Serrari Group

In a notable development for the semiconductor industry, Vanguard International Semiconductor Corporation, backed by Taiwan Semiconductor Manufacturing Co. (TSMC), and Dutch chipmaker NXP Semiconductors have announced plans to establish a $7.8 billion wafer manufacturing plant in Singapore. This joint venture, named VisionPower Semiconductor Manufacturing Company (VSMC), will bolster the global semiconductor supply chain and create approximately 1,500 jobs in the region.

According to the joint statement released on Wednesday, Vanguard will hold a 60% stake in VSMC, while NXP will own the remaining 40%. The facility will produce wafers essential for the automotive, industrial, consumer, and mobile device markets. TSMC will provide the underlying manufacturing technologies necessary for the project, ensuring high standards and efficiency.

Construction of the VSMC plant is set to begin in the second half of 2024, with production expected to start in 2027. The funding for this ambitious project will see NXP investing $1.6 billion and Vanguard contributing $2.4 billion. An additional $1.9 billion will be allocated by both companies to support the plant’s long-term capacity, with the remaining financing secured from third-party investors.

NXP President and CEO Kurt Sievers highlighted the strategic importance of this investment, noting that it aims to ensure a manufacturing base that offers competitive costs, supply control, and geographic resilience. This aligns with NXP’s long-term growth objectives and the broader industry goal of creating a more distributed semiconductor supply chain.

For Vanguard, this project represents a significant expansion of its manufacturing operations. The company previously acquired a wafer facility in Singapore from GlobalFoundries in 2019 for $236 million. The new plant will enhance Vanguard’s capabilities and its position in the semiconductor market.

Singapore continues to attract significant semiconductor investments due to its business-friendly environment. In recent years, the city-state has seen substantial investments from companies like GlobalFoundries, which opened a $4 billion chip fabrication plant last year, and United Microelectronics Corp, which invested $5 billion in its Singapore microchip factory. Neighboring Malaysia has also become a hotspot for semiconductor companies, with notable investments from Intel and GlobalFoundries.

Amid intensifying U.S.-China tensions, TSMC, the world’s largest semiconductor foundry, is diversifying its manufacturing footprint. The company is building new plants in Japan and the U.S. and recently partnered with NXP to invest in its first European chip plant in Dresden, Germany.

This joint venture between Vanguard and NXP is a strategic move to enhance the global semiconductor supply chain’s stability and resilience. As the industry navigates ongoing challenges, such investments are crucial for supporting technological advancement and meeting the growing demand for semiconductors worldwide.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

7th June, 2024

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