Foundry Business and Market Trend Report ｜ February 2023

Key Takeaways:

TSMC Leading Node UT Rate Tracker

Our research indicates that TSMC's N3 UT (utilization rate) is likely to increase in the first quarter of 2023 and remain fully utilized in the second quarter. However, N4/5 UT may experience a decline in the first quarter followed by a gradual recovery in the second quarter. Meanwhile, N6/7 UT is expected to decrease to the mid-60s due to weakened demand and inventory issues.

The U.S.-China Chip Ban

It is our view that the US government's potential imposition of further restrictions on China's access to iDUV (immersion DUV or ArFi) technology could mirror its previous ban on EUV lithography systems, which aimed to impede Chinese progress in developing chip processes of 7nm and below. This is because Chinese foundries may still leverage iDUV to achieve further scaling down to 5nm processes or 28nm minimum metal pitch.

NXP’s outsourcing strategy could benefit dedicated foundries

As for NXP, the company currently possesses with 8” in-house capacity, which comprises the shared supply of SSMC, totaling approximately 2.2-2.3 million WPY (wafer per year) in 2022. However, as NXP shifts its 200mm R&D focus towards GaN technologies, it is likely to trim down its in-house 8" capacity and rely more on dedicated foundries such as GlobalFoundries and TSMC for wafer demand.

Cloud Capex outlook (Y2023)

We anticipate a 6-7% increase in global CSP server CAPEX to 190~200B USD in 2023, which is lower than our previous version, due to an expected flattening in US CSP CAPEX at approximately 110-115 billion USD or a 1-2% increase. This trend may be driven by a reduced capital intensity, accompanied by longer depreciation cycles of computing-related assets.

Smartphone demand outlook (Y2023)

Our analysis suggests that the demand for smartphone AP procurement units is likely to decline by 13-16% YoY in 2023, due to high inventory levels and continued demand weakness in the global smartphone market. Furthermore, we have revised down flagship AP procurement forecasts for Qualcomm and MediaTek by 20-30% in 2023, primarily due to the order cuts from Chinese smartphone OEMs resulting from the ongoing weakness in the global smartphone market.

Full insights delivered in Feb'23 Monthly Report.