South Korea to pour in $450 billion to become global chipmaking leader

With the global semiconductor industry facing a shortage, South Korea has announced a plan to invest $450 billion (510 trillion Korean won) to supercharge the country’s chipmaking industry, joining the likes of Taiwan, China, and the US to become the global leader in chip manufacturing.

The South Korean government unveiled a national blueprint that will see several ambitious investments in semiconductor research and production. Tech giants Samsung and SK Hynix, the semiconductor manufacturing arm of national telco SK Telecom, will be committing $151 billion (170 trillion Korean won) and $97 billion (109 trillion Korean won) respectively to expand their existing chipmaking facilities.

SK Hynix’s co-CEO, Park Jung-ho further revealed that SK Hynix will be building four new semiconductor plants in Yongin, the largest city in the Gyeonggi-do province in South Korea.

Samsung has also revealed that the company has commenced construction of a new manufacturing line “25 times the size of a football pitch” in the city of Pyeongtaek, south of Seoul. The new factory is scheduled for completion in 2022.

“The entire semiconductor industry is facing a watershed moment and now is the time to chart out a plan for long-term strategy and investment,” said Kim Ki-nam, Vice Chairman and Head of Device Solutions at Samsung.

“For the memory business, where Samsung has maintained its undisputed leadership position, the company will continue to make pre-emptive investments to lead the industry,” he added.

South Korea’s Finance Ministry has also announced a tax deduction ratio of 40 percent to encourage spending on chipmaking, an increase from the previous 30 percent.

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Taiwan is spending $100 billion to solve global chip shortage

Taiwan Semiconductor Manufacturing Co. (TSMC), one of the world’s largest chipmakers, has unveiled plans to invest $100 billion to increase the output of semiconductor chips to keep up with rising global demand.

This announcement comes after US semiconductor leader Intel’s decision last week to spend $20 billion to boost semiconductor production both domestically and in Europe.

TSMC CEO, Wei Che-Chia, said that the company will start building new fabrication plants and expanding existing ones for both leading-edge and specialty technologies.

“We have started hiring thousands of new employees, acquired land and equipment, and started construction of new facilities at multiple sites globally,” he added.

Semiconductor chips are integral to the global cloud and data centre industry. As demand for cloud services continues to grow exponentially and more data centres are being built all around the world, semiconductor chips are seeing such a sharp rise in demand that the global market is heading towards a shortage.

Said shortage also appears to be spreading to the electronic hardware industry, including smartphones, tablets, and laptops.

In January, TSMC had set aside a budget of $25 billion to $28 billion for chipmaking. The company’s quadruple increase in investment shows the urgency of chip shortage in the semiconductor industry.

On top of technological expansion, CEO Wei also promised clients that TSMC would suspend wafer price discounts throughout the whole of 2022.

Taiwan is currently the world’s leading semiconductor manufacturer, alongside South Korea’s SK Hynix. In March, Japan had to source semiconductor chips from Taiwan after a fire devastated a production plant in northeast Japan.

Tencent invests $279 million in AI chip startup

Tech giant Tencent has invested a staggering $279 million (1.8 billion yuan) into an artificial intelligence (AI) semiconductor chips manufacturing company in China.

Enflame Technology, headquartered in Shanghai, has received funding from Tencent and several other investors including China’s state-owned conglomerate group CITIC, and investment firms China International Capital Corporation (CICC) and Primavera.

Tencent’s investment will allow it to segue into the booming semiconductor chip industry, which is currently dominated by NVIDIA, AMD, and most recently, Intel after its acquisition of US chipmaker Xilinx.

This move by the Chinese tech company is also expected to contribute to China’s plan to become more self-reliant in the technology sector after numerous tech-related bans by the US, such as TikTok and Huawei’s 5G development.

Founded in 1998, Tencent is best known for messaging app WeChat and multiplayer video game League of Legends. The company reported $5.88 billion in profit in the third quarter of 2020, a 29% year-on-year increase.

This is Tencent’s fourth time injecting funds into Enflame Technology, which was founded in 2018.

Semiconductor chips produced by companies such as Enflame Technology are becoming more important to the global tech market, because these chips are capable of processing large amounts of data which are used to train AI models and power data centers.

AI technology is taking over

Technological developments, increase in demand for Big Data and analytics, and increased digitisation across all sectors are factors fuelling the growth of the global AI hardware market.

The onset of COVID-19 has fuelled utility & adoption of artificial intelligence (AI) hardware, due to its ability to screen, track and predict the present and future patients affected by coronavirus infection.  According to the NewVantage Partners, the number of companies that invest over $500 million annually in big data increased to 21.1% in 2019 from 12.7% in 2018, indicating the importance of AI and Big Data across organizations, hence propelling industry growth.

Meanwhile, Asia Pacific market is anticipated to experience robust growth over 2020-2027, owing to increasing investment in AI technology by different end-use industries, and rising demand for big data and analytics in the region.

SK hynix to buy Intel’s NAND chip business for $9 billion

SK hynix, South Korea’s second biggest chipmaker, has announced plans to buy the NAND memory chip business of semiconductor giant Intel for US$9 billion.

SK hynix said it will acquire Intel’s factory in Dalian, China as well as its NAND flash and solid-state drive businesses, excluding its advanced memory technology unit, Optane.

“I am pleased to see SK hynix and Intel’s NAND division, which have led the NAND flash technology innovation, work to build the new future together,” said Seok-Hee Lee, the CEO of SK hynix.

Intel and SK hynix will work together to ensure a seamless transition for customers, suppliers and employees. The two companies will work collaboratively as they did recently with DDR5, to better serve the growing demand from the memory-based semiconductor ecosystem.

“By taking each other’s strengths and technologies, SK hynix will proactively respond to various needs from customers and optimise our business structure, expanding our innovative portfolio in the NAND flash market segment, which will be comparable with what we achieved in DRAM,” added Mr. Lee.

The deal will allow SK hynix to become the world’s second-largest NAND flash chip producer, overtaking Japan’s Kioxia and narrowing the gap with market leader Samsung Electronics, as the shift to work-from-home boosts demand for chips used in tablets and servers.

According to market researcher TrendForce, SK hynix was the world’s fourth-largest NAND flash maker with 11.7% revenue share in the second quarter of 2020, while Intel was ranked sixth with 11.5% revenue share. Samsung Electronics led the market with 31.4% share, followed by Japan’s Kioxia with 17.2%.

With the acquisition, SK hynix, part of South Korean conglomerate SK Group, will have a market share of 23.2%.

Bob Swan, Intel’s CEO said, “I am proud of the NAND memory business we have built and believe this combination with SK hynix will grow the memory ecosystem for the benefit of customers, partners and employees. For Intel, this transaction will allow us to further prioritise our investments in differentiated technology where we can play a bigger role in the success of our customers and deliver attractive returns to our stockholders.”

Most of SK hynix’s revenue currently comes from the DRAM business, where SK hynix ranks as the world’s second-largest supplier. In the second quarter, the company logged sales of US$7.5 billion (8.6 trillion won), with customers like Apple, Huawei and Microsoft. Its NAND flash business accounted for 24% of the company’s sales in the second quarter, with SSD sales making up nearly half of its NAND flash revenue.

The NAND Flash industry grew between April and June thanks to robust demand for PCs and servers, as the COVID-19 pandemic forced millions of people to work from home, according to market researcher TrendForce.

George Davis, Intel’s Chief Financial Officer, said in March that while the flash memory business showed promise, with a growing market in data centers, the company hadn’t been able to generate the profits it wanted.

SK hynix will pay Intel US$6.9 billion (8 trillion won) by 2021 to acquire Intel’s Chinese production facility and SSD unit, while it will pay the remaining US$2.017 billion (2.3 trillion won) by March 2025 to complete the deal.

Intel intends to invest transaction proceeds to deliver leadership products and advance its long-term growth priorities, including artificial intelligence, 5G networking and the intelligent, autonomous edge.

Intel’s shares were up nearly 3% after the announcement from SK hynix.

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India’s Wipro to acquire US semiconductor specialist Eximius Design

India-based information technology specialist Wipro is set to acquire engineering services company Eximius Design for US$80 million.

The acquisition will enable Wipro to strengthen their market position in very large-scale integration (VLSI), a process of creating an integrated circuit by combining thousands of transistors into a single chip, and systems design services and accelerate silicon innovation for their customers.

“We are pleased to welcome Eximius’ employees and look forward to helping our customers innovate at scale and deliver next generation connected products, faster,” said Harmeet Chauhan, the Senior Vice President of Industrial & Engineering Services at Wipro.

Eximius has design centers in the US, India and Malaysia, with clientele including Fortune 100 corporations and new age companies across semiconductors, cloud and hyperscale infrastructure, consumer electronics and automotive segments.

“Our customers, employees and the entire semiconductor ecosystem will tremendously benefit from the synergies of Eximius and Wipro’s combined portfolio of offerings,” said Jay Avula, the CEO of Eximius Design.

Eximius provides end-to-end solutions and services for building smarter, smaller and faster connected products for various use cases of IoT, Industry 4.0, edge computing, cloud, 5G and artificial intelligence.

“Clients will gain access to Wipro’s global scale and offerings, along with Eximius’ innovative solutions to accelerate the adoption of ASIC, FPGA, systems and software engineering initiatives,” added Mr. Avula.

Eximius’ offerings and solutions will be consolidated as a part of Wipro’s EngineeringNXT framework, providing customers with a platform to innovate and engineer the next generation of products and platforms at scale.

Eximius employs 1,100 people and registered $35.2 million in revenue in 2019.

The acquisition by Wipro is expected to close by the end of 2020, following customary closing conditions and regulatory approvals.

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