European chip giant STMicroelectronics (STM) said it will outsource the fabrication of legacy semiconductors to China's second-largest foundry, in a deal that strengthens China's role in the legacy chip sector.
STM chief executive Jean-Marc Chery said at the company's annual investor day in Paris on Wednesday that the firm will use Hua Hong Semiconductor to make 40-nanometre industrial microcontrollers (MCUs) for the mainland Chinese market starting next year, as part of a strategy to manage the risks of supply chain disruptions.
"We acknowledge that the market we serve is becoming increasingly complex [and that] we face competition from the rise of Chinese car makers, which is fast reshaping market dynamics," Chery said, adding that it was crucial for STM to stay relevant in the world's largest auto market via its localisation strategies.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
"Through the partnership with the Hua Hong Group, ST will be able to respond more quickly to the needs of the Chinese market and capitalise on opportunities in fast-growing areas such as electric vehicles," Chery said.
STMicroelectronics CEO Jean-Marc Chery (left) seen with Infineon CEO Jochen Hanebeck and NXP CEO Kurt Sievers at the Electronica & SEMICON Europa conference, in Munich, Germany November 11, 2024. Photo: Reuters alt=STMicroelectronics CEO Jean-Marc Chery (left) seen with Infineon CEO Jochen Hanebeck and NXP CEO Kurt Sievers at the Electronica & SEMICON Europa conference, in Munich, Germany November 11, 2024. Photo: Reuters
The remarks from one of Europe's largest car chipmakers come as geopolitics have upended the global semiconductor supply chain, with the US, European Union, China, Japan and South Korea all investing huge amounts to strengthen their capacity in semiconductor manufacturing amid fears of disruptions.
The move signifies the importance of China's EV market and the country's progress in legacy chipmaking, amid Beijing's tech self-sufficiency efforts to overcome Washington's export restrictions aimed at keeping US core tech out of the hands of the Chinese military.
The US sanctions are intended to hinder China's efforts to leapfrog into leading-edge chip manufacturing at the 5-nanometre node and below, crucial for smartphone chips and graphics processing units.
However, China's legacy chipmaking capacity is expanding, with the country's global share of mature capacity expected to reach 39 per cent by 2027, up from 31 per cent in 2023, according to consultancy TrendForce.
STM, which also works with the world's largest contract chip foundry Taiwan Semiconductor Manufacturing Company, last year inked a deal with Chinese light-emitting diode maker Sanan Optoelectronics to build a 200-millimetre silicon carbide wafer fab in China's southwest metropolis of Chongqing. The facility, expected to begin production in the fourth quarter of 2025, will support growing demand in China for car electrification.
STM also has a so-called back-end manufacturing facility in Shenzhen for testing, assembly and packaging of chips, and an application centre in Shanghai, according to slides shown during the investor conference.
Interior of the STMicroelectronics plant in Catania, Italy, which will make energy-efficient chips from silicon carbide for electric cars, May 31, 2024. Photo: Reuters alt=Interior of the STMicroelectronics plant in Catania, Italy, which will make energy-efficient chips from silicon carbide for electric cars, May 31, 2024. Photo: Reuters>
Hua Hong, which specialises in legacy chips, has seen its revenue from automobile and industrial applications rise steadily from 2021 to 2023. In the third quarter, this segment accounted for 23.5 per cent of its total revenue, while 63 per cent came from consumer electronics, according to data from Visible Alpha, an investment research unit of S&P Global Market Intelligence.
Both Hua Hong and its much larger crosstown rival Semiconductor Manufacturing International Corp have benefited from growing demand for foundry services from Chinese fabless chipmakers, which have sprouted up since 2021. Hua Hong generated 82.5 per cent of its revenue from mainland China, followed by 8.9 per cent from the US and 3.1 per cent from Europe, Visible Alpha data showed.
However, its 40-nm node process only started "pilot production" in the first half and has yet to generate any revenue, the company said in its 2024 first-half report.
www.yahoo.com
STM chief executive Jean-Marc Chery said at the company's annual investor day in Paris on Wednesday that the firm will use Hua Hong Semiconductor to make 40-nanometre industrial microcontrollers (MCUs) for the mainland Chinese market starting next year, as part of a strategy to manage the risks of supply chain disruptions.
"We acknowledge that the market we serve is becoming increasingly complex [and that] we face competition from the rise of Chinese car makers, which is fast reshaping market dynamics," Chery said, adding that it was crucial for STM to stay relevant in the world's largest auto market via its localisation strategies.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
"Through the partnership with the Hua Hong Group, ST will be able to respond more quickly to the needs of the Chinese market and capitalise on opportunities in fast-growing areas such as electric vehicles," Chery said.
STMicroelectronics CEO Jean-Marc Chery (left) seen with Infineon CEO Jochen Hanebeck and NXP CEO Kurt Sievers at the Electronica & SEMICON Europa conference, in Munich, Germany November 11, 2024. Photo: Reuters alt=STMicroelectronics CEO Jean-Marc Chery (left) seen with Infineon CEO Jochen Hanebeck and NXP CEO Kurt Sievers at the Electronica & SEMICON Europa conference, in Munich, Germany November 11, 2024. Photo: Reuters
The remarks from one of Europe's largest car chipmakers come as geopolitics have upended the global semiconductor supply chain, with the US, European Union, China, Japan and South Korea all investing huge amounts to strengthen their capacity in semiconductor manufacturing amid fears of disruptions.
The move signifies the importance of China's EV market and the country's progress in legacy chipmaking, amid Beijing's tech self-sufficiency efforts to overcome Washington's export restrictions aimed at keeping US core tech out of the hands of the Chinese military.
The US sanctions are intended to hinder China's efforts to leapfrog into leading-edge chip manufacturing at the 5-nanometre node and below, crucial for smartphone chips and graphics processing units.
However, China's legacy chipmaking capacity is expanding, with the country's global share of mature capacity expected to reach 39 per cent by 2027, up from 31 per cent in 2023, according to consultancy TrendForce.
STM, which also works with the world's largest contract chip foundry Taiwan Semiconductor Manufacturing Company, last year inked a deal with Chinese light-emitting diode maker Sanan Optoelectronics to build a 200-millimetre silicon carbide wafer fab in China's southwest metropolis of Chongqing. The facility, expected to begin production in the fourth quarter of 2025, will support growing demand in China for car electrification.
STM also has a so-called back-end manufacturing facility in Shenzhen for testing, assembly and packaging of chips, and an application centre in Shanghai, according to slides shown during the investor conference.
Interior of the STMicroelectronics plant in Catania, Italy, which will make energy-efficient chips from silicon carbide for electric cars, May 31, 2024. Photo: Reuters alt=Interior of the STMicroelectronics plant in Catania, Italy, which will make energy-efficient chips from silicon carbide for electric cars, May 31, 2024. Photo: Reuters>
Hua Hong, which specialises in legacy chips, has seen its revenue from automobile and industrial applications rise steadily from 2021 to 2023. In the third quarter, this segment accounted for 23.5 per cent of its total revenue, while 63 per cent came from consumer electronics, according to data from Visible Alpha, an investment research unit of S&P Global Market Intelligence.
Both Hua Hong and its much larger crosstown rival Semiconductor Manufacturing International Corp have benefited from growing demand for foundry services from Chinese fabless chipmakers, which have sprouted up since 2021. Hua Hong generated 82.5 per cent of its revenue from mainland China, followed by 8.9 per cent from the US and 3.1 per cent from Europe, Visible Alpha data showed.
However, its 40-nm node process only started "pilot production" in the first half and has yet to generate any revenue, the company said in its 2024 first-half report.
China's No 2 foundry to make legacy chips for Europe's STM, serving mainland market
European chip giant STMicroelectronics (STM) said it will outsource the fabrication of legacy semiconductors to China's second-largest foundry, in a deal that strengthens China's role in the legacy chip sector. STM chief executive Jean-Marc Chery said at the company's annual investor day in...
