US 301 Investigation on China's Mature Node Foundry: Industry Implications

Wed Jan 01 2025

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US initiated 301 investigation on China mature node foundry, and many of you think the industry dynamics would change and hence mature node not in oversupply anymore. We think it is better to separate mature node into <=28nm vs 28nm and above.

  • 28nm and above - we think the investigation comes too late, as (1) Chinese fabless and Asian fabless are all utilizing China's low cost edge, as seen by the rising utilization of SMIC/HuaHong, and it's hard for US to regulate Asian fabless, (2) China already can internalize equipment of 28nm and above domestically, other than front-end DUV litho.
    • This is just like LED, solar, optical fiber, LCD panel we saw in the past - once China can internalize equipment for an industry, the oversupply of that industry will linger for years. Even if US put heavy tariff on solar, Chinese makers still dominate the global supply.
  • <=28nm - mainly manufactured in TSMC, GlobalFoundries, UMC, SMIC, Samsung, Intel IFS (captive capacity in Samsung and Intel are also big). At 12/14nm, competition only removes SMIC given concern on continuity of 14nm technology development.
    • Structural issues remain for GFS on 40-50% higher price vs peers like UMC (see chart below) and lack of big customer at its FinFET.
    • Structural issue also remain for UMC with TSMC's subsidiary Vanguard tapping into 12" FinFET with its new Singapore fab coming online from end-2026/2027.

Overall speaking, it is the potential high tariff from Trump on China-exports that may slow down demand and expansion of China mature node. Hard for the investigation to move the needle at this stage.