration.

For those unfamiliar with ARC, these processors use the 16/32/64-bit ARCompact compressed ISA originally developed in the 1990s for graphics processing purposes. Instead of a fixed microarchitecture, ARC allows designers to add custom instructions, bespoke accelerators, and modify datapaths while the software toolchain (compilers, debuggers, profilers) automatically adjusts to match the hardware. This makes ARC fundamentally different from general-purpose CPUs, as the final ASIP is shaped around a specific workload rather than optimized to run a wide range of applications. As a result, ARC excels in applications where specialization matters more than peak performance. As a result, specially-tailored Application-specific instruction set processors (ASIPs) can offer higher performance-per-watt efficiency and predictable performance than SoCs based on off-the-shelf CPU cores and IPs.

Building its own IP ecosystem

The goal set by GlobalFoundries is to 'deliver a comprehensive processor IP suite' that spans from RISC-V general-purpose cores to special-purpose DSPs, NPUs, and other accelerators. Ultimately, this will increase its customer lock-in through lower adoption barriers, a faster-time-to-market, accelerated development of custom silicon, as well as IP licensing and embedded software.

Once GlobalFoundries integrates the Processor IP Solutions into MIPS, it will inevitably align ARC and MIPS designs with its own process technologies, packaging options, and verification/qualification flows, which is something that must be done to accelerate development of custom solutions as well as speed up time-to-market.

This alignment will reduce incompatibilities between architectural intent and physical implementation, as both will come from a singular company. As a result, GlobalFoundries' customers will be able to pick up a wide range of silicon-proven IP blocks, integrate them into their own differentiating IP (or even develop one based on the ARC ISA from scratch) into their upcoming chip, and greatly fast-track their path from Register-Transfer level design (RTL), to mass production while taking advantage of power, performance, and area-optimized IPs with predictable yields.

For embedded designs with a very long lifecycle, that predictability, along with cost-cutting and time-to-market, matters more than chasing leading-edge density or the highest performance. In fact, many fabless companies among those building custom silicon for emerging applications lack internal resources to assemble a full compute stack from scratch. Traditionally, these customers would license CPU IP from one vendor, DSP or AI blocks from another, and only then begin mapping the design onto a foundry's process technology. With TSMC's OIP and Arm's portfolio of IPs, the path to silicon is rather straightforward, as the ecosystems are vast.

With the takeover of MIPS and ARC, GlobalFoundries can offer its clients a bundle of silicon-proven IPs from one shop, which means even faster time to market, greater flexibility with RISC-V and ARC, and perhaps a lower price. While GlobalFoundries avoids explicitly marketing this as vertical integration, the technical implication the company revealed earlier this year in an interview with Tom's Hardware made clear: processor IP, software tools, and fabrication are now coordinated inside a single organization.

Changing the role of pure-play foundry

GlobalFoundries is deliberately reshaping its role in the semiconductor value chain by combining its manufacturing capability with in-house processor IP — built around RISC-V and the newly acquired Synopsys ARC portfolio, as well as silicon photonics and optical connectivity enabled by Advanced Micro Foundry (AMF) and InfiniLink acquisitions — to offer customers a tightly integrated path from architecture to silicon. The strategy targets a wide range of emerging applications across a variety of verticals, including automotive, embedded, industrial, and physical AI markets.

For GlobalFoundries's customers, the ARC + RISC-V combination provides a standards-based ISA for general-purpose compute, paired with the ability to introduce workload-specific instructions and accelerators without negotiating changes with the owner of a proprietary architecture, such as Arm.

This might open GlobalFoundries some additional business opportunities with newly established fabless chip designers with limited budgets, clients with requirements for sovereign chip designs without massive upfront investments, and customers operating under export controls and looking for a partner with policy-resilient IP and manufacturing. Keeping in mind location of GloFo's fabs in Asia, Europe, and the U.S., the strengthened IP portfolio makes even more sense.

What's next for GlobalFoundries?

With two CPU IP-related acquisitions in less than a year, we can now only wonder what is next for GlobalFoundries: will it focus on integration of MIPS and ARC into its organization, or it will pursue more M&A activities?

If the company is looking forward to more acquisitions, the most logical thing to do would be to pursue adjacent technologies, enabling M&A that deepens its platform without turning it into an Integrated Device Manufacturer or putting it in conflict with customers or partners. Among the most probable scenarios for the company would be to obtain controller, connectivity, and security IP to further simplify the development of chips for its clients. Another move could be acquiring an IP focused on advanced packaging.

A less likely move is to purchase an accelerator or domain-specific IP to address specific applications. So far, GlobalFoundries has focused on general IP, which can be deployed broadly.

Another option for the company could be taking over software or middleware assets for automotive, embedded, or industrial applications. Software certification is a long process, so offering customers a solution that includes both silicon-proven hardware and functionally safe software and middleware could produce another layer of opportunities for GlobalFoundries.

A calculated expansion

The acquisitions of MIPS and ARC represent a calculated expansion of GlobalFoundries's value proposition that extends beyond silicon manufacturing production and now spans to the level of physical IP and software.

To a large degree, GlobalFoundries is about to become a platform partner for its clients as it not only makes and packages chips, but also defines IP that is inside. This strengthens GloFo's competitive position against other foundries as well as against TSMC, whose OIP ecosystem serves the same purposes as GlobalFoundries's in-house IP.

For customers, the ARC + MIPS integration will offer faster time-to-market, deeper customization, increased efficiency, and safeguards against geopolitically motivated limitations.

TSMC's average selling prices (ASPs) for its wafers have increased 15.9% annually from 2019 to 2025. Additionally, gross profit margins per wafer rose rapidly to 3.3x throughout 2025, according to SemiAnalysis. This increased margin reflects TSMC fully leveraging its market-leading position and broad ecosystem to command higher product pricing, which in turn drives downstream effects, including higher end-product pricing. The increases come after a decade during which TSMC earned minimal profit, keeping pricing low as it cornered the market and expanded its market share.

The new era of extreme ultraviolet (EUV) chipmaking began in 2019, with TSMC positioned as the top contract chipmaker. Equipped with robust production capacity and an ecosystem of partners leveraging this new technology, TSMC has seen significant ASP growth. The company is expected to maintain this momentum into 2026 and beyond, driven by several factors.

The rise of TSMC

Since its inception in 1987, through to the 2010s, TSMC was considered a leading foundry, but not a leading chipmaker. At the time, Intel was the undisputed champion of the semiconductor industry, with microelectronics pioneers like IBM also remaining competitive. However, TSMC has been consistently expanding its ecosystem over the years. In 2008, the company established its Open Innovation Platform (OIP) program — uniting TSMC with chip designers, IP providers, and EDA tool developers — essentially setting the stage for its current success.

Things changed suddenly for TSMC in the mid-2010s, when Apple outsourced production of its chips to TSMC, departing from Samsung, which had since become a significant rival to Apple in the smartphone segment. For Apple, going with TSMC guaranteed no IP theft and no plans to compete in the smartphone segment. TSMC also offered a continually evolving roadmap of process technologies and capacity availability, which, among other things, persuaded Apple to back TSMC.

Landing orders from the world's largest manufacturers of consumer electronics (including Huawei, Sony, and Panasonic) gave TSMC the financial capacity required to invest in R&D and new tools to produce chips for customers at high volumes. With Intel's hiccups with its 10nm fabrication process, TSMC entered 2019 with all of the factors needed to become a market leader.

The company was offering services that no other chipmaker could match, bagging big-name customers like Apple, Huawei, and Nvidia in the process. This offered TSMC not only informal recognition of leadership but also the financial resources to expand its turf.

Expensive tools? Even more expensive chips

As a result, after more than a decade of stagnation, TSMC's wafer pricing model fundamentally changed in 2019, as it had to buy, deploy, and depreciate ASML's Twinscan NXE tools, which cost around $235 million each. While these tools from ASML were less expensive in 2019, they steadily increased in price, as the machines became more advanced.

Since TSMC had no real competition, and an increase in the costs of machinery, these factors set the stage for market dominance. Paired with the massive OIP infrastructure, TSMC managed to expand gross profit per wafer by roughly 3.3x throughout 2025, based on data from SemiAnalysis. The report claims that quotes are rising at a far faster pace than production costs, which sets a new economic baseline for leading-edge foundry manufacturing.

EUV revolutionizes fab industry

From 2005 to 2019, TSMC's wafer ASPs remained largely flat because leading-edge foundry capacity was still relatively elastic due to competition, according to SemiAnalysis. Over those 15 years, ASPs increased by only $32 per wafer, with an annual growth rate of approximately 0.1%. Process nodes advanced rapidly using DUV lithography, so capital intensity increased gradually (i.e., in accordance with the growth of customer requirements) rather than exponentially.

During this period, the company largely operated under a cost-pass-through model, using modest pricing adjustments to offset rising manufacturing expenses. This approach limited margin expansion even as process complexity increased. Consequently, market conditions dictated wafer pricing, rather than the capital requirements of foundries.

However, customer economics limited this value-based pricing. Leading-edge demand was dominated by smartphones and consumer SoCs with tightly constrained bill-of-materials (BOM) targets, and no ballooning AI or HPC segment was generating massive gross margins. Yield learning curves were rapid; performance-per-watt gains were predictable; tool and mask costs were rising at a pace that allowed rivals to follow TSMC with capacity and competitive nodes; and there was no structural shortage of production capacity.

As a result, TSMC, just like other foundries, prioritized utilization, scale, and long-term ecosystem dominance over margin expansion. This strategy kept ASP growth near zero until TSMC began to adopt EUV for high-volume manufacturing, forcing their hand and intensifying capital expenditures. These factors coincided with the beginning of the AI and HPC megatrends we've observed in recent years.

In the six years that followed, wafer ASPs at TSMC rose by approximately 133%, equivalent to a 15.2% compound annual growth rate, while the cost of goods sold increased by only 78%. As a result, TSMC's gross profit per wafer increased sharply. Regression analysis made by SemiAnalysis illustrates the shift clearly: before 2019, every $1 increase in cost of goods sold (COGS) translated into $1.43 in ASP, yielding $0.43 in incremental profit; after 2019, the same $1 cost increase generated $2.31 in ASP, or more than $1.30 in incremental profit.

As noted above, the inflection coincided with the industry's transition to EUV-based process technologies, which dramatically altered supply dynamics, as TSMC became the only viable choice for big companies. While Samsung began using EUV tools for HVM in 2018, it used them only for its own chips, primarily due to tool scarcity and yield constraints.

The use of EUV tools at TSMC increased capital intensity and slowed capacity expansion, as EUV systems are physically larger than older DUV scanners and place their light source beneath the tool, making the addition of leading-edge output even more difficult. As a result, advanced-node wafers ceased to be interchangeable commodities and became capacity-constrained assets for tens of competing high-tech giants.

This allowed TSMC to price its output well above incremental cost without eroding demand. AI and HPC processors produced for customers like AMD, Broadcom, Google, Intel, or Nvidia carry significantly higher margins than legacy mobile or consumer chips. As a result, TSMC anchors pricing to customer value rather than manufacturing expense, which highlights the post-2019 divergence between ASP growth and COGS inflation.

In fact, big customers like AMD, Broadcom, Nvidia, and Marvell are willing to pay TSMC extra to lock in production capacity with the best process technologies to produce AI accelerators.

Advanced packaging further strengthened TSMC's position. By integrating leading-edge logic with sophisticated packaging technologies, the company increased customer lock-in and raised barriers for competitors. Notably, rising wafer costs now work in TSMC’s favor by discouraging new entrants and widening the competitive moat, rather than compressing margins as they did in earlier eras.

A new foundry model

The data published by SemiAnalysis indicates that TSMC has transitioned from a traditional foundry model focused on scale, utilization, and cost recovery to one defined by systematic undersupply, extreme capital intensity, and value-based pricing.

Leading-edge wafers are no longer commodities that can be obtained from multiple sources, but constrained assets required by trillion-dollar corporations. Given the current situation, pricing is increasingly anchored in the economic value delivered to customers rather than in incremental manufacturing costs. As a result, TSMC is thriving, and it will continue to do so until a viable challenger emerges. Neither Intel Foundry nor Samsung Foundry can currently compete against TSMC's leading-edge production capabilities, at least not yet.

It should be noted that TSMC's pricing power did not appear overnight. It emerged after decades of sustained capital investment, consistent yield leadership across successive nodes, and the gradual consolidation of the industry's most valuable supplier onto a single chip development and manufacturing platform under the OIP brand. Also, TSMC has attracted most of the world's leading chip designers, including Intel, which has its own manufacturing capacities.

These factors created both technical and economic lock-in, resulting in rising costs that reinforce competitive barriers rather than shrinking margins. This highlights a fundamental reality of advanced semiconductor manufacturing in general: TSMC's lasting pricing power has emerged from long-term structural investments along with stable performance increases and yields, and cannot be replicated in the short term.

Global sales of semiconductor manufacturing tools are set to climb through at least 2027 due to increasing demand for chips by the AI sector as well as continued growth in China that strives for semiconductor self sufficiency, reports SEMI, an organization that unites different companies across the semiconductor supply chain.

Sales of semiconductor production tools — including wafer fab equipment (WFE), test tools, and assembly and packaging (A&P) equipment — are set to reach around $133 billion in 2025, up 13.7% year-on-year, followed by $145 billion in 2026 and $156 billion in 2027, if SEMI's estimates are correct. SEMI projects both front-end and back-end segments to expand continuously through the forecast period. It is necessary to note that the organization has revised its forecast from mid-2025 due to stronger than expected sales of AI accelerators and infrastructure required to support them.

"Global semiconductor equipment sales show robust momentum, with both the front-end and back-end segments projected to see three consecutive years of growth, culminating in total sales surpassing $150 billion for the first time in 2027," said Ajit Manocha, SEMI president and CEO. "Investments to support AI demand have been stronger than anticipated since our midyear forecast, leading us to boost the outlook for all segments."

Front-end equipment

Within the whole market of semiconductor manufacturing tools, front-end wafer fab equipment remains the dominant category. After reaching $104 billion in 2024, WFE revenue is forecast to increase 11% to $115.7 billion in 2025, up from SEMI's mid-year outlook. The adjustment reflects heavier spending on DRAM, and high-bandwidth memory (HBM) in particular, as well as continued fab build-outs in China. Growth is expected to persist in the coming years as WFE sales projected to rise 9% YoY in 2026 and 7.3% YoY in 2027, when they are expected to reach $135.2 billion.

On the application side, foundry and logic equipment spending is projected to grow 9.8% year-on-year to $66.6 billion in 2025 as companies like Intel, Samsung, and TSMC continue to spend on leading-edge production capacities. SEMI expects this segment to expand further in 2026 and 2027, reaching $75.2 billion as TSMC, Samsung, and others ramp production of AI accelerators, HPC processors, and premium mobile SoCs.

Although DRAM and NAND makers express reluctance to invest significantly in expansion of their production capacity, SEMI predicts that memory will experience a particularly strong rebound in the coming years. DRAM equipment sales are projected to rise 15.4% to $22.5 billion in 2025, then continue expanding in 2026 and 2027 as suppliers scale HBM production and transition to more advanced process technologies. Spending on 3D NAND manufacturing tools is expected to surge 45.4% to $14 billion in 2025, followed by growth to $15.7 billion in 2026 and $16.9 billion in 2027, driven by higher 3D NAND layer counts and capacity additions.

Back-end equipment

Back-end tools, which began recovering in 2024, is expected to maintain strong momentum.

Chip test equipment revenue is forecast to jump 48.1% to $11.2 billion in 2025, followed by additional growth of 12% in 2026 and 7.1% in 2027. Assembly and packaging (A&P) tools are projected to grow 19.6% to $6.4 billion in 2025 and continue to expand through 2027. SEMI attributes this trend to increasingly complex device architectures, the rapid uptake of advanced and heterogeneous packaging, and higher performance requirements for AI processors and HBM stacks.

China to remain the biggest market

From a geographic standpoint, China, Taiwan, and South Korea are expected to remain the largest markets for semiconductor equipment throughout the forecast period.

Even as growth moderates after 2026, China is projected to retain its leading position as domestic manufacturers invest in mature and select advanced nodes. Taiwan's elevated spending in 2025 reflects large-scale capacity additions for leading-edge AI and HPC logic chips (and probably memory), while South Korea's increases are expected to be driven by major investments in advanced memory technologies, including HBM.

Other regions are also expected to see increased spending in 2026 and 2027, though SEMI attributes this to government incentives, onshoring, and specialty capacity expansions.

GlobalFoundries just announced its acquisition of Advanced Micro Foundry, a Singapore-based silicon photonics maker, a purchase the company says makes it the largest manufacturer of the technology, as reported by Reuters. Silicon photonics uses light instead of electrical pulses to transmit data, and it can be used for communication within chips, between components, and even across servers.

Nvidia is already planning to implement silicon photonics for its next-generation AI servers, which would reduce power consumption while simultaneously increasing data transfer speeds. This is crucial for the company, as it could enable clusters with millions of GPUs within data centers. AMD is also jumping on this technology, reportedly spending nearly $300 million to open a research and development center in Taiwan that focuses on said tech. It acquired Enosemi, another silicon photonics firm, earlier this year, to help compete against Nvidia.

Silicon photonics’ ability to reduce power consumption while increasing data transmission speeds is crucial for the future of AI computing. This is especially true now that the AI data center build-out is straining the electricity grid with the unprecedented increase in power demand. “As data moves faster and workloads grow more complex, the ability to move information with greater speed, precision, and power efficiency is now fundamental to AI data centers and advanced telecom networks,” said GlobalFoundries CEO Tim Breen in a statement.

Aside from its use with AI, silicon photonics is a pivotal technology in quantum computing. The use of light instead of electrical signals could allow for systems that do not require cryogenic cooling, making quantum computers much more practical and less costly to operate.

While big names like AMD, Nvidia, and GlobalFoundries are investing in silicon photonics, other startups are also entering the fray. Firms like Ayar Labs, Celestial AI, and Lightmatter are developing their own technologies and photonic-based chips, especially as it’s seen as the future of computing.

While we don’t expect to see consumer-grade CPUs, GPUs, and motherboards come with this technology anytime soon, it’s already being applied to large-scale servers that deal with terabytes of data every second. And with the continued investment in AI data centers, we anticipate that research and development on this promising tech would move forward as well.

Last week, a new round of the U.S.-China trade war commenced. China imposed export controls on a new set of rare earth materials and the methods of their processing, which may impact a variety of products and industries. More importantly, China expanded its export control framework beyond raw materials, now reaching actual products and complex devices made outside of China. This means that a product produced anywhere in the world, but containing rare earth materials from China, may be subject to Beijing's export licensing regime if the value of rare earth materials in this product exceeds 0.1%. The U.S. was quick to retaliate with a 100% tariff on China-made products and a ban on 'critical software' for China-based entities.

Materials

Starting early November, China will add five heavy rare-earth elements to its export controls list, including erbium, europium, holmium, thulium, and ytterbium, as well as their alloys, oxides, compounds, and finished materials.

The controls explicitly cover magnetic powders, luminescent phosphors, fibre-optic materials, thermal-shield coatings, hydrogen storage, and magnetic alloys. These five elements and alloys on their base are used to build devices like displays, EV drivetrains, lasers, magnetic subsystems (hard drives), optical and photonic infrastructure, satellites, and more.

This round of China's export controls targets rare earth elements that generate, manipulate, and sense light or magnetism, which are critically important for dozens of devices and industries. By tightening export controls over these materials, China is increasing its influence over both the supply of rare earths and the foundational building blocks that the computing, defence, and telecommunication industries rely upon worldwide.

While companies in these industries have the flexibility to switch from one supplier to another, doing so is difficult and expensive because they have downstream partners that need to validate and qualify all the components they use.

China's export controls policy evolved from restricting fundamental semiconductor materials such as antimony, gallium, and germanium (Round I) to advanced interconnect metals (Round II), then to functional rare earths used in chipmaking, telco, and storage devices (Round III, scandium and dysprosium).

The October 2025 round extends this logic to the optical and magnetic layer of the value chain, covering materials that enable fiber-optic networks, display manufacturing, laser, and EV motors. This is clearly not an isolated move, but is a part of a multi-stage plan that now spans every level of the electronics and semiconductor ecosystem from wafer substrates to photonics and magnetics.

The fourth round of rare earths export controls expands the list of materials that will now require a dual-use export license from China's Ministry of Commerce. While this hurts several industries, it does not hurt them significantly more than the prior rounds (particularly the April 2025 round), so we could consider the new list as an expansion of the Round III rather than an all-new Round IV (more on this later), though for simplicity we will call it this way.

The big question is whether the industry outside of China can replace the People's Republic's rare earth supplies in a timely manner. While there have been conversations about replacing China-originated materials, from semiconductor production and broader industries, the main limitation seems to be the lack of efficient technologies for processing rare earth elements.

Processing tools and methods

Over recent decades, China has not only perfected the mining of rare earth minerals but also the technologies required for the associated tools and processing. Therefore, companies and countries planning to switch from using materials from China to their own will have to buy equipment and technologies from Chinese companies. China's government now has everything covered.

The newly imposed export regulations now also include rare-earth production and processing equipment, covering over 20 types of industrial machinery. This includes centrifugal extraction units, acid-resistant roasting kilns, precipitation and crystallization reactors, electrolytic and vacuum furnaces, vacuum casting and sintering systems, isostatic and magnetic presses, laser and grinding machines, and crystal-growth furnaces used for high-purity rare-earth crystals.

Advanced crystal-growth furnaces are particularly important for antimony, gallium, germanium, and other rare-earth elements used in semiconductor manufacturing, though the exact purity levels and applications vary. High-purity materials are essential to minimize defects and ensure the consistent electrical properties demanded by process technologies. While it is theoretically possible to use different crystallization reactors, presses, and furnaces, the final material, although pure, will differ from that produced using standard tools.

This may require requalification of the semiconductor process technology, which might take months and incur significant costs. To that end, it will become difficult for foreign companies to mine and refine rare earth materials outside of China with the new regulation.

In addition, a new regulation introduced last week extends the same legal framework to the mining reagents, separation chemicals, and mineral feedstock required to produce or refine rare earths. Until now, China has mainly regulated exports of refined metals and oxides, while mining reagents and separation chemicals have been lightly monitored.

By adding these materials to the list of controlled items, China is closing an option for companies to buy Chinese reagents or ores and perform refining elsewhere. This means even if a foreign refinery exists, it cannot legally operate without a Chinese export license, which further reinforces China's control not just over mined output but over the mining and refining hardware, consumables, and chemical know-how.

Going beyond its own borders

The new export restrictions on five rare earth elements, mining and refining tools, and chemicals used for their mining and refining, clearly expand China's control over rare earth supplies and solidify the country's market share, the final set of restrictions is absolutely unprecedented as they expand export controls beyond China's borders.

Starting December 1, China will require foreign companies to obtain a dual-use Chinese export license if their products contain Chinese-origin rare-earth materials (≥ 0.1 % by value) or were manufactured using Chinese rare-earth mining, refining, or magnet-production technologies. The rule applies to all companies, regardless of geography.

The regulation outright prohibits exports to military users, to entities listed on China's export control or watch lists (and to their subsidiaries with 50% or more ownership), for end uses involving weapons of mass destruction, and terrorism, which is something to be expected.

However, the most painful part is that China's Ministry of Commerce will review export license applications related to the production or research of advanced logic (14nm and below), or 3D NAND (256-layer+ memory chips), as well as AI technologies with potential military applications. This means that China's ministry may refuse to supply materials to any chipmaker in the world, whether it is TSMC producing AI processors for Nvidia, or Micron producing 3D NAND memory for its latest SSD.

What's next?

From a strategic point of view, Round IV of China's rare earth materials export restrictions marks China's shift from being the world's largest supplier of rare earths to the global watchdog over rare earth materials and products. In addition to restricting shipments of 20 metals from China, the country now controls exports of processing equipment and chemicals. The country will also govern how rare earth materials and China's mining and refining knowledge are used worldwide. As a result, Beijing has gotten a set of powerful instruments of industrial and geopolitical control.

China's latest announcement may not be the last blow to the global semiconductor trade. However, further export controls won't have as much of an impact as the announced proposals on rare earth materials.

China already controls exports of foundational materials like antimony, gallium, germanium, as well as crucially important bismuth, indium, molybdenum, and tungsten. The country can expand the list of controlled elements further, albeit not very significantly.

Furthermore, now that China intends to control the means of rare earth mining and refining, as well as applications that use rare earth metals, the next step could be controlling the particular end user of finished products, just like the U.S. Department of Commerce's Bureau of Industry and Security controls end users of products made using American technologies.

This will require a global tracing system to identify Chinese rare-earth content across the supply chain, but the ongoing feud between China and the U.S. has demonstrated that both countries are willing to go great lengths to protect national interests.

When GlobalFoundries announced plans to acquire MIPS earlier this week, it looked like the company decided to change its strategy once again and build its own processors, thus competing with some of its customers. However, after talking with the company, we can confirm that this is not the case and that GlobalFoundries does not have ambitions to become an integrated device manufacturer. Instead, it will be able to offer a pret-a-porter compute IP to its clients to speed up their time to market.

"The acquisition of MIPS will enhance GlobalFoundries’ ability to deliver more complete and differentiated offerings to its customers," Erica McGill, director of corporate communications at GlobalFoundries, told Tom's Hardware. "By integrating MIPS' proven RISC-V processor IP and software tools, GF customers will benefit from broader access to compute IP, improved time-to-market, greater flexibility and openness, and better technologies for high-growth markets. The move will position GF as a more strategic partner, offering not just manufacturing but also foundational compute technologies that will help customers build smarter, faster and more efficient products."

MIPS will not make GF an IDM

GlobalFoundries reiterated its status as a pure-play foundry, saying the acquisition does not signal a pivot toward designing or selling chips directly. Instead, the goal is to support customers — especially those new to silicon development or seeking vertically integrated solutions — with ready-to-use IP blocks that simplify system design. Concerns that this move could turn GlobalFoundries into a competitor for its own fabless clients are unsubstantiated. 

"We remain a pure-play foundry focused on enabling our customers to build world-class products on our platforms," said the spokesperson for GlobalFoundries. "The acquisition expands our capabilities to better support fabless customers with a more comprehensive set of offerings, especially for first-time silicon builders or those targeting vertical integration." 

By offering RISC-V processor IP, GlobalFoundries acknowledges it may now compete with established IP vendors such as Andes Technology. However, it believes the ability to pair IP with differentiated manufacturing processes and secure production gives it a distinct advantage in the market.

But will enhance GF's value-added services

Foundries tend to offer various IPs to their customers, but these are relatively simple IPs, such as interfaces. Companies like Arm do offer their cores tailored for select process technologies, though. However, GF will be the first contract chipmaker to offer compute IPs based on the open-source RISC-V instruction set architecture (IPs). This will greatly enhance the value of its services to many customers among newcomers. 

The company plans to support MIPS' portfolio of processor cores built on the open RISC-V architecture, which will serve compute needs in a variety of applications, thus enhancing GF's ability to serve new markets and applications. 

"MIPS' proven processor cores will complement GF's existing IP offerings, enabling customers to build differentiated products across a wide range of markets," said McGill. "This includes compute subsystems for autonomous platforms, embedded systems, and intelligent edge devices. Following the closing, GF is committed to supporting MIPS' portfolio of open RISC-V-based instruction set architecture (ISA) processors and its broader ecosystem. Beyond edge AI applications, the combined capabilities of GF and MIPS are particularly well-suited for high-growth sectors such as automotive, internet of things, and datacenter infrastructure applications. These segments demand real-time compute, safety certification, and scalable architectures."

MIPS will remain independent

China's aggressive push to develop a domestic semiconductor industry has largely been successful. The country now has fairly advanced fabs that can produce logic chips using 7nm-class process technologies as well as world-class 3D NAND and DRAM memory devices. However, there are numerous high-profile failures due to missed investments, technical shortcomings, and unsustainable business plans. This has resulted in numerous empty fab shells — zombie fabs — around the country, according to DigiTimes.

As of early 2024, China had 44 wafer semiconductor production facilities, including 25 300-mm fabs, five 200-mm wafers, four 150-mm wafers, and seven inactive ones, according to TrendForce. At the time, 32 additional semiconductor fabrication plans were being constructed in the country as part of the Made in China 2025 initiative, including 24 300-mm fabs and nine 200-mm fabs. Companies like SMIC, HuaHong, Nexchip, CXMT, and Silan planned to start production at 10 new fabs, including nine 300-mm fabs and one 200-mm facility by the end of 2024.

Plenty of zombie fabs

However, while China continues to lead in terms of new fabs coming online, the country also leads in terms of fab shells that never got equipped or put to work, thus becoming zombie fabs. Over the past several years, around a dozen high-profile fab projects, which cost investors between $50 billion and $100 billion, went bust.

Many Chinese semiconductor fab projects failed due to a lack of technical expertise amid overambitious goals: some startups aimed at advanced nodes like 14nm and 7nm without having experienced R&D teams or access to necessary wafer fab equipment. These efforts were often heavily reliant on provincial government funding, with little oversight or industry knowledge, which lead to collapse when finances dried up or scandals emerged. Some fab ventures were plagued by fraud or mismanagement, with executives vanishing or being arrested, sometimes with local officials involved.

To add to problems, U.S. export restrictions since 2019 blocked access of Chinese entities to critical chipmaking equipment required to make chips at 10nm-class nodes and below, effectively halting progress on advanced fabs. In addition, worsening U.S.-China tensions and global market shifts further undercut the viability of many of these projects.

So, let's go over some of China's most ambitious fab projects, many of which have fallen into oblivion, or have become a dreaded zombie fab.

Failures to learn from

Leading chipmakers, such as Intel, TSMC, Samsung, or SMIC have spent decades developing their production technologies and gain experience in chips on their leading-edge nodes. But Chinese chipmakers Wuhan Hongxin Semiconductor Manufacturing Co. (HSMC) and Quanxin Integrated Circuit Manufacturing (QXIC) attempted to take a shortcut and jump straight to 14nm and, eventually, to 7nm-class nodes by hiring executives and hundreds of engineers from TSMC in 2017 – 2019.

HSMC was founded in late 2017 with a plan to build 14nm and 7nm-capable logic fabs in Wuhan with an initial investment of around $19 billion. However, a land-use dispute halted construction in November 2019, and by mid‑2020, it suffered severe underfunding of billions of dollars. By March 2021, the local government seized the project, fired all employees, and confirmed no chip production had ever occurred.

QXIC similarly aimed at 14nm-class production when it was founded in 2019 as a sister venture to HSMC in Jinan, Shandong. The company was born after issues with HSMC occurred. Despite government backing, the project never progressed beyond hype: there were no equipment orders, no factory construction, and by 2021, operations were suspended. Interestingly, Cao Shan, who served as chief executive of QXIC, was also a former board member of HSMC.

Perhaps, the most notorious China fab venture failure — the first of many — is GlobalFoundries' project in Chengdu. GlobalFoundries unveiled plans in May 2017 to build an advanced fabs in Chengdu in two phases: Phase 1 for 130nm/180nm-class nodes and Phase 2 for 22FDX FD-SOI node. The company committed to invest $10 billion in the project, with about a billion invested in the shell alone.

Financial troubles forced GlobalFoundries to abandon the project in 2018 (the same year it ceased to develop leading-edge process technologies) and refocus to specialty production technologies. By early 2019, the site was cleared of equipment and personnel, and notices were issued in May 2020 to formally suspend operations.

The site and unfinished building remained uninhabited for five years before Shanghai Huali Microelectronics Corp. (HLMC), controlled by the Hua Hong Group, announced it would take over the dormant site in mid-2023. HLMC is one of a few Chinese companies that intend to develop a sub-10nm-class fabrication process. However, it is unclear whether the Chengdu fab will be used as its flagship facility. GlobalFoundries’ Chengdu project serves as a rare example of a recovery among China’s stalled semiconductor projects. A rare exception to the numerous failures that China has encountered thus far.

Dehuai Semiconductor, an analog and mixed signal IDM startup, was not so lucky. The company was launched in 2019 with the help of local authorities. Dehuai did not present a clear roadmap, and made false claims about how its project was proceeding. By mid-2021, local anti-corruption authorities arrested key executives after investigations revealed that no fab had been built: only initial site preparation had begun. The project was one of the most notorious examples of fraud and mismanagement among China’s failed semiconductor ventures.

The fate of Fujian Jinhua Integrated Circuit (JHICC) is a bit different. Formally, this is not a failed project, but it is not a living one either. JHICC was launched with an ambition to build China's first large-scale DRAM fab in 2016. The company magically began trial production about two years after its inception, but it was soon discovered that it had stolen process technology from Micron using the help of UMC. Eventually, the U.S. Commerce Department put Fujian Jinhua into its Entity List, cutting its access to any American technology. This essentially stops the development of new process technologies and bans the procurement of any advanced tools. As a result, while JHICC has formally survived and exists on paper, it is a spectre of its former ambitions.

Another memory project that has failed in China is Jiangsu Advanced Memory Semiconductor (AMS). The company was established in 2016 with the plan to lead China's efforts in phase-change memory (PCM) technology. The company aimed to produce 100,000 300-mm wafers annually and attracted an initial investment of approximately $1.8 billion. Despite developing its first in-house PCM chips by 2019, AMS ran into financial trouble by 2020 and could no longer pay for equipment or employee salaries. It entered bankruptcy proceedings in 2023, and while a rescue plan by Huaxin Jiechuang was approved in 2024, the deal collapsed in 2025 due to unmet funding commitments.

Producing commodity types of memory is a challenging business. Tsinghua Unigroup was instrumental in developing Yangtze Memory Technology Co. and making it a world-class maker of 3D NAND. However, subsequent 3D NAND and DRAM projects were scrapped in 2022, after the company faced financial difficulties one year prior.

Tsinghua Unigroup’s second 3D NAND project aimed to mirror YMTC's model. But, at the time, even YMTC itself was still far from challenging multinational 3D NAND makers. So, the logic of building another costly fab (potentially reaching $24 billion) and possibly developing a new 3D NAND process technology was questionable.

For its DRAM efforts, Tsinghua brought in former Elpida CEO Yukio Sakamoto, who had experience competing with Samsung and Micron. However, he left in 2021 as Tsinghua approached bankruptcy, before he could contribute. Given the years and billions needed to develop DRAM technology — compounded by tool supply risks — Tsinghua scrapped its DRAM ambitions.

Logic and memory require rather sophisticated process technologies, and fabs that cost billions. By contrast, CMOS image sensors (CIS) are produced using fairly basic production nodes and on relatively inexpensive (yet very large) fabs. Nonetheless, this did not stop Jiangsu Zhongjing Aerospace, Huaian Imaging Device Manufacturer (HiDM), and Tacoma Semiconductor from failing. None of their fabs have been completed, and none of their process technologies have been developed.

China's failures could come back to haunt future ambitions

As more applications and industries adopt advanced technologies, the demand for various kinds of chips is increasing. While some applications can manage with older, trailing-edge process nodes, an increasing number of devices require chips produced on advanced fabrication processes (7nm and below). To that end, production capacity for advanced manufacturing technologies is expected to expand by a whopping 69% through 2028, according to SEMI. 

The study conducted by SEMI forecasts that overall 300mm wafer output is set to increase at a yearly growth rate of 7% from late 2024 until 2028. This trajectory would bring monthly production volume to 11.1 million wafers, marking an all-time high for the industry. 

A major factor behind this surge is the rapid expansion of capacity dedicated to more sophisticated manufacturing technologies, such as 7nm and below, which are projected to increase output by 69% over the period, rising from 850,000 wafers starts per month (WSPM) in 2024 to 1.4 million monthly units by 2028. This segment is expected to achieve a compound annual growth rate (CAGR) of approximately 14%, which is twice the rate of the overall semiconductor sector. 

The report states that monthly capacity will move from 982,000 wafers in 2025 to 1.16 million in 2026, passing the 1 million threshold for the first time. In the area of 2-nanometer and smaller processes, volumes are projected to accelerate sharply, more than doubling from below 200,000 wafers in 2025 to beyond 500,000 by 2028.

The semiconductor industry is growing rapidly as demand for chips increases, as devices and applications bleed into daily life. However, the sector is facing a deep workforce imbalance, the availability of qualified professionals — especially engineers and leaders — is shrinking at an alarming rate, according to Semi. While companies and countries have their own workforce development programs, it's seemingly not at a fast enough pace to avoid a skilled workforce shortage in the coming years, which could lead to a shortfall of one million workers.

Not enough engineers for the semiconductor industry

Semi's projections indicate that by 2030, the chip industry will need to hire around one million additional skilled workers worldwide. The Semiconductor Industry Association (SIA) estimated that by 2030, there will be a shortage of 67,000 workers in the U.S. semiconductor industry alone. Europe is expected to face a shortage of over 100,000 engineers, while the shortfall in the Asia-Pacific region will exceed 200,000.

Additionally, the industry will require at least 100,000 middle-tier managers and 10,000 higher-tier leaders by 2030. However, considering the shortage of skilled workers in the semiconductor industry, many of those managers will have to come from outside the chip sector.

Sales in the semiconductor sector hit $627.6 billion in 2024, a 19.1% increase over the previous year. Advancements in the AI industry drove this, in addition to the spread of 5G networks, demand from the automotive sector, and steady growth in consumer electronics. Forecasts remain positive, with nearly 19% of executives expecting strong growth without supply gluts over the next four years.

Governments across major economies are backing this expansion with large-scale investments. The European Chips Act is targeting a 20% production share for the EU by 2030, with a €43 billion package designed to provide incentives to chipmakers willing to build fabs in Europe. The United States is channelling $52.7 billion into domestic semiconductor manufacturing and R&D via the CHIPS and Science Act.

Conversely, the UK is quite a bit behind: although it has launched a £1 billion initiative over 10 years, this is barely enough to build a single fab. Leading chipmakers — such as GlobalFoundries, Intel, Infineon, NXP, STMicroelectronics, Samsung, and TSMC — are building new production capacities in different parts of the world, and will therefore need more skilled workers already in the coming years.

The core of the talent shortage lies in the academic pipeline. Fewer students are enrolling in semiconductor-related or engineering university programs. In Germany, the number of STEM students declined by 6.5% in 2021. In 2018, Germany had just under 82,000 electrical engineering students, while Ireland saw only 742 new students in the field in 2017. In the U.S., only 13,767 bachelor's degrees in electrical engineering were awarded in 2018.

An aging workforce is another side of the problem. In the U.S., a third of semiconductor professionals are 55 or older. In Germany, the situation is similar, as one-third of workers are set to retire in the next decade. On top of that, the nature of the work is shifting. In Europe, employers now prioritize expertise in artificial intelligence and machine learning over traditional systems architecture. Embedded software development is getting more popular than analog or digital circuit design.

Competition for workers is intensifying

China has introduced new export restrictions on materials containing key materials for RF and storage applications — scandium and dysprosium — which may hurt key players in these industries, including Broadcom, GF, Qualcomm, TSMC, Samsung, Seagate, and Western Digital. China's new restrictions follow two prior rounds of rare earth export rules that are slowly tightening the supply of these critical minerals, especially those used in several chipmaking applications.

Scandium is widely used for RF front-end modules found in smartphones, Wi-Fi modules, and base stations, whereas dysprosium is used for HDD heads and electric vehicles.

This is not the first time China's Ministry of Economy has restricted exports of rare-earth materials. The restriction on rare earth materials export has been made in response to the 54% tariffs imposed on goods produced in China by the Trump administration, complemented by a 34% import duty on all products made in the U.S.

Effective immediately, exporters of products containing Scandium, Dysprosium, Gadolinium, Terbium, Lutetium, Samarium, and Yttrium must apply for an export license from the China Ministry of Economy. The application requires customers to detail the final use of the material.

The new rules cover various products containing the previously listed rare earth metals, including raw ore, metal, compounds, and finished goods. While not an outright ban, this is the third round of China's export restrictions that raises supply concerns among manufacturers worldwide and deepens tensions between the U.S. and China.

These export restrictions reflect a calculated escalation strategy that targets the entire supply chain of high-tech manufacturing, from foundational wafer-level materials to fabrication-critical metals, in addition to rare earth materials used in other use-cases.

But is the third round of export restrictions from China more impactful on the industry than the first two?

The third round of China's rare earth restrictions explained

As the image above illustrates, two of the key materials restricted in this round are Scandium and Dysprosium, both of which hold significant importance for the telecom and storage industries, which are difficult to overstate.

Scandium is primarily used in RF applications through its role in Scandium Aluminum Nitride (ScAlN). This material is used for high-performance wave filters like BAW (Bulk Acoustic Wave) and SAW (Surface Acoustic Wave).

By introducing (doping) Scandium to Aluminum Nitride at levels of around 10% to 40%, ScAlN achieves higher piezoelectric response and electromechanical coupling (compared to AlN alone), which is critical for improving signal strength, bandwidth, and power efficiency in high-frequency telecom applications.

These filters are essential components in the front-end modules of 5G smartphones and base stations and Wi-Fi 6 and Wi-Fi 7 modules. While scandium is ubiquitous, one 200-mm or 300-mm wafer with chips featuring ScAlN only needs a few grams of Scandium.

Dysprosium is an even more widely used material as it is used for storage, electric vehicles, and even radiation-hardened applications. In HDDs, dysprosium is added to permanent neodymium-iron-boron (NdFeB) magnets used in voice coil motors, which control the read/write head as it improves the magnet's coercivity under high temperatures. NdFeB magnets are also used for motors in electric vehicles, so dysprosium is used for the same purpose.

In MRAM (Magnetoresistive Random Access Memory), Dysprosium is used in the free or pinned magnetic layers of GMR (Giant Magnetoresistance) or TMR (Tunneling Magnetoresistance) stacks to maintain stability of magnetic orientation. In addition, radiation-shielding components, such as those used in nuclear reactors, spacecraft, and satellites, also use Dysprosium.

Other materials in the list, namely Gadolinium, Terbium, Yttrium, Lutetium, and Aamarium, are also widely used and cannot be substituted without tradeoffs and at enhanced costs (including those associated with changes of production flows), characteristics, and risks.

But there is good news, too. While rare earth metals are called 'rare' and China supplies the lion's share of the world's rare earth materials, these elements are actually not rare. In fact, these metals are pretty widespread well beyond China.

They are hard to get; as in many cases, rare earth metals are obtained by mining other materials and subsequent separation of rare earths. The key reason why China is the dominant supplier of these materials and products on their base is because Chinese companies have managed to build an efficient ecosystem to mine, extract, and refine rare earth elements.

Some say China subsidizes its rare earth industry to control the supply of critical materials by making it unprofitable to produce them in other parts of the world. However, once China began to 'weaponize' its rare earth prowess, companies in other countries rejoiced, as their potential to supply rare earth materials in volume just became a real business opportunity. Few companies would try to save on strategically important items, such as rare earth materials, so companies would likely be willing to switch suppliers following the restrictions.

This isn't the first time we've seen restrictions

As noted above, this isn't the first round of China's restrictions of rare earth supplies. Moreover, this is not the most 'impressive' one, either. China's rare earth export curbs escalate from foundational materials (Antimony, Gallium, and Germanium) to fabrication-critical metals, then to rare earths used in RF, storage, and precision components.

In the initial round, China restricted Antimony, Gallium, and Germanium. Germanium is crucial for producing wafers featuring strained silicon and the most high-performance chips made by Intel, TSMC, and Samsung. These companies have used strained silicon for a couple of decades. Meanwhile, a 300-mm wafer uses around a gram of Germanium.

Antimony is used as a dopant to make n-type regions in transistors, so again, requirements per wafer are limited. As for Gallium, it is a key element to power semiconductors, RF electronics, infrared sensing, and compound semiconductors (such as ScAlN/AlGaN/GaN). However, when it comes to usage in applications like radars and telecommunications, Gallium and Germanium are inseparable.

Without any doubt, these materials support industries ranging from telecommunications to defense and data centers. That makes the restrictions highly disruptive at the early stage of the semiconductor value and manufacturing chain.

The second round expanded pressure to include Tungsten, Indium, Molybdenum, Bismuth, and Tellurium, materials tied directly to semiconductor fabrication. Tungsten and Molybdenum are used in transistor contacts, gates, and interconnects in advanced nodes where extreme thermal and electrical reliability are necessary. Indium is crucial for 5G mmWave front-end modules, satellite communications, and photonic chips.

Restricting these materials strikes at the core of modern semiconductor production, though we have yet to see any actual disruption of chip supply due to China's export curbs.

What's next?

With its export restrictions, China leverages its dominance not only in resource extraction, but also in processing and material science. Thus, creating widespread uncertainty across the global semiconductor ecosystem, which now spans from smartphones, to PCs, self-driving vehicles, and sophisticated defense systems.

On one hand, this means that China's approach to export curbs indicates a deliberate, phased control strategy, targeting the entire vertical stack of semiconductor and high-tech production, including niche but irreplaceable elements. On the other hand, it means that the impact of China's curbs could decrease over time as the industry adapts its supply chains to the new reality.

Will there be further rounds? Without a doubt. We can only wonder what materials they will target, but keep in mind that China does not want to ruin the whole semiconductor or high-tech supply chain and instead wants to thrive on it. Stay tuned, as it's unlikely that this will be the last time we'll hear from the country about rare earth export restrictions.

Although the new import tariffs imposed by the Trump administration do not tax semiconductor imports, they do tax imports of wafer fabrication equipment (WFE) made outside of the U.S. and used by American chipmakers. As a result, companies like Intel, GlobalFoundries, Samsung Foundry, and TSMC will have to pay at least 20% more for chipmaking tools in the U.S. than they do in other countries, which will likely affect the prices of chips made in America.

Although the U.S.-based Applied Materials, KLA, and Lam Research control about 50% of the chipmaking tool market, producers of fab tools from China, Europe, Japan, South Korea, and Taiwan command the remaining 50%. U.S.-based chipmakers hardly use tools made in China, but they certainly use lithography, etching, and deposition equipment produced in the EU, Japan, South Korea, and Taiwan. Starting from April 9, they will have to pay a 20% to 32% import tax (depending on the origin of the equipment) when buying semiconductor production equipment from companies in these countries, which will inevitably affect their costs in the U.S.

Given that equipment costs determine the costs of chips more than anything else, expect a tangible increase in production costs in America. Then again, if the Trump administration imposes additional tariffs on chips made elsewhere, this will somewhat level the costs of chips produced overseas and domestically. However, this will not make chips made in the U.S. more competitive on the global market.

20% to 32% more for wafer fab equipment

The 20% import tax on lithography tools made by ASML will probably have the biggest impact on American chipmakers as ASML does not really have U.S.-based rivals when it comes to advanced immersion DUV litho tools as well as Low-NA EUV and High-NA EUV litho machines. While a 20% rate seems modest compared to the 54% tariffs on Chinese imports, they apply to extremely costly equipment.

ASML's advanced immersion DUV (ArF) machines used for sub-10nm fabrication processes cost $82.5 million per unit on average (based on the company's Q4 FY2024 results), a Low-NA EUV system is priced around $235 million depending on configuration, and its upcoming High-NA EUV tool is expected to cost $380 million. With the new import duties, those same tools will cost American chipmakers $99 million per Twinscan NXT:2000i-series DUV machine, $282 million per Twinscan NXE:3800E Low-NA EUV system, and $456 million for next-generation Twinscan EXE:5000-series High-NA EUV tool.

It is noteworthy that ASML produces not only lithography scanners but also metrology and inspection tools, which will also become more expensive for American chipmakers. In fact, some of ASML's HMI eScan e-beam tools are assembled in Taiwan, and they will be 32% more expensive for American buyers. The good news is that ASML can expand the production of HMI tools in San Jose, California.

In addition, there are other European fab equipment makers, such as ASM International, which makes atomic layer deposition (ALD) and epitaxy tools, and Aixtron, which makes deposition equipment for compound semiconductors (GaN, SiC, etc.), which are also produced in the U.S. (by companies like Macom and X-Fab).

Speaking of cleaning, coating, deposition, and etching tools, tools from Japan-based companies like Tokyo Electron and Screen Holdings are quite popular on the market, and they are set to get 24% more expensive for American companies.

Domestic replacements?

Given that wafer fab equipment from Europe and Asia has just gotten 20% to 32% more expensive for American buyers, a natural question is whether these tools can be replaced with ones produced in the U.S.

ASML has only two big rivals — Canon and Nikon — and they are based in Japan and do not produce EUV systems or advanced DUV scanners anyway, so American fabs will have to pay 20% extra for ASML tools in the foreseeable future. The actual impact of ASML’s tools on production costs will be determined by whether a particular product is more lithography intensive (DRAM, logic), or etching and deposition intensive (3D NAND).

As for cleaning, coating, deposition, and etching tools, Applied Materials, KLA, and Lam Research build world-class machines for these steps. However, if a particular process technology and production flow already integrates a certain system from Tokyo Electron, then switching to a different tool is extremely complicated and takes time. Also, some tools are unique and are designed for a very specific process or flow, which makes their replacement even more complicated.

In general, this sudden increase undermines the significant capital investment plans of companies like Intel, TSMC, and Samsung Foundry, all of which are building or expanding advanced fabs that cost tens of billions of dollars in the U.S. The impact will not be limited to leading-edge nodes. Companies using mature and specialty manufacturing technologies, including GlobalFoundries and Texas Instruments, will also pay more for their needed equipment. In the end, the added costs will push up the price of chips produced domestically.

A 43-year-old Russian engineer is accused of secretly supplying sensitive technical information from ASML, NXP, and TSMC to Russia, allegedly to assist in building a 28nm-capable fab there, reports Dutch newspaper NRC.

The engineer, identified in court documents only as German A., illicitly earned about €40,000 and now faces 18 to 32 months in prison. Though German A. alone could not steal full designs for a semiconductor, a coordinated group could potentially assist semiconductor production in Russia.

Hundreds of confidential documents stolen

German A. is accused of supplying Russia with confidential technical materials from ASML, GlobalFoundries, NXP, TSMC, and GlobalFoundries, including semiconductor production manuals and various chipmaking machines. The investigators reportedly found that he obtained 105 internal documents from ASML and 88 files related to TSMC.

The materials did not contain complete blueprints for building wafer fabrication equipment or something more significant (e.g., a fab itself or how to design a process technology). Still, they were labeled confidential and could support the setup of a basic semiconductor line capable of producing chips at 28nm-class process technology, which is good enough for military applications.

Investigators believe he shared this data via cloud storage and messaging apps and handed over a USB stick in Moscow, allegedly earning around €40,000 in the process.

German A. is reportedly also linked to an attempt to acquire a chemical vapor deposition tool, possibly as part of efforts to equip a future chip facility in Russia. However, according to the report, the tool was first redirected to Israel and then never delivered.

In August 2024, German A. was taken into custody following a report from the national intelligence agency. A month later, ASML and NXP were officially informed of the espionage suspicion. His case is now being handled in court, and authorities suspect ties to Russian intelligence. Both firms are involved in the investigation and have filed complaints against the former employee.

While German A. could not possibly steal blueprints of all tools necessary to build a fully functioning semiconductor production facility in Russia, a network of such spies could potentially do the job and revive semiconductor production in the hostile nation.

A long career

Before his arrest in 2024, German A had a long career in the semiconductor development and production industry. In 2008 and 2009, he interned at Imec, a research center in Belgium. After that, he joined the Greek research institute NCSR and later started to work at Fab 1, a Dresden facility of GlobalFoundries.

In 2015, he joined a Dutch start-up called Mapper, which developed a maskless lithography technology based on massively parallel e-beam writing using 10,000 – 13,000 e-beams. Mapper received financial backing from Rusnano, a state-controller high-tech investor, in 2012 and built a small site in Russia to manufacture MEMS (micro-electromechanical systems).

When Mapper went bankrupt in late 2018, ASML absorbed its assets and personnel under pressure from the Dutch and U.S. governments to protect the technology. German A. was among over 100 engineers who moved to ASML, where he operated machines for producing electro-optical components. For now, ASML's employees describe German A. as a 'not high flyer,' whereas others claim he was a committed but introverted technician who had difficulty communicating.

However, according to NRC, German A.'s name appears on four patent filings associated with ASML, the latest of which was published just a month ago. These documents list several inventors, and it is unclear whether German A. played a significant role in those innovations.

A review of his digital activity shows that he accessed restricted files on two days in December 2020, even though he had no need for them. At the time, the company's internal security systems did not raise any alerts. Experts asked by NRC believe the leaked data includes presentations and manuals but not the core plans needed to construct chip machines or an entire plant. His contract ended in 2021 when ASML outsourced his work.

After ASML, German A. used recruitment agencies to look for work in research roles but was unsuccessful. In January 2022, during the pandemic, he joined NXP in Nijmegen on a temporary contract as a process technician. In May of that year, he contacted a company in Nijmegen to request a quote for a used chemical vapor deposition tool from ASM International. Initially, the equipment was supposed to be shipped to Germany, but he later changed the destination to Israel. The item was never delivered. This is now seen as an attempt to gather parts for a new facility.

Statements from his former spouse reveal that by late 2023, he was in touch with Russian researchers about building a fab in Russia capable of producing chips using a 28nm technology. Back then, Russian entities were blacklisted and could not get advanced chips from prominent suppliers, whether distributors or foundries.

That same year, he held a one-year position at TU Delft but remained isolated, and investigators found no signs of theft there.

Not first time

Both ASML and NXP experienced breaches involving unauthorized access in the past. In late 2023, it was revealed that a cyber group linked to China had been covertly operating within NXP's systems for an extended period. ASML also battles frequent cyberattacks and insider threats: in early 2022, a former Chinese employee stole confidential data. Although that employee, just like German A., lacked access to complete designs needed to construct a fab tool or equip a fab, a broader network of similar operatives could realistically piece together enough to boost the semiconductor industries of China and Russia.

In response, both companies have strengthened their digital defenses: internal systems now limit access between departments and employee activity is tracked for unusual behavior.

GlobalFoundries is mulling a possible merger with Taiwanese semiconductor producer United Microelectronics Corp. to strengthen their shared role in making chips using mature and specialty process technologies, according to an assessment document reviewed by Tom's Hardware.

The document outlines plans for 'Project Ultron,' which is meant to create a powerhouse controlling a significant share of the global production of chips. However, the plan will likely face major financial, political, and regulatory challenges. Nikkei has also reported on the matter, citing that it has reviewed an assessment plan. UMC has denied involvement, saying it is not currently conducting a merger.

After ceasing to develop leading-edge process technologies in the late 2010s, GlobalFoundries and UMC focused on specialty and mature process technologies. Avoiding competition with TSMC, Intel, and Samsung Foundry enabled the companies to focus on profitability and growth.

The semiconductor market in general, and the foundry market in particular, have changed significantly in recent years, however. SMIC has become a much bigger competitor than it was seven or eight years ago, and China has invested tens of billions of dollars into fabs that use mature process technologies. By contrast, GlobalFoundries's revenue has declined since 2022, whereas UMC's revenue has stagnated in recent years after peaking in 2022.

Tim Breen, named GlobalFoundries's next chief executive in February, will take over in April and is considering acquiring UMC, one of GF's main rivals. Combining two major foundries would create a stronger competitor in the mature-node segment (e.g., 28nm and above), essential for automotive, industrial, and legacy applications.

The combined company is expected to control around 28% of the mainstream node foundry revenue, and a greater scale would enable better pricing power, operational efficiency, and stronger negotiating leverage with customers. The GF-UMC, if combined, will still be smaller than TSMC, which controls 44% of the mainstream node share.

There is a rationale for GlobalFoundries to buy its rival and for UMC to become a part of GF. The mature-node segment is increasingly threatened by low-cost Chinese fabs, and a combined GF-UMC entity could consolidate global capacity and better compete on cost, scale, and reliability. Also, UMC and GF have different but complementary customer sets, so a merger could enable cross-selling, better utilization of fabs, and more diversified revenue streams, reducing business risks.

Also, UMC is heavily concentrated in Taiwan, while GF operates fabs in the U.S., Germany, and Singapore, so a merger would spread geographic risk, reduce reliance on Taiwan, and appeal to customers and governments looking for supply chain resilience. Taiwan would still lead with 40% of capacity (UMC), followed by Singapore with 25% (shared by both), and smaller shares in China (11%), Germany (9%), the USA (9%), and Japan (6%). Growth is expected in the USA, Germany, and Singapore, while capacity in China and Taiwan is projected to decline.

Last but not least, GlobalFoundries – UMC will have the scale to develop new 'single-digit nanometer' process technologies, which will open doors to new applications and design wins for the combined company, according to the document. However, it remains to be seen whether it will invest in sub-10nm process technologies to compete against TSMC, Intel, and Samsung Foundry.

While the idea for GlobalFoundries to acquire UMC is an ambitious project that has a lot of rationale, it will be hard to accomplish. The market capitalization of GlobalFoundries is $20.41 billion, whereas the market capitalization of UMC is $16.86 billion. GF does not have the cash to acquire UMC now, so it will either have to take on debt, issue more shares, or ask its main investor, Mubadala, for cash.

However, even if funding is secured, regulatory barriers could prevent the transaction from happening. If GlobalFoundries were to take control after a deal, that outcome would likely be opposed by the Taiwanese government. Chinese approval could be hard to obtain too as the new entity will be a tough rival for Chinese mature nodes fabs. However, if the merged company commits to build additional capacity in China, this could change the mind of regulatory organizations in the People's Republic.

A group of European countries led by the Netherlands is setting the groundwork for the European Chips Act 2.0 after the original one failed to achieve its goal of strengthening the European semiconductor industry, reports Reuters.

The group aims to deliver concrete proposals by summer to work closely with the European Commission. The politicians indicated their work after producers of chips and chipmaking tools asked the EC to launch a follow-up for the 2023 Chips Act.

The group includes nine European Union members led by the Netherlands, including France, Germany, Italy, and Spain, which already have semiconductor industries (except Spain, which is more focused on R&D activities). Dutch Economy Minister Dirk Beljaarts explained that this group is preparing for a potential second funding package for the semiconductor industry, including both small and medium-sized companies.

"We need to allocate funds," Beljaarts told Reuters. "Both private and public funds to push the sector, also to make sure that the trickle-down effect takes place and that (small and medium-size) companies also benefit."

The 2023 Chips Act program, which is currently under review, failed to achieve any significant targets as it required the EC to approve projects funded by member countries and the EC (yet most of the projects were funded solely by member countries). The approval processes required by the EC, member countries, and local authorities were too slow for the rapidly developing semiconductor industry.

As a result, Intel and Wolfspeed postponed building major production facilities in Europe since economic situations changed while awaiting their approvals. According to Beljaarts, the intention this time is to be more selective and strategic in funding decisions.

Europe is strong in areas like research and development as well as chipmaking tools (ASML, ASM International, Carl Zeiss SMT, SUSS MicroTec, etc.). However, only Intel makes chips using advanced process technology in Ireland. Other European chipmakers use trailing nodes.

Because of interest in selling their most advanced tools and government funding, makers of semiconductor production equipment have called the EC to launch the second round of funding.

After a gathering in Brussels with European lawmakers, ESIA and SEMI Europe (organizations uniting producers of chips and chipmaking equipment) said they would formally address their proposal to Henna Virkkunen, the EC's digital official. SEMI stated the need for direct backing in several areas beyond fabs, including 'semiconductor design and manufacturing, R&D, materials and equipment.'

More than a dozen companies joined the meeting. Among them were chip manufacturers Bosch, Infineon, NXP, and STMicroelectronics, as well as equipment suppliers ASML, ASM, Zeiss, and Air Liquide.

Jensen Huang, chief executive of Nvidia, confirmed at GTC 2025 that the company plans to spend hundreds of billions of dollars on chips made in the U.S. over the next four years, reports the Financial Times. This decision comes as the company works to lessen its reliance on Asian manufacturing due to potential tariffs under the Trump administration and geopolitical instability surrounding Taiwan. The company is also producing Blackwell systems in the US.

Nvidia to spend hundreds of billions on American chips

"We are in it," Huang said at a GTC press conference, answering a question about production at TSMC Arizona, reports Reuters. "We are now running production silicon in Arizona." Huang also confirmed to the Financial Times that Blackwell systems are being produced in the US.

Huang did not elaborate on which chips are being manufactured at TSMC’s Fab 21 in Arizona, nor did he disclose volumes that Nvidia is producing there. The phrase ‘running production silicon’ means that actual chips (not test or prototype chips) are being manufactured. It does not necessarily imply high-volume production.

But while the volumes of Nvidia’s chips made in the U.S. remain unclear, Nvidia is set to increase manufacturing in America over the course of the next four years.

“Overall, we will procure, over the course of the next four years, probably half a trillion dollars’ worth of electronics in total,” Jensen Huang told the Financial Times. “And I think we can easily see ourselves manufacturing several hundred billion of it here in the U.S.”

It should be noted that while unit sales of discrete GPUs for client PCs are generally decreasing, the die sizes of flagship graphics processors are increasing, so the silicon real estate that Nvidia produces is also expanding. Additionally, sales of Nvidia’s gigantic data center GPUs are on the rise, and the company expects this to continue for the next several years. Therefore, it is not surprising that the company plans to spend roughly $500 billion on chips in the next four years.

Nvidia is mostly known for its GPUs for client PCs and data centers. In addition to GPUs, Nvidia also designs its own CPUs, DPUs, NVLink switches, networking chips, and system-on-chips (SoCs) for vehicles as well as various embedded applications. The vast majority of Nvidia’s silicon is produced by TSMC, though some chips are made by other foundries.

However, Nvidia’s products and Nvidia-based products also use numerous other chips not designed by Nvidia or produced by TSMC.

For example, the company uses CPUs developed by AMD and Intel, as well as GDDR and HBM memory made by Micron, Samsung, and SK hynix. It also uses a variety of components from other suppliers, including retimers, system management controllers, clock generators, power management ICs, analog devices, and various controllers/microcontrollers, to name a few.

Companies producing memory (Micron, SK hynix) and other components (Analog Devices, GlobalFoundries, Texas Instruments) are all building new production capacity in the U.S. (Micron’s fab is coming online in 2027, SK hynix is expected to follow in 2028, and TI’s SM1 fab is expected to be operational in 2025).

As a result, Nvidia may increasingly source these components from American facilities. Furthermore, Nvidia’s next-generation x86 servers will use AMD or Intel CPUs that could be produced by either TSMC in Arizona or Intel in Arizona. 

That said, with the expanded production of semiconductors in the U.S., it would not be surprising if Nvidia spent several hundred billion dollars on silicon made in America in the coming years. However, a key question is whether by ‘hundreds of billions’ Jensen Huang meant closer to $125 billion or between $250 billion and $300 billion, as many new fabs in the U.S. are coming online in the latter half of the decade.

Last week, U.S. President Donald Trump called on Republican legislators to revoke the CHIPS and Science Act that was passed during the previous Biden administration, as he considers it a waste of taxpayers' money. Republican lawmakers were not exactly enthusiastic about the proposal, as their districts have benefited from investments already made by leading chipmakers. Also, the U.S. government remains legally obliged to distribute already allocated funds ($39 billion), so leading companies that plan to build fabs in the U.S. will get their money.

Supporting this reticence, Bloomberg recalled an earlier prediction of the Semiconductor Industry Association that the U.S. market share on the semiconductor market would have dropped below 10% if it had not been for the CHIPS and Science Act. It suggests that the Trump administration should probably think twice before revoking the law.

$450 billion at stake

The CHIPS and Science Act, enacted in 2022 under President Biden, is a $52 billion strategy to strengthen U.S. semiconductor manufacturing and reduce reliance specifically on Asian suppliers. The Act provides $39 billion in grants to boost chip manufacturing, $11 billion for research and development, and a 25% tax credit for manufacturing projects. Companies can also access up to $75 billion in loans and guarantees.

The tax credit is projected to cost over $85 billion in government revenue, surpassing original estimates and reflecting significant investment levels. Trump argues that tariffs would better encourage domestic investment while generating federal revenue and plans to introduce new tariffs on semiconductor imports by April 2025. Some believe that TSMC’s commitment to invest an additional $100 billion in its U.S. campus was a way to avoid the imposition of tariffs on chips made in Taiwan.

However, the enactment of the law has already driven nearly $450 billion in private investment by leading semiconductor companies, including Intel, GlobalFoundries, Micron, Samsung, SK hynix, Texas Instruments, and TSMC, just to name a few. To secure their grants and tax credits, these companies signed contracts with the federal government and must comply with a number of regulations. By contrast, TSMC’s commitment seems to be a plan that can change and is not legally binding.

Political Hurdles

Repealing the CHIPS Act faces political hurdles. It passed with bipartisan support, and many Republican-held districts have been chosen for funded factories. A full repeal is unlikely given the narrow Republican majority in the House and the likelihood of Democratic opposition in the Senate.

Despite difficulties in repealing the Act, the Trump administration could attempt to alter certain provisions. Potential changes include removing labor-friendly or environmental requirements. Adjusting benchmarks for fund disbursement or altering contract terms could also be pursued to reshape the program’s impact.

While changes to individual agreements are possible, the Trump administration remains legally obligated to distribute the $39 billion allocated by September 2026. Some contracts allow the government to delay or recover funds under specific conditions, but overall, the administration has limited power to significantly disrupt funding without congressional action.

To overcome these constraints, the administration may consider softer changes, such as removing requirements like childcare facilities at production sites. This approach could offer a political win while avoiding major disruptions. However, companies are wary of contract renegotiations that could delay projects or reduce funding certainty.

Additionally, changes may be difficult to impose and renegotiate in a timely manner. The U.S. Commerce Department, which oversees the CHIPS Act, lost about 40% of its workforce due to federal staffing cuts. However, key teams managing funding negotiations and disbursements were largely preserved to ensure continuity in implementation, according to Bloomberg.

Earlier this week, President Donald Trump publicly called for repeal of the CHIPS Act during a televised speech before Congress, criticizing it for delivering wasteful corporate subsidies. While House Speaker Mike Johnson applauded Trump's remarks, many Republican lawmakers, Johnson included, were caught off guard and showed little interest in undoing the legislation, reports NBC.

"Your CHIPS Act is a horrible, horrible thing,” Trump said. "We give hundreds of billions of dollars, and it does not mean a thing. All that was important to them was they did not want to pay the tariffs. You should get rid of the CHIPS Act. And whatever is left over, Mr. Speaker, you should use it to reduce debt. Or any other reason you want to."

The CHIPS Act, passed in 2022 with bipartisan support, allocated $280 billion (in cash, loan guarantees, and tax credits) to boost domestic semiconductor manufacturing and research. It has already spurred investments from companies like Intel, GlobalFoundries, Samsung, SK Hynix, Texas Instruments, TSMC, and many others across different states.

The CHIPS Office estimated that the legislation and incentives motivated semiconductor companies to commit to making $400 billion – $500 billion investments in the U.S. industry.

Mike Johnson has a history of changing his views on the CHIPS and Science Act. Johnson initially suggested repealing the law in 2023 if Trump become the president, but quickly reversed his position after recognizing its importance in battleground districts.

When asked about the future of the act this week, Johnson did not commit to a repeal but acknowledged the need for reforms. He expressed concerns about how the Biden administration was implementing the program and indicated that Republicans would review Trump’s upcoming budget proposal before making decisions.

Other Republican senators, including Todd Young and John Cornyn, defended the law they helped to craft, arguing it has strengthened U.S. supply chains and national security.

Democratic leaders are strongly against the idea of repeal. Senate Minority Leader Chuck Schumer of New York emphasized that the law was designed to strengthen national security, outcompete China, and rebuild U.S. supply chains.

Senator Tammy Baldwin of Wisconsin pointed out that the COVID-19 pandemic exposed vulnerabilities in the country's reliance on foreign semiconductor production. She argued that the legislation had already begun delivering economic benefits.

Key Republican aides indicated in conversations with NBC there were no immediate plans to take action, as other legislative issues were more pressing. Senate Republicans also showed little enthusiasm for undoing the law, acknowledging its widespread economic impact, the difficulty of unraveling ongoing investments, and the time constraints of upcoming legislative sessions.

Even if Republicans wanted to dismantle the act, doing so would be difficult. The CHIPS Act passed with bipartisan support, and with Republicans holding only 53 Senate seats, they would struggle to reach the 60-vote threshold needed for repeal. Additionally, federal funding has already been allocated to projects across more than 20 states, making it legally and politically complicated to unwind.

In a surprising move, GlobalFoundries this week announced that Dr. Thomas Caulfield had been appointed executive chairman, while Tim Breen will become the new CEO, succeeding Caulfield, effective April 28, 2025. While leadership transitions happen occasionally, the Internet rumor mill (Reddit) reacted by speculating that Caulfield, who has been rumored to be a potential replacement for Pat Gelsinger,  could become the next chief executive at Intel. The rumor mill also points to recent highly irregular trade activities in Intel stock as a sign that Caulfield is headed to Intel. 

Before Thomas Caulfield became chief executive of GlobalFoundries in 2018, he was general manager of GF's Fab 8 300-mm facility in New York, and before that, he spent 17 years at IBM Microelectronics from 1989 to 2005. While at the helm of GlobalFoundries, Caulfield sold assets he deemed unpromising, but more importantly, he quit the leading-edge process technology race, leaving it to Intel, TSMC, and Samsung. Instead, GlobalFoundries was repurposed to become a specialty foundry, competing in completely different markets. Eventually, he made the company profitable and guided it through an IPO. 

Thomas Caulfield's role change at GlobalFoundries has sparked speculation about his potential move to Intel. His departure comes without mention of retirement, and given his industry reputation, some Intel investors on Reddit believe that he could become the next CEO of Intel. Caulfield's extensive semiconductor industry experience, including his leadership at GF, operational expertise at IBM Microelectronics, and a doctorate in Materials Science from Columbia University, would make him a highly qualified candidate for Intel's CEO position. 

An unusual Intel stock trade is used to reinforce this theory: On February 4, when 8,913,900 Intel shares were purchased after hours for $172 million — an amount eerily close to the $178.59 million stock-based incentive given to Intel's previous chief executive Pat Gelsinger back in 2021. The Intel stock transaction was nearly three times the company's average daily trading volume, making it a highly irregular occurrence, particularly in the after-market. Large block trades of this nature are rare for Intel, and the timing aligns suspiciously with Caulfield's announcement the following day. 

However, some factors do not align with the theory. Under the terms of the GlobalFoudries shakeup, Thomas Caulfield becomes executive chairman of GlobalFoundries. Being a hands-on chairman typically involves substantial operational oversight or strategic direction, which can clash with the time demands of being a full-fledged CEO elsewhere. Naturally, one could assume that Intel wouldn't want a CEO who would spend significant amounts of time serving other companies. 

Yet, Caulfield will likely have to oversee GF as Tim Breen becomes the next CEO of GF, whereas Niels Anderskouv (currently the chief business officer) will take on the roles of president and COO. Ahmed Yahia Al Idrissi, who has been chairman for over a decade, will step down.

Another factor that should be kept in mind is that while Thomas Caulfield has over 30 years of operational excellence and is deeply respected in the semiconductor industry, he has limited experience running a products company and has zero experience running a products company at Intel scale. 

In general, while Thomas Caulfield has many competencies valued in the industry, his upcoming position at GlobalFoundries and some other factors do not necessarily support the theory that he is set to become the next CEO of Intel. However, Intel might be ready to make concessions to secure a CEO with industry experience. Only time will tell.

U.S. President Donald Trump announced plans Monday night to impose massive tariffs on Taiwan-made chips in an attempt to incentivize companies to relocate production to the United States. On the one hand, this could reduce American companies' reliance on Taiwan in general and TSMC in particular. On the other hand, building a semiconductor fab takes three to four years, so the effect of production moving to the US due to tariffs may not be felt for some time.

"In the very near future, we are going to be placing tariffs on foreign production of computer chips, semiconductors, and pharmaceuticals to return production of these essential goods to the United States," Trump told House Republicans conference (via C-Span.org). "They left us and went to Taiwan; we want them to come back. We do not want to give them billions of dollars like this ridiculous program that Biden has given everybody billions of dollars. They already have billions of dollars. […] They did not need money. They needed an incentive. And the incentive is going to be they [do not want to] pay a 25%, 50% or even a 100% tax."

Trump criticized leading U.S. tech companies, such as Apple, AMD, Broadcom, Nvidia, and Qualcomm, for building their processors at TSMC in Taiwan. He emphasized that the proposed tariffs would leave companies with no choice but to invest in domestic production facilities to avoid high taxes. He also argued that government grants like the CHIPS Act are unnecessary and counterproductive and that companies should use their own resources to build fabs rather than rely on public funding.

However, fabs take years to build, and a leading-edge fab costs tens of billions of dollars. Even if TSMC were to start constructing a sub-2nm-capable fab in the U.S. today, it would come online only in 2028–2029. Assuming that Trump’s administration imposes tariffs on ASICs, CPUs, GPUs, and other types of chips made in Taiwan in the coming weeks, this would make PCs, servers, and smartphones more expensive for companies and individuals in the U.S. immediately, which will hardly serve the U.S. economy well. To avoid this, the administration would need to introduce exemptions, just like it did with China-made graphics cards and motherboards years ago.

Still, tariffs and exemptions are good leverage to make companies like Apple, AMD, Nvidia, and TSMC invest in America and build a significant percentage of their chips in the U.S. For now, TSMC has only one small fab in the U.S. and is building two additional modules. Perhaps the company will have to review its plans for the next four years. Still, chips made in the U.S. are more expensive than chips made in Taiwan.

The proposed tariffs mark a significant shift in U.S. trade policy, signaling an aggressive stance to curb dependence on foreign manufacturing and prioritize domestic production, but it remains to be seen how well this strategy will work.

GlobalFoundries announced that it will build an advanced packaging and testing facility at its Malta, New York fab to support the growing demand for silicon built entirely within the United States. GlobalFoundries said that this extension will also provide assembly and testing for silicon photonics, a tech that combines optical and electrical components to deliver better efficiency and performance than chips that rely just on silicon and copper.

This facility is projected to cost $575 million to construct, and GlobalFoundries needs another $186 million for research and development costs over the next decade. However, New York state will provide up to $20 million to support this project, which is in addition to the $550 million it has already spent to support GlobalFoundries. The U.S. Department of Commerce will also give $75 million in direct funding in addition to the $1.5 billion it received from the CHIPS and Science Act.

“We’re proud to partner at the state and federal level on this new center, which is a direct response to our customers asking for more geodiversity in their supply chains and additional support with advanced packaging solutions for GF silicon photonics, Trusted, and 3D/HI offerings,” says Global Foundries CEO and President Dr. Thomas Caulfield. “The New York Advanced Packaging and Photonics Center will be unique in our industry and will play a vital role in the continued growth of the Empire State’s world-class semiconductor manufacturing and innovation ecosystem.”

The construction of an advanced packaging facility within the United States is crucial for the country’s target of silicon independence. Currently, most of these activities happen in Asia; for example, TSMC is already producing 4nm chips at its Arizona fab, but it still needs to ship them back to Amkor in Taiwan for packaging until the latter completes its own nearby facility.

A GlobalFoundries packaging facility in New York helps ensure chip security because the silicon wafers never leave American borders. More importantly, it is an American company and a trusted U.S. Department of Defense supplier. This makes it a great candidate for producing the advanced chips that the U.S. military needs to maintain global technological supremacy.

The Chinese Ministry of Commerce (MOFCOM) announced it has received complaints from domestic companies about unfair subsidies provided by the Biden administration to U.S. chipmakers under the CHIPS and Science Act, reports state-owned GlobalTimes. As a result, China launched an investigation into U.S. government subsidies, claiming they harm Chinese chipmakers that produce chips on mature process technologies, Reuters reports. 

The Chinese Ministry of Commerce alleges that subsidies under the CHIPS and Science Act, which allocated $52.7 billion for U.S. semiconductor production, research, and workforce development, give American companies an unfair edge. These subsidies reportedly allow U.S. chipmakers to export mature node chips to China at reduced prices, undermining Chinese competitors. 

While the aim of the CHIPS and Science Act was to bring back production of logic and memory chips on leading-edge nodes back to the U.S., the U.S. government awarded billions of dollars to companies that produce chips on specialty or mature process technologies. The list of such companies is not too long and includes contract chipmakers GlobalFoundries and SkyWater Technologies, as well as integrated device manufacturers Microchip, Polar, and Texas Instruments. While there are makers of GaN, SiC, InP semiconductors which received subsidies, the objections cited by GlobalTimes and Reuters only mention 'mature node chips.' 

To get subsidies from the U.S. government, companies must invest millions or billions from their own pocket, therefore  they don't really cut down their CapEx budgets (which could allow them to reduce costs and lower prices). So it's unclear whether the allegations of MOFCOM have merits. However, the U.S. government's subsidies are aimed to make American chipmakers bigger and more competitive in general. 

This is not something that China likes as the country has built and continues to build dozens of fabs that are focused on making chips on 28nm-class process technologies and less-advanced nodes. Most, if not all, of these fabs are constructed with significant subsidies from the Chinese government. Chips made on mature nodes tend to be very cheap, but they are essential for everyday products like home appliances and communication devices, so their addressable market is vast. 

Last year, Barclays predicted that China could expand its chip production capacity by 60% over the following three years, and the vast majority of this capacity will be dedicated to mature nodes. China is certainly interested in ensuring that those fabs have enough customers as it aims to flood the market with cheap chips designed to replace equivalents made in Europe and the U.S.

GlobalFoundries and IBM have resolved all their legal disputes, including the ongoing lawsuits over contract violations, trade secrets, and intellectual property issues. The two companies signed a confidential settlement agreement, opening the door for future collaboration.

IBM and GlobalFoundries filed multiple lawsuits against each other. The lawsuits span from breach of contract obligations by GlobalFoundries to intellectual property usage by IBM. The conflict traces back to 2015 when IBM sold its semiconductor manufacturing business to GlobalFoundries. As part of the deal, IBM agreed to pay $1.5 billion to GlobalFoundries to take over its microelectronics operations and would continue developing advanced process technologies for IBM's processors for mainframes and other applications.

However, GlobalFoundries ceased to develop advanced production nodes in 2018 as it did not have enough high-profile clients to justify multi-billion investments. As a result, it did not have a 7nm-class process technology to make IBM's Z processors meet its partner's needs. As a result, IBM alleged that GlobalFoundries failed to deliver on its promises in 2021. IBM claimed that the semiconductor manufacturer left IBM without high-performance processors necessary for mainframes and sought compensation for damages and negative impact on its business.

In 2023, GlobalFoundries filed its lawsuit, accusing IBM of disclosing sensitive intellectual property to third parties, including Intel and Rapidus. The IP was related to next-generation process technologies and was developed together with GlobalFoundries, so according to the company, IBM had no right to share it after selling its microelectronics unit. The chipmaker argued that IBM could profit from licensing technologies it no longer owned by disclosing the IP.

After years of conflict, the two companies announced a settlement this week. While the terms of the agreement remain confidential, both IBM and GlobalFoundries expressed a desire to move forward and explore potential areas of collaboration.

"We are pleased to have reached a positive resolution with IBM, and we look forward to new opportunities to build upon our long-standing partnership to further strengthen the semiconductor industry," said Dr. Thomas Caulfield, president and CEO of GF.

"Resolving these disputes is a significant step forward for our companies and will allow us to both focus on future innovations that will benefit our organizations and customers," said Arvind Krishna, Chairman and CEO of IBM.

GlobalFoundries (GF) has been awarded up to $1.5 billion under the CHIPS and Science Act to expand its U.S. semiconductor manufacturing operations. The funding will be part of the company’s $13 billion investment plan to expand production capacity at its two U.S. sites over a decade. The U.S. government signed a deal with GF after the company was fined $500 million for violating U.S. export rules, as The Register noticed.

“GF’s essential chips are at the core of U.S. economic, supply chain and national security,” said president and CEO Dr. Thomas Caulfield. “We greatly appreciate the support and funding from both the U.S. Government and the states of New York and Vermont, which we will use to ensure our customers have the American-made chips they need to succeed and win.”

GF will use the funding for three major projects. The first is expanding its Fab 1 facility in Malta, New York, by installing new tools and porting various technologies from its global sites in Singapore and Germany. This will ensure a reliable supply of domestically produced chips for the U.S. automotive sector.

The second project aims to upgrade GF’s Essex Junction, Vermont, fab. The modernization will boost the capacity to produce next-generation gallium nitride (GaN) semiconductors for electric vehicles, data centers, IoT devices, and smartphones.

The third initiative involves constructing another cleanroom module at Fab 1 in Malta, New York. This new facility will manufacture chips for diverse markets, including AI, aerospace, and defense. Over the next decade, this expansion is expected to triple the campus’s chip production capacity.

The combined projects will create nearly 1,000 manufacturing jobs and over 9,000 construction roles. The investment also includes $550 million from New York State’s Green CHIPS Program and contributions from Vermont, GF’s partners, and strategic customers.

GF’s facilities in New York and Vermont are accredited under the Trusted Foundry program, ensuring secure chip manufacturing to meet the requirements of the U.S. Department of Defense and various agencies. This highlights GF’s important role in domestic chip supply.

“By investing in GF’s domestic manufacturing capabilities, we are helping to secure a stable domestic supply of chips that are found in everything from home electronics to advanced weapons systems,” said Commerce Secretary Gina Raimondo. “Thanks to President Biden’s leadership and because of CHIPS for America, we are strategically strengthening every part of the semiconductor supply chain to ensure we meet our national security objectives and can out-compete and out-innovate the rest of the world.”

It is noteworthy that recently the U.S. Commerce Department fined GlobalFoundries $500,000 for sending $17.1 million worth of chips to SJ Semiconductor, an affiliate of blacklisted Chinese chipmaker SMIC, without obtaining the required license, reports Reuters.

GlobalFoundries attributed the violation to a data-entry error made before the blacklisting and highlighted its commitment to maintaining a solid trade compliance program. The company voluntarily disclosed the issue and worked with authorities, earning acknowledgment for its cooperation.

TSMC and GlobalFoundries have finalized CHIPS and Science Act funding agreements with the U.S. government to support their fab projects in America, reports Bloomberg. These will be the first two major foundries to receive actual money under the CHIPS and Science Act, which marks a significant step forward both for the bill and the companies — and it comes just months before President-elect Donald Trump's second administration begins, which creates uncertainty for chipmakers that were negotiating with President Joe Biden's administration.

The finalized agreements offer GlobalFoundries and TSMC billions of dollars in grants and loans to build and expand manufacturing facilities in the U.S. TSMC's agreement includes $6.6 billion in grants and up to $5 billion in loans to develop Fab 21 in Phoenix, Arizona. GlobalFoundries will receive $1.5 billion in grants and up to $1.6 billion in loans to construct a new semiconductor production facility in New York and expand operations in New York and Vermont. The company is also set to get $600 million from the state of New York. 

This funding is part of the CHIPS and Science Act, an initiative with $39 billion designated for grants and additional loans and tax credits, aimed to bring the production of microelectronics on leading-edge process technologies back to the U.S. More than 20 companies are in line for funding under this act, but all applicants have undergone a thorough due diligence process, which has delayed some funding decisions. For example, Intel has invested about $30 billion in its American fabs over the past several but has yet to receive funding from the U.S. government. 

A portion of the CHIPS Act's funds, around $3 billion, remains unallocated and may soon be divided among companies still in preliminary negotiation stages, reports Bloomberg. 

The timing is critical as these funding decisions may transition into the Trump administration. Trump is set to take office in January. Industry representatives are pushing for swift finalization, not only to secure funding but also to prevent potential delays or policy shifts under Trump, who has recently criticized the CHIPS Act. 

House Speaker Mike Johnson (R-LA), for example, recently hinted at possible changes to the CHIPS Act and suggested 'streamlining' the program. While he clarified that a complete repeal was not the goal and that the upcoming administration understands the value of domestic semiconductor production both for economy and national security, he initially said that a repeal was a possibility.

The Biden administration (via Reuters) has announced a $500,000 fine for U.S.-based chipmaker GlobalFoundries following shipments of silicon wafers, valued at over $17 million, to China’s SJ Semiconductor (SJS), a company listed on the U.S. entity list. This list, managed by the Bureau of Industry and Security (BIS), includes firms deemed security threats, requiring special U.S. licenses for technology exports.

Notably, SJ Semiconductor was added in 2020 for connections with Semiconductor Manufacturing International Corporation (SMIC), China’s top chipmaker, which the U.S. alleges has links to the Chinese military. Between February 2021 and October 2022, GlobalFoundries sent 74 shipments of silicon wafers—critical materials in semiconductor manufacturing—to SJS.

This violation was reportedly due to a data error that failed to flag SJS in GlobalFoundries’ screening process. Despite the breach, GlobalFoundries voluntarily disclosed the shipments and fully cooperated with BIS, leading to a significantly reduced fine compared to potential maximum penalties.

The penalty marks one of the few instances where a prominent U.S. semiconductor firm has faced financial repercussions under the U.S. export control policies. GlobalFoundries is a significant beneficiary of the CHIPS and Science Act, aimed at bolstering U.S. chip production. Earlier this year, the company received a $1.5 billion award and $1.6 billion in federal loans to expand its New York manufacturing operations to triple its output over the next decade.

Matthew Axelrod, Assistant Secretary for Export Enforcement at BIS, underscored the importance of vigilance in the semiconductor sector, especially when dealing with restricted parties in China. Axelrod emphasized that the administration expects strict compliance with export controls while noting the agency’s more lenient treatment of companies that proactively disclose compliance issues and take corrective action.

The Biden administration has implemented stringent controls on chip technology sales to China, aiming to prevent U.S. advancements from fueling China’s military developments. However, enforcement has proven complex, as some companies and allied governments voice concerns over the economic impact. Taiwan Semiconductor Manufacturing Company (TSMC) recently revealed that some of its chips have ended up in products by Huawei, a Chinese telecommunications firm under U.S. sanctions, indicating the ongoing challenges in enforcing these restrictions effectively.

One issue with the U.S. semiconductor industry is the lack of qualified talent, with SIA predicting that the shortfall could be as high as 67,000. While the U.S. government has programs to support the industry (including the CHIPS Act, of course), programs that support education and talent growth within the industry have not exactly been widespread and successful. GlobalFoundries is here to help, according to Business Insider.

In May, GlobalFoundries introduced a student loan relief program to help retain and attract workers. The program offers eligible U.S. employees up to $28,500 in loan repayment support over a decade. The program is part of GlobalFoundries's broader efforts to address hiring challenges in the semiconductor industry, which is expected to face a shortage of 67,000 skilled workers by 2030. To fill this gap and ensure it has enough talent in the long run, the company has also established partnerships with educational institutions and launched an internal apprenticeship program, the first of its kind in the sector.

GF's workforce development push aligns with the U.S. government's goals to increase domestic chip production. The 2022 CHIPS Act allocated $52.7 billion to support the semiconductor industry. GlobalFoundries has received $1.5 billion to expand its facilities in Malta and New York, creating 1,500 new jobs over the next decade. Where to take that talent is something that we know now that GlobalFoundres did announce the program with some backing.

According to Business Insider, despite the federal backing and initiatives, GlobalFoundries continues to face difficulties recruiting enough skilled workers, especially for technical roles. However, the student loan relief program is vital to the company's strategy to attract talent in this competitive industry.

The CHIPS and Science Act of 2022 has spurred growth in the American chip industry regarding investments from private companies and massive infusion from the government. Still, challenges persist in meeting the labor demands. The SIA's forecast shows that the current workforce of 345,000 will need to expand to 460,000 by the end of the decade. Broader trends indicate that 1.4 million technical jobs across various industries may remain unfilled by 2030.

Efforts like regional partnerships, growing the domestic STEM pipeline, and retaining international graduates are crucial to alleviating the shortage. Companies like TSMC are already experiencing difficulties hiring locally, particularly in Arizona. Then again, Intel has no problems with hiring in Arizona.

President Joe Biden has enacted a law that exempts certain U.S. semiconductor manufacturing facilities, funded under the CHIPS & Science Act, from undergoing additional federal environmental assessments, reports Reuters. This move is intended to speed up the approval process and prevent potential delays for projects already in progress.

The new legislation prevents fab projects from being subjected to extra reviews under the National Environmental Policy Act (NEPA) 1969. Proponents of the legislation argue that these projects already comply with existing federal, state, and local environmental regulations, and the added NEPA reviews could have delayed them for years. Some environmental groups oppose the law, however, arguing that NEPA reviews are crucial for ensuring the safety of workers and communities potentially exposed to hazardous materials used in semiconductor production.

Under the new law, passed by the House of Representatives on Sept. 24, the Department of Commerce has the authority to act as the lead agency for any semiconductor project that qualifies as a significant federal action under NEPA. This centralizes oversight and simplifies the review process when the Department of Commerce approves or regulates a project. The act also lets the DoC rely on prior environmental studies, planning documents, and decisions made by federal, state, or tribal authorities. As long as these studies meet federal standards, they can be used in place of new reviews, preventing unnecessary duplication of efforts.

There are multiple conditions that fab projects must comply with to avoid NEPA review:

• Construction of the fab started or starts before December 31, 2024.
• The project is funded in the form of a loan or loan guarantee, but not a direct grant from the federal government.
• The financial assistance provided in the form of grants and excluding any loan or loan guarantee comprises not more than 10% of the total estimated cost of the project.

The first requirement is one many chipmakers are likely to fulfill, as multiple fabs, including large projects in Ohio and Arizona, are already underway. The remaining conditions will be far more difficult to achieve. Chipmakers need substantial financial assistance to build expensive fabs in the U.S.

Additional exclusions exist for projects on sites with similar construction or expansion. The sites are owned or leased by the company receiving federal financial aid. This means that companies like Intel and TSMC will not need to wait for additional environmental reviews when they expand their Arizona and Ohio sites.

Although there are now exemptions from federal environmental reviews, the White House assures these fabs will continue to meet key ecological standards, including clean water, air quality, and endangered species protections. Also, individual states have environmental regulations that will complicate the process. For instance, Micron's planned campus in New York is an exception to the new rules, as the company still needs to adhere to the permitting processes mandated by the Clean Water Act, along with various state-level environmental laws.

The UCIe Consortium on Wednesday released version 2.0 of the UCIe specification, which brings support for standardized management of system architecture across different chiplets and support for industry-standard 3D packaging of chiplets with hybrid bonding and bump pitches of variable sizes. The new specification makes it easier to develop, build, and manage system-in-packages (SiP) containing chiplets from different vendors. 

For now, SiPs with UCIe chiplets have to use multiple management frameworks for each chiplet if they use chiplets from more than one vendor. The UCIe 2.0 specification introduces a standardized manageability system architecture that addresses manageability, testability, and debugging (Dfx) across multiple chiplets throughout the SiP lifecycle. In addition, the new spec defines optional UCIe DFx Architecture (UDA), which integrates vendor-agnostic testing, telemetry, and debug fabric within each chiplet to simplify development and bring-up of multi-chip system-on-packages.

Another key feature of UCIe 2.0 is 3D packaging support. UCIe-3D is optimized for hybrid bonding supporting bumps that can be 1 micron or smaller, of 10 – 25 microns, to provide flexibility and scalability. To put these numbers into context: Intel's Foveros 3D technology features 36-micron bump pitches, supporting up to 770 microbumps per square millimeter and 160 GB/s per mm bandwidth. Future advancements will include 25-micron and 18-micron micro bumps — significantly increasing interconnection densities. UCIe-3D will support densities well beyond those currently envisioned by chipmakers; the specification is meant for long-term use. 

Finally, the UCIe 2.0 specification includes optimized package designs to ensure interoperability and effective compliance testing. The purpose of compliance testing is to verify the main-band supported features of a Device Under Test (DUT) against a known-good reference UCIe implementation. This specification sets up an initial framework for testing physical components, adapters, and protocols. 

"UCIe Consortium is supporting a diverse range of chiplets to meet the needs of the rapidly changing semiconductor industry," said Cheolmin Park, UCIe Consortium President and Corporate VP of Samsung. "The UCIe 2.0 Specification builds on previous iterations by developing a comprehensive solution stack and encouraging interoperability between chiplet solutions. This is yet another example of the Consortium’s dedication to the flourishing open chiplet ecosystem."

Semiconductor Manufacturing International Corp. (SMIC), China's largest contract chipmaker, this week announced its financial results for the first quarter of 2023. Despite crushing US sanctions, SMIC is now the world's second-largest pure-play foundry after TSMC. The company managed to outsell GlobalFoundries and UMC, two of the other pure-play foundries, which it used to trail for years. However, it still lags behind IDMs like Intel and Samsung. 

With $1.75 billion revenue for the first quarter, SMIC is ahead of the two other leading pure-play foundries, UMC (which earned $1.71 billion, up 0.8% YoY) and GlobalFoundries (which earned $1.549 billion, down 16% YoY). As a result, SMIC is the No. 2 pure-play foundry in the world for now. 

Two other contract chipmakers — Intel Foundry and Samsung Foundry — are part of multinational conglomerates Intel and Samsung Electronics and serve the needs of their owners as well as third-party customers. In Intel Foundry's case, well over 90% of its earnings come from Intel itself.  

Intel said that its foundry unit's revenue was $4.4 billion in the first quarter of 2024, making it the world's second-largest contract chipmaker by revenue, if you can call it that given that the vast majority of its business is comprised of products it makes for Intel itself. 

As for Samsung Foundry, we estimate that it earned around $3.38 billion: we assumed that SF's revenue represents about 82% of Samsung's Device Solutions division revenue, excluding memory, which was around $4.127 billion for both System LSI and Foundry units in Q1 2024. As a result, Samsung Foundry is now the world's third-largest contract chipmaker by revenue, though its primary client is probably Samsung Electronics itself.

SMIC's revenue for the first quarter of 2024 was $1.75 billion, up 19.7% year-over-year from $1.462 billion in the same quarter a year ago. This increase is due to increasing orders and production of high-performance processors using the company's 2nd Generation 7nm-class fabrication process.

However, SMIC's profitability declined sharply from $231.1 million in Q1 2023 to $71.792 million in Q1 2024 despite increased utilization (80.8% vs 68.1%) and shipments (1.795 million 200-mm equivalent wafers vs 1.252 million 200-mm equivalent wafers). 

The primary reason for lower profitability is SMIC's massive capital expenditure hike from $2.235 billion in Q1 2024 to $1.259 billion in Q1 2023. Another possible reason is that the company is ramping up production of chips on its 2nd-generation 7nm-class fabrication process, which increases its costs but will naturally drive substantial long-term revenue increases. 

The U.S. government is set to invest $3.5 billion in Intel to boost the production of advanced chips for military and intelligence purposes, reports Bloomberg. The payment could be a part of a rumored total incentive package exceeding $10 billion from the U.S. CHIPS and Science Act (encompassing both grants and loans) or could be a part of the proposed Secure Enclave project that is designed for military and intelligence chips and is funded separately. 

The investment involves funding the Secure Enclave program for three years and is poised to make Intel a leading semiconductor player in the defense market. This program is designed to enhance the security and reliability of the supply chain for semiconductors used in military and intelligence applications. The funding is reportedly drawn from the broader CHIPS and Science Act grant pool, though it is unclear whether this is part of Intel's rumored $10 billion grants and loans. 

Intel Foundry head Stu Pann recently confirmed in an interview with Tom's Hardware that the company had signed a major — $1 billion worth — foundry contract with the U.S. Government and Department of Defense. Under the U.S. government's RAMP-C initiative, many industry players, including IBM, Microsoft, and Nvidia, are developing chips for the U.S. military. For Intel, this is a major advantage when it comes to learning how its upcoming nodes perform. However, it should be noted that not all chips for military and intelligence applications need leading-edge fabrication technologies. 

"The government funding allows them to operate with much lower-sophistication PDKs than somebody would normally run test chips with," Pann said. "So that has been really instrumental in helping us learn how our customers view our process/performance, the classic PPAC (power, performance, area, and cost): those test chips tell you what the PPAC looks like." 

This funding announcement comes as the Commerce Department prepares to unveil multi-billion-dollar awards to leading chipmakers, including Intel, Micron, and Samsung. The goal is to bolster domestic semiconductor manufacturing capabilities. The agency has already announced three grants, including a national-security-focused award to BAE Systems's American subsidiary and a $1.5 billion grant to GlobalFoundries for producing older-generation chips, including chips for military and intelligence applications.

The European Commission recently asked for the semiconductor sector feedback as it is trying to formulate the European Economic Security Strategy amid geopolitical tensions and strategic dependencies of the industry. SEMI Europe, a semiconductor industry association, responded to the call and issued a paper that calls for the chip industry international collaboration, establishing a structured dialogue between the industry and legislators and also warning the EU from imposing further restrictions against China.

Although SEMI Europe supports the European Economic Security Strategy's focus on establishing a common framework for achieving economic security, minimizing risks, and plans to support the European microelectronics industry (the so-called European Chips Act) export controls that, among other things, prevent technology leakage, the group stresses that maintaining free trade partnerships is the most effective strategy to ensure security during geopolitical crises. As a result, the new European Economic Security Strategy should not prevent investments from foreign entities and to foreign entities or restrict sales of certain items internationally.

"The success of the European and global semiconductor industry is built upon a complex supply chain and that export controls should indeed be a last resort for cases with genuine concerns for national security," a statement by SEMI reads. "For this reason, in conjunction with increased EU coordination on export controls, the EU should continue to advocate for a multilateral and rules-based global order."

Instead, SEMI contends that export controls should be coordinated between all member states and focused on clearly identified risks, not on hypothetical risks of weaponization of certain technologies. Such risk assessment could be handled by a forum akin to the Wassenaar Agreement, which is said to be no longer capable of establishing and enforcing export control rules that are agreed upon multilaterally and without placing unjustified burdens on the industry.

In addition, SEMI Europe emphasizes the importance of international cooperation and maintaining competitiveness and stresses the need for the European semiconductor industry to have the liberty to make investment decisions without excessive restrictions. The group argues that any limitations on investment could diminish the agility and relevance of European semiconductor companies, ultimately affecting their long-term competitive positions.

The association also raises concerns about the potential negative impact of rigorous vetting of inbound investments. Such measures, according to SEMI Europe, could deter companies from investing in the region and undermine the objectives of the European Chips Act, which aims to bolster the semiconductor industry in response to similar initiatives in China, South Korea, Taiwan, and the United States. The document also recommends measures to strengthen the high-tech ecosystem, such as targeted funding and public-private partnerships. 

Finally, SEMI Europe calls to initiate ongoing structured discussions with the industry to avoid imposing unnecessary due diligence, risk management, and reporting requirements that increase the administrative load for businesses and ultimately slow down innovation.

So far, the government has received over 600 statements of interest for funding under the U.S. CHIPS and Science Act from big and small companies, and right now, it is in the process of distributing funding in a bid to revitalize the American semiconductor industry. Gina Raimondo, the U.S. Commerce Secretary, admitted that some companies are more likely to receive funding than others as one of the goals of the CHIPS and Science Act is to onshore 20% of leading-edge chips production by 2030.

"We think our investments in leading-edge logic chip manufacturing will put this country on track to produce roughly 20% of the world's leading-edge logic chips by the end of the decade," said Raimondo at a news conference dedicated to the CHIPS Act Implementation. "That is a big deal. Why is that a big deal? Because folks, today, we are at zero. […] So, a year ago, before we saw the applications, I did not know exactly what we could do. […] Today, I am confidently standing before you to say by the end of the decade, we are going to go from zero to 20% of leading-edge [chips] built in the United States of America."

TSMC mass produces chips on N3B and N3E 3nm-class process technologies in Taiwan, and these can be considered the world's most advanced production node. Meanwhile, Intel is about to kick off mass production of chips on its Intel 20A fabrication process, a 2nm-class fabrication process that could offer better characteristics than TSMC's N3B. Intel is then expected to start making chips on its Intel 18A process technology in 2025, and the company says that node will clearly outperform TSMC's competitor. 

This will certainly increase the U.S.'s share of chips made using a leading-edge process technology. Still, because TSMC has more customers than Intel Foundry, Taiwan will remain the main producer of some of the world's most advanced chips for quite some time. Meanwhile, as Intel Foundry gains customers, it will inevitably become a considerably bigger player in the market of leading-edge logic, especially considering that it will have at least three major manufacturing sites in the U.S. (in Oregon, Arizona, and Ohio). 

Interestingly, Raimondo seems quite optimistic about building advanced semiconductor production sites in the U.S.

"Last year, I said the goal, when we are all said and done with this CHIPS initiative, is to have at least two new large-scale clusters of leading-edge logic fabs," said the Commerce Secretary. "Each of those clusters employs thousands of workers. I am pleased to tell you that today, we expect to exceed that target."

But while producing advanced chips in America is important, what is perhaps more important is that U.S.-based companies will develop processors in the country.

"By the end of this decade, by 2030, the United States of America will be the only country in the world where new chip architectures can be invented in our new research labs, including those funded by the NSTC," said Raimondo. "There will [chips] be designed in the United States for every end-use application you can think of and manufactured at scale in the United States by well-paid American workers and packaged with the most advanced technology in the world."

In addition to investing in the chip manufacturing sector, the U.S. government also plans to invest in various engineering schools across the country to ensure that there are enough specialists to work at those new fabs and build new fabs.

"Engineering schools all over the country will be pumping out more engineers and technicians trained specifically for the chips industry," said the Commerce Secretary. "We are going to make building hardware sexy again."

The U.S. Department of Commerce has set a conference call regarding implementing the U.S. CHIPS and Science Act. The call is entitled 'Investing in Leading-Edge Technology,' which is self-explanatory, so expect it to focus on pouring money into the semiconductor industry and the production of advanced chips.

The commitment of the U.S. government to rejuvenate the semiconductor industry is evident from the 2022 CHIPS and Science Act, which provided $39 billion in direct grants and another $75 billion in loans and loan guarantees to attract leading semiconductor companies to set up manufacturing operations in the U.S. The U.S. Commerce Department is in the process of allocating these funds to various applicants. It has already announced three awards to major industry players, including the American subsidiary of BAE Systems, GlobalFoundries, and Microchip Technology, which serve American companies that the government considers crucial for U.S. national security.

Meanwhile, none of the allocations have been invested in leading-edge fabs, such as those set to be built by Intel (which are set to produce chips on Intel 20A and Intel 18A process technologies in Arizona and Ohio, which belong to 2nm and 1.8nm nodes) as well as advanced fabs, such as those already built (at least on the shells level) by TSMC and Samsung in Arizona and Texas.

Meanwhile, based on a Bloomberg report citing sources familiar with the situation, the U.S. government is in talks to provide Intel with over $10 billion in subsidies under the CHIPS and Science Act. If confirmed, this would be the most prominent award package announced so far under the act, which aims to boost domestic semiconductor production. $10 billion is a lot of money to organize a news conference.

The expected financial support for Intel is likely to include loans and direct grants, with the distribution specifics still being negotiated, the report says. Neither Intel nor the U.S. Commerce Department has officially confirmed the $10 billion package. Intel has been in the running to receive substantial subsidies from the U.S. government for some time, so the company is more than likely to get quite some money.

U.S. Commerce Secretary Gina Raimondo emphasized the necessity for ongoing investments in the American semiconductor industry to regain global leadership and fulfill demand for artificial intelligence (AI) processors. She highlighted the significance of the U.S. government's effort to fund the chip industry amid global challenges during a virtual appearance at yesterday's Intel Foundry event, reports Bloomberg. 

"I suspect there will have to be — whether you call it CHIPS 2 or something else — continued investment if we want to lead the world," said Raimondo. 

Raimondo's remarks underscored the importance of the semiconductor sector, particularly in light of the increasing computational demands of AI technologies. She cited her discussions with Sam Altman, CEO of OpenAI, who is seeking U.S. government support for his chip venture. According to Raimondo, the sheer volume of chips required for AI applications, as projected by industry leaders, is astonishing. Meanwhile, a surplus of AI processors will enable more companies to adopt artificial intelligence, which will be a competitive advantage for the U.S. 

The U.S. government's commitment to revitalizing the semiconductor industry is evident in the 2022 CHIPS and Science Act, which allocated $39 billion in direct grants and an additional $75 billion in loans and loan guarantees. The Commerce Department is actively distributing these funds among numerous applicants, with three awards already announced to key players in the industry, including the American subsidiary of BAE Systems, GlobalFoundries, and Microchip Technology. 

Meanwhile, Intel is reportedly negotiating for over $10 billion in grants and loans to support its expansion plans, including a20 billion on initial two fabs in Ohio and a $20 billion expansion in Arizona. Pat Gelsinger, chief executive of Intel, expects an announcement about the award soon, but Raimondo remains tightlipped about the plan. 

While the U.S. Department of Commerce is yet to distribute the CHIPS Act money that it has, the very assurance of the U.S. government to revitalize the domestic semiconductor industry has attracted massive investments in the sector. Various semiconductor companies have either invested or committed to invest over $230 billion into the U.S. chip industry. These companies include Intel, GlobalFoundries, Micron, Samsung, Texas Instruments, and TSMC.

The U.S. Department of Commerce on Monday revealed its intention to provide $1.5 billion in direct funding to GlobalFoundries under the U.S. CHIPS and Science Act. Additionally, the company is set to receive over $600 million in support from the state of New York over the next decade to aid in its growth and modernization efforts. This financial support will enable GlobalFoundries to upgrade existing manufacturing capacities in the U.S. and build new ones to meet the demand for U.S.-made chips in automotive, aerospace, defense, and other industries.

GlobalFoundries said it has a $12 billion investment plan for its U.S. manufacturing sites over the next decade that involves public-private partnerships with federal and state governments and strategic ecosystem partners. The company said that this investment package is expected to help it meet the increasing demand for domestically produced chips and create over 1,500 manufacturing jobs and approximately 9,000 construction jobs. 

By supporting GlobalFoundries and encouraging it to invest in American semiconductor facilities, the U.S. government boosts the competitiveness and strength of the U.S. semiconductor industry, which is among the key purposes of the CHIPS and Science Act. GlobalFoundries has outlined three key projects to invest in in the upcoming quarters.

First, the company intends to expand its Fab 8 in Malta, NY, to manufacture chips for automotive applications using fabrication technologies already in use at its facilities in Germany and Singapore, which essentially means bringing trailing nodes to Fab 8. This upgrade is vital for meeting the growing demand from the automotive sector as it transits to electric and software-defined vehicles. Additionally, the project will broaden the scope of GloFo's Malta fab and increase its importance for important fundamentals, such as automotive.

Second, GlobalFoundries intends to construct an all-new fab module on its Malta campus. This upcoming facility aims to satisfy future demand for chips made in the U.S., catering to a variety of sectors such as AI, automotive, aerospace, and defense. The establishment of this new facility, coupled with the enlargement of the existing fab, is projected to triple Malta's present output to over one million wafer starts per year over the next ten years, which equals approximately 83,300 wafer starts per month (WSPM).

Last, the company aims to revamp its Essex Junction, Vermont facility by upgrading existing fab tools, expanding capacity, and installing tools needed to mass-produce next-generation gallium nitride (GaN) chips whose usage is growing in various applications such as electric vehicles, data centers, communications, and power grids.

"These proposed investments, along with the investment tax credit (ITC) for semiconductor manufacturing, are central to the next chapter of the GlobalFoundries story and our industry," said Dr. Thomas Caulfield, president and CEO of GlobalFoundries. "They will also play an important role in making the U.S. semiconductor ecosystem more globally competitive and resilient and cements the New York Capital Region as a global semiconductor hub. With new onshore capacity and technology on the horizon, as an industry we now need to turn our attention to increasing the demand for U.S.-made chips, and to growing our talented U.S. semiconductor workforce."

Companies like AMD, Qualcomm, General Motors, and Lockheed Martin have praised the grants, emphasizing the importance of the U.S. semiconductor supply chain for emerging applications in automotive and IoT industries as well as global trends like 5G, AI, high-performance computing (HPC), and edge computing. 

According to a Bloomberg report that cites people familiar with the matter, ' the U.S. government is in discussions to provide Intel with over $10 billion in subsidies under the CHIPS and Science Act.' If the information is accurate, this will be the most significant award package announced under the act designed to revitalize domestic semiconductor production.

Intel's potential financial package is expected to consist of loans and direct grants, although the exact distribution between these is still under negotiation. The funding is a segment of the larger $39 billion in direct grants and $75 billion in loans and guarantees allocated by the CHIPS Act to entice top semiconductor firms to establish manufacturing bases in the U.S. Neither Intel nor the U.S. Commerce Department has formally confirmed the $10 billion package. Meanwhile, Intel has been a candidate to receive billions in subsidies from the U.S. government for a while.

The Bloomberg report states that since President Joe Biden's tenure began, chip companies have poured over $230 billion into U.S. investments. The administration aims to create at least two advanced manufacturing clusters on American soil by the decade's end. So far, the plan has been a success.

Intel is building up its first brand-new site in decades in Ohio, which is expected to require investments of over $100 billion to be fully built. The project requires about $20 billion in initial investments in the first two fabs. While the project might be delayed by a year or two, it will still become operational this decade. In addition, Intel is investing $20 billion in Arizona expansion and $3.5 billion in its New Mexico site. Meanwhile, the company's expansion plans hinge on the anticipated government funding.

In addition to Intel, TSMC has established its first campus in Arizona to produce chips on some of its most advanced manufacturing nodes. The company will start with 4nm and 5nm-class process technologies and then expand the campus to make 3nm-class chips. Yet again, the project entirely depends on government funding.

GlobalFoundries, Micron, Samsung, Texas Instruments, and several other chipmakers are also expanding their presence in the U.S. due to anticipated support from the government.

The U.S. Commerce Department has already distributed smaller CHIPS Act grants to other companies and anticipates more substantial announcements in the upcoming months.

To ensure the maximum utilization of their fabs today and in the future, Chinese chipmakers have already started cutting tape-out prices to retain existing customers and attract business from Taiwanese IC design companies, reports IJIWEI (via TrendForce). This trend comes as China is expanding its mature node production dramatically as it appears to plan to flood the market with chips to push out competitors. Chinese contract chipmakers have yet to increase their output considerably, but gaining customers will be important as it increases production throughout the coming quarters.

Mainland China-based SMIC, Hua Hong Semiconductor, and Nexchip reduced their tape-out service prices last year for Taiwanese chip design companies to secure orders for new capacity. As a result, some customers of GlobalFoundries, PSMC, Samsung Foundry, and UMC canceled their orders with their regular production partners as they geared up to move them to Mainland China's wafer fabs, according to the report.  

In response to the Chinese price cuts, Taiwan-based UMC and PSMC reportedly had to lower their prices to remain competitive. UMC reportedly reduced its quotes for its 300-mm wafer foundry services by 10% to 15% and 200-mm wafer services by around 20%. This change took effect in the fourth quarter of 2023, indicating a direct reaction to the market pressures initiated by Chinese foundries. The report claims that Samsung Foundry also joined this price competition in the first quarter of the year, offering discounts ranging from 5% to 15%. 

In addition to looming capacity expansion at Chinese foundries, the semiconductor market's overall sluggishness in 2023 catalyzed some of these price reductions. China and South Korea have reduced their prices aggressively, with cuts of 20% to 30% observed in 200-mm and 300-mm mature processes. Taiwanese foundries have also had to cut pricing to maintain their market positions.  

Even TSMC, which is the world's No. 1 foundry that earned 75% of its revenue in Q4 from FinFET-based process technologies (16nm and below), made some adjustments to its quotes to make its services a little bit more attractive to customers amid slow demand for chips, the report claims. In particular, TSMC reduced mask services costs for the processes (which is set to make masks cheaper for new designs), but the extent of cuts depended on order volumes.

With China-based foundries cutting down their tape-out quotes and production prices even before they install all the tools they procured and build all the fabs they are constructing, we can only wonder how they will behave once the new capacity comes online. The sanctions against China's semiconductor sector do not affect mature nodes, so Chinese companies can and will steal customers of other foundries using mature technologies in the coming years.

With dozens of fabs being built in China and coming online over the next few years, China is poised to expand its chipmaking capacities dramatically. Most of these fabs will produce chips using mature process technologies, enabling China to flood the chip market on these nodes. Meanwhile, experts from market research company TrendForce warn that this could lead to an oversupply of capacity, making foundries cut their quotes, and some may go bankrupt. 

China currently has 44 wafer fabs, excluding seven inactive ones. Among these, 25 are 300-mm fabs, five process 200-mm wafers, and four process 150-mm wafers, according to TrendForce. By the end of 2024, companies like SMIC, HuaHong, Nexchip, CXMT, and Silan aim to add ten more wafer fabs to this list, comprising nine 300-mm fabs and one 200-mm facility. There are 23 more fabs under construction, including 15 300-mm and eight 200-mm facilities, bringing the total new wafer fabs to 32, and all of them are expected to come online in the coming years.

These new and upcoming fabs focus primarily on mature process technologies, specifically 28nm and thicker. To build those fabs, Chinese companies acquired hundreds of lithography tools from ASML, and importing lithography equipment from the Netherlands saw a 1050% surge in 2023. This indicates a concerted effort by China to ramp up its chip manufacturing capabilities, particularly in mature technologies that are used to build chips for a wide range of applications, including consumer electronics and Internet-of-Things.

TrendForce forecasts a global ratio of mature (greater than 28nm) to advanced (less than 16nm) semiconductor processes at around 7:3 from 2023 to 2027. With China's capacity in mature processes expected to grow from 29% to 33% by 2027, there's potential for a significant influx of these chips into the global market, potentially triggering a price war. This growth also indicates a trend towards increased localization in sectors like display driver IC (DDIC), CIS/ISP, and power management ICs (PMICs), posing risks of client erosion (i.e., smaller fabless chip designers go bankrupt) and pricing pressures for smaller foundries with similar processes.

The U.S. semiconductor industry is facing a big talent problem: it will be short of 67,000 employees by 2030, according to estimates by the Semiconductor Industry Association (SIA), a lobbying group for the sector. Efforts to develop local talent in the U.S. are ongoing, but there is still a big gap, which is why the industry depends on engineers, computer scientists, and technicians from abroad. 

However, the U.S. H-1B Visa system is making it tough to bring in and keep these workers, so the U.S. chip industry is calling on the U.S. government to rethink it, according to an article from Semiconductor Engineering. One of those options is a new type of visa specifically for the semiconductor industry.

A new type of visa —  a Chipmaker's Visa — specifically for the semiconductor industry has been proposed by the industry and the Economic Innovation Group (EIG). This proposal aims to provide a more streamlined process for industry-specific talent acquisition. The urgency of these measures is underscored by the industry's crucial role in national security and the broader economy.

If the U.S. government were to follow EIG's proposal, it would auction off 2,500 visas per quarter, a total of 10,000 per year.  The group cites a 2013 study from Orrenius et al, estimating that if H-1Bs were subject to auction pricing, they would go for between $5,000 and $10,000 each. 

If a company wanted to use the visa system to avoid paying domestic applicants a market salary, the added cost of buying the visas would eliminate that benefit. On top of that, only companies with NAICS  (North American Industry Classification System) codes related to chipmaking or suppliers would be eligible to bid.  

"The government recognizes there is a talent shortage specific to our industry, and that it is going to take a combination of both efficient immigration policy, as well as investing in STEM programs and other programs, to help grow a workforce," Royal Kastens, director of public policy and advocacy at SEMI, told Semiconductor Engineering. "I do not think it is one or the other." 

As it stands, the H-1B visa system, the primary route for the U.S. semiconductor industry to import international talent , poses many challenges. This company-sponsored visa, typically valid for three years and extendable to six, is allocated via a lottery system due to a 7% cap on visas per country, which is a challenge for workers from countries with a large population like India and China. 

After the visa expires, foreign employees need to get a Green Card for permanent residency, which is another lottery due to country caps. While a worker can stay indefinitely while waiting for a Green Card via an i-140 petition, this situation leaves many skilled workers in a state of limbo, without the rights afforded by a Green Card or citizenship, and can discourage potential talent from considering the U.S. as a long-term career destination, especially if things get better at home. 

One advantage of the Chipmaker's Visa is that it would be renewable once. So a foreign worker could use the first five years and then renew for another five. By the time those 10 years pass, there might be more domestic talent available. EIG says that this "longer-than-usual term" gives U.S. semiconductor firms time to scale up. It also claims that having the auctions quarterly makes the system more flexible than current-day, annual distributions. 

Education in the U.S. is another part of the puzzle. A significant chunk of graduate students in engineering come to the United States from abroad. But once they graduate, sticking around in the U.S. is not easy because of visa issues, which just adds to the industry's shortage of skilled workers. 

To fix these problems, multiple ideas are on the table. Beyond the chipmaker's visa, these include giving H-1B visa holders more time to find new jobs (because today they have 60 days to find a new job or leave), upping the visa caps, and making it easier for graduates from U.S. universities to stay and work.  

This past November, Senators Hickenlooper and Cramer introduced the EAGLE Act, which would increase the 7 percent per-country cap to 15 percent and make other changes to allow more talent in. It would apply across industries and not specifically help build up U.S. semiconductor manufacturing.

"Arbitrary caps on employment-based visas are holding back our economy when so many industries are hurting for workers," Hickenlooper said in a press release at the time. "This bill is a commonsense fix to our immigration system that will reduce visa backlogs, and fill gaps in our workforce."

Whether change comes through the Chipmaker's Visa, the  EAGLE Act or some other government action, there seems to be a consensus that the current immigration system isn't allowing the U.S. to scale up its chip manufacturing capabilities and meet the promise of the CHIPS Act.

The SEMI World Fab Forecast report anticipates a 6.4% increase in capacity in 2024, reaching over 30 million wafer starts per month (wpm). Driven by serious government funding, China is predicted to lead the world in expanding semiconductor production, with a total of 18 new fabs expected to begin production in 2024. 

The rather substantial 6.4% increase in wafer processing capacity follows a 5.5% rise to 29.6 million WSPM in 2023. The expansion is primarily driven by developments in leading-edge logic by Intel, TSMC, and Samsung Foundry, as demand for processors aimed at artificial intelligence (AI) and high-performance computing (HPC) applications continues to grow rapidly. 

SEMI expects as many as 82 new fabs to go online from 2022 through 2024, which includes 11 projects slated for 2023 and an ambitious 42 projects in 2024. These new facilities will use a range of wafer sizes from 100mm to 300mm and dozens of mature and leading-edge process technologies, indicating a diverse expansion across the semiconductor industry. 

China is poised to lead this expansion, bolstered by government funding and various incentives for chipmakers. In 2023, Chinese chip manufacturers are forecasted to grow capacity by 12% year-over-year (YoY), reaching 7.6 million WSPM. This growth is projected to accelerate to 13% in 2024, reaching a capacity of 8.6 million WSPM. A total of 18 new fabs are expected to start operations in China in 2024. 

Other regions are also contributing to the increase in global chip production capacity. Taiwan is set to remain the second-largest region in semiconductor capacity, with a projected increase to 5.4 million WSPM in 2023 and 5.7 million WSPM in 2024. South Korea and Japan follow, with South Korea expected to reach 5.1 million WSPM in 2024. The Americas, Europe, Mideast, and Southeast Asia are also gearing up for growth, with each region launching several new fabs in 2024. 

In terms of specific segments within the semiconductor industry, the foundry suppliers are forecasted to lead in equipment purchases, increasing their capacity to a record 10.2 million WSPM in 2024. Despite a slowdown in 2023, the memory segment, including DRAM and 3D NAND, is expected to increase capacity gradually. The discrete and analog segments, driven by vehicle electrification, are also projected to grow significantly, highlighting the diverse and dynamic nature of the global semiconductor industry's expansion.

The U.S. Department of Commerce announced its first semiconductor manufacturing incentive as part of the CHIPS and Science Act this week. BAE Systems, which makes various chips for applications such as fighter planes, is set to get $35 million from the U.S. government. U.S. Commerce Secretary Gina Raimondo said that she expects to announce a dozen funding awards over the course of next year. Meanwhile, she warned that some fab projects could still be delayed.

"Next year we will get into some of the bigger ones with leading-edge fabs," Raimondo is reported to have said, according to Reuters. "A year from now I think we will have made 10 or 12 similar announcements, some of them multi-billion dollar announcements."

Meanwhile, Gina Raimondo has mentioned a significant challenge in expanding America's semiconductor industry: the potential for delays caused by standard environmental reviews. To a large degree, this poses a conflict between environmental regulations and national security goals.

"Obviously we want to do everything always to protect the environment," Raimondo told Bloomberg. "But this is a national security priority, and we need to move quickly."

Raimondo is concerned that these environmental permitting processes take a long time, which she fears could halt construction for years. This issue gained prominence after her request to exempt federally-funded chip projects from such reviews was rejected by House Republicans. As a result, major projects by companies including Intel, Micron, TSMC, and Samsung that cost tens of billions of dollars are at risk of being slowed down by these reviews.

Right now, the U.S. makes about 12% of the world's chips, down from 40% in 1990. The government's goal is to push that up to around 20%, which is a big jump. This whole effort is backed by the $39 billion CHIPS fund. The plan is to help each project with 5% to 15% of what they need to spend, but not more than 35% in total.

Part of the plan is to set up at least two advanced manufacturing hubs in the U.S. (such as those built by Intel and TSMC), then to restart making advanced memory chips (Micron has already announced such plans), and establish leading-edge packaging facilities (which Intel is already doing). There's also a focus on meeting the military's needs for different kinds of chips. There is a lot of interest, with over 550 companies indicating they are keen to participate, and nearly 150 putting in applications or proposals.

The global foundry industry was on the rise in Q3 2023, led by TSMC, Samsung, SMIC, and Intel Foundry Services (IFS), based on a TrendForce report. The combined revenue of the Top 10 foundries reached approximately $28.29 billion, a notable 7.9% rise from the previous quarter due to a resurgence of demand for smartphones and PCs. TSMC was certainly a star of the report as it continued to dominate the market, IFS made its debut in the Top 10 rankings for the first time in some time, whereas SMIC did not show any particular financial gains from its 2nd generation 7nm ramp for Huawei.

3nm Drives Revenues Up for TSMC

TSMC's revenue reached $17.249 billion in the third quarter of 2023, which allowed the company to claim a 57.9% market share of the whole foundry sector (by revenue). The surge in TSMC's growth can be attributed to the high demand in several key areas, notably in the PC and smartphone markets. Meanwhile, a significant contributor to TSMC's financial success in the quarter was its 3nm fabrication technology, which is used to make Apple's A17 Pro, M3, M3 Pro, and M3 Max processors for smartphones and PCs. As TSMC began to formally recognize its 3nm revenue during the quarter, the technology immediately contributed 6% of its earnings per quarter. Meanwhile, 60% of the foundry's earnings stemmed from its more advanced manufacturing processes (7nm and thinner).

Samsung Foundry is another contract maker of semiconductors who has a 3nm fabrication process in its fleet. Meanwhile, the company only produces smaller chips for cryptocurrency mining on this technology, so the node has yet to become a significant revenue contributor. Samsung Foundry posted a $3.69 billion revenue for the quarter, a 14.1% increase quarter-over-quarter, according to TrendForce. While Samsung attributes this rise to a growing demand for its advanced process technologies (which certainly made a significant contribution), TrendForce believes that Samsung's revenue growth was due to a variety of other factors, including orders for Qualcomm's 5G application processors for mid-to-low range smartphones, 5G modems, and the well-established 28 nm OLED display driver ICs.

7nm Barely Has Impact on SMIC

China's semiconductor champion Semiconductor Manufacturing International Corp. (SMIC) did not make it into the Top 3 foundry's list, though its revenue — $1.62 billion, up 3.8% quarter-over-quarter — was not significantly behind those of GlobalFoundries and UMC, two specialty foundries. But it made quite a breakthrough in the third quarter when it started shipments of Huawei's HiSilicon Kirin 9000S application processor based on SMIC's 2nd generation 7nm process technology. Unfortunately for SMIC, this did not really drive its revenue significantly upwards, based on numbers from TrendForce,

TrendForce attributes this to the shift of SMIC's client base: the share of revenue coming from Chinese customers rose sharply to 84%, driven by the government's emphasis on local sourcing and a surge in orders for smartphone parts from Chinese makers. On the other hand, revenue from American clients saw a decline, attributed to a diversification in the supply chain and the movement of American customers to production locations outside of China. It is possible that the shift in the nature of orders played a role as well, with Chinese firms possibly placing more orders for lower-cost chips compared to their American counterparts.

Intel Is Back to Top 10

A standout development in the contract chipmaking segment is the re-entry of Intel Foundry Services (IFS) into the Top 10 foundries for the first in several quarters. In Q3 2023, IFS reported a revenue of $311 million, marking a significant 34.1% increase from the previous quarter. This substantial growth may be attributed to IFS's collaboration with Amazon Web Services, which ramped up production and assembly of its Graviton4 and Trainium2 system-in-packages in Q3. These SiPs require advanced packaging technologies, such as Intel's Foveros 3D, therefore likely contributing to IFS's recent financial success.

Mixed Bag for Others

Other foundries demonstrated mixed results: some remained flat with the previous quarter, others demonstrated declines of revenues.

GlobalFoundries showed steady performance, with its revenue remaining stable at about $1.85 billion, in line with its previous quarter's earnings. The company's sales were mostly drive by the Internet of Things (IoT) products for home and industrial applications alongside major orders from the U.S. aerospace and defense industries, according to TrendForce.

As for UMC, although its overall revenue dipped slightly by 1.7% to $1.8 billion, the company witnessed a noticeable rise in its 28/22 nm orders. This almost 10% revenue boost from these production nodes helped to offset a minor drop in total wafer shipments.

Tower Semiconductor saw a marginal increase in revenues of 0.3% quarter-over-quarter, essentially maintaining a steady status with $358 million, while Vanguard International Semiconductor recorded a 3.3% increase over the same period to $333 million. 

In contrast, HuaHong Group faced a downturn, with a 9.3% decrease in revenue quarter-over-quarter, dropping to around $766 million. PowerChip Semiconductor Manufacturing Corp (PSMC) also experienced a decline in revenue by 7.5% to $305 million. This was largely due to reductions of nearly 10% and 20% in revenues from PMIC and power discrete products, respectively, impacting its overall financial results, as noted by TrendForce.

Intel could potentially be the top beneficiary of the CHIPS Act funding as the company is not only building several leading-edge fabs in Arizona and Ohio, but is apparently involved in a secret 'secure enclave' project designed to ensure that the U.S. military has access to chips produced in America, reports the Wall Street Journal.  

Intel is currently building four new fabs in the U.S.: Intel 20A-capable Fab 52 and Fab 62 near Chandler, Arizona, that are due to come online in 2024 as well as two new Intel 18A and Intel 20A-capable near Columbus, Ohio, that are set to start mass production in 2025. Recently the company announced plans to accelerate Arizona fabs buildout to start earlier production of advanced chips. Both vast projects require investments of $100 billion or more,  so it is not surprising why Intel needs government support.

In addition to building leading-edge fabs in the USA, Intel is apparently in talks with the U.S. government over the so-called 'secure enclave' project, which goal is to reduce reliance of applications for the U.S. government and military on chips made in Taiwan, which the U.S. government considers a vulnerable country.

'Secure enclave' fabs are projected to be funded separately, according to the WSJ. The precise funding allocation by the U.S. government remains unclear, but individuals with knowledge of the matter have estimated that the cost for these facilities might range from $3 billion to $4 billion. This expenditure is expected to be sourced from the $39 billion designated for manufacturing grants under the Chips Act.

Intel could get funding for its Arizona, Ohio, and secure enclave facilities, which will make it the main beneficiary of the CHIPS Act funding. Meanwhile, the focus on Intel has sparked a debate among lawmakers and competitors as thereis a fear that allocating a substantial portion of the Chips Act funds to Intel could disadvantage other companies. Moreover, some senators are advocating for a more integrated approach to security within the chip manufacturing process, rather than isolating it within dedicated fabs.

These dedicated fabs serving solely the defense sector might face financial challenges, a sector that accounts for only about 2% of the total chip market. Additionally, defense clients typically have specialized requirements, such as the need for chips that can withstand extreme temperatures or the conditions of space, something that no other clients need. They argue that this could be a more cost-effective method, referencing a Defense Department review that found low security risks at the chip fabrication stage.

"We are concerned that the [Department of Defence] is considering sole sourcing an award to one company to build a secure enclave at a cost that is far greater than [a typical approach to secure chips for defence applications]," a letter obtained by The Wall Street Journal and signed by multiple American politicians reads. "Doing so would limit funding for other projects that would create a diversified domestic supplier base of semiconductors critical to the defense industrial base."