Powerchip Semiconductor Manufacturing Corp. (PSMC) is the sixth largest chip foundry in the world, behind China’s HuaHong Group. It currently trades on the Taipei Exchange (emerging market) under the stock ticker code: 6770.
PSMC plans to list on the Taiwan Stock Exchange (TWSE) in December of this year. The details below are from materials provided by PSMC, in addition to online meetings as part of the roadshow leading up to the initial public offering (IPO).
The company’s IPO prospectus is not yet available. It’s important to remember that the prospectus is a legally binding document in terms of the veracity of the information.
The TWSE approved PSMC’s IPO application in late September.
One of the most interesting details to come out of PSMC’s roadshow presentations has been that the company, which competes with cross-town rivals Taiwan Semiconductor Manufacturing Corp. (TSMC) and United Microelectronics Corp. (UMC), saw its gross margin in August rise to 44 percent, and management believes it will continue to rise in the fourth quarter – with the potential to finish 2021 with a full year gross margin over 40 percent. Last year, its full year gross margin was 24 percent. The company’s rising gross margins show ASPs (average selling prices) are rising for chip foundry services, amid global shortages for semiconductors. The company sees room to further increase prices next year.
When asked if management saw any signs of overbooking (companies ordering more than they need in order to secure supplies), PSMC executives said yes, but that it does not seem excessive since currently, there is such a demand/supply imbalance that no customers are able to secure 100 percent of what they want.
History:
Perhaps the most important detail to understand about PSMC is that it has been reborn from the ashes of Powerchip, the memory chip maker, and boasts a long history of technical and management expertise in the semiconductor industry.
The original firm completed its first 8-inch factory in 1996 and began competing in the cutthroat DRAM market. It became a market leader as the industry transitioned to 12-inch wafers from 8-inch, but then hit hard times during the 2008 financial crisis.
Taiwan decided not to help out its DRAM industry during the financial crisis, unlike South Korea. Some Taiwan companies survived on their own by selling assets and renegotiating debt payments. Others didn’t make it.
Powerchip weathered the storm, restructuring and repaying NT$120 billion (US$4.30 billion) in debt, was delisted from the stock exchange, and reorganized into PSMC. Now it plans to list again as a chip foundry service provider, able to provide both memory chip and logic chip foundry services. Many key executives remain at PSMC, including Chairman Frank Huang, along with a number of talented engineers.
Details:
Powerchip Semiconductor Manufacturing Corporation (PSMC)
Chinese: 力晶積成電子製造(股)公司 or 力積電
Two 8-inch (200mm) wafer fabrication plants (fabs)
Three 12-inch (300mm) wafer fabs
Employees: 7,260
https://www.powerchip.com/
Key Products:
DRAM and NAND Flash memory of many types
LCD driver ICs
Power Management ICs
CMOS Image Sensors
Integrated Memory chips
Microcontrollers, Power MOSFETs, and More
As a former memory chip maker, much of the company’s production equipment is made for memory chips, and other high volume chips. CMOS Image Sensors, for example, are another major product at PSMC just as they are at memory chip makers such as Samsung Electronics and Micron Technology.
PSMC has worked to transition to more logic products as any full service chip foundry should, and has gained expertise as it adds new products to its repertoire.
In March of this year, PSMC broke ground on an NT$278 billion (US$9.94 billion) 12-inch wafer fab in Tongluo SciencePark, in central Taiwan. The company said it hopes the new fab will help it win new orders for chips ranging from automotive, to 5G-related, AI (artificial intelligence) and AIoT (AI of things) and more.
PSMC’s capital spending (capex) this year will total US$350 million, up from US$140 million last year, some for existing fabs and some for construction on the new Tongluo fab.
The next few years will see the firm spend roughly US$3.5 billion each year as it ramps up the new fab – giving it some flexibility to speed up or slow down the ramp up as the supply situation dictates – with the plant to be at full production, 100,000 wafers per month, in 2025.
By the end of the first stage of construction, in 2023, the fab ready to produce semiconductors on a range of “mature processes and innovative technologies,” the company said.
This graphic provided by PSMC shows the range of process technologies:
Source: PSMC 2021
At the very top of the graphic are process technologies in small type, M = Memory and L = Logic, so M 20nm is Memory 20-nanometer process technology; while L 55nm is Logic 55-nanometer process technology.
The monetary figures up top, from left to right, read NT$49.9 billion, NT$35.9 billion, NT$45.7 billion and NT$28.6 billion. The years listed on the bottom are based on the Republic of China (ROC, Taiwan) calendar, 107 = 2018, 108 = 2019, 109 = 2020 and 110 = 2021.
The following graphic provided by PSMC shows a breakdown of the company’s Logic and Memory products:
Source: PSMC 2021
The company’s process technology by wafer size as of the end of the second quarter of 2021 includes 0.35 micron to 0.11 micron on 8-inch wafers, and 0.18 micron to 40nm on 12-inch wafers. PSMC plans to focus development over the next few years on 55nm – 40nm process technology, new 28nm technology, and High-Voltage and other logic processes.
In terms of total output by wafer size, PSMC’s two 8-inch fabs run 100,000 wafers per month, while 12-inch output totals 55,000 wafers per month.
The following graphic from PSMC offers a view of its wafer fabs, their output, and process technologies.
Source: PSMC 2021
The company warned of some key challenges for the future, aside from operating in an extremely competitive environment against much larger rivals, including TSMC, UMC, and Samsung Electronics.
A near term challenge for the semiconductor supply chain is the power shortages in China. Much of the chip assembly industry is in China, so power shortages there mean a key bottleneck in the supply chain. For part of the year, chip assembly plant closures in Malaysia, Vietnam and elsewhere due to Covid-19 hampered that part of the supply chain. China is a much bigger player in chip assembly.
A longer term challenge will be finding enough engineers for new chip factories and in research and development. Taiwan companies in particular and global chip makers in general have warned that the number of new factories under construction, and the many more needed to keep up with global demand, require engineering talent that universities are not providing fast enough.
Select financial information provided by the company is below. Most of the information can be found on the TWSE website, using the company’s stock ticker: 6770
Source: PSMC
All figures are in New Taiwan Dollars (NT$)
All figures are in 000s, except % and EPS.
For example: In 2020, PSMC’s sales were NT$45.68 billion
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