TSMC's 16 nm FinFET sees adoption by Qualcomm and Apple, competes with Samsung

TSMC will receive majority of Apple A9 business

According to reports, TSMC will receive the majority of Apple A9 SoC orders, which includes the A9 for next-generation iPhones and A9X for iPads. According to sources quoted by EE Times, Apple had originally planned to give Samsung a majority of the Apple A9 orders, but has recently shifted orders to TSMC, most likely using a 16 nm FinFET process.

Because ramping up production of a similar chip from a second source with different foundry technology is challenging and complicated, I believe it is likely that A9 production will be overwhelmingly (and perhaps exclusively) concentrated at TSMC. A parallel can be drawn with various reports from last year, which for a long time continued to echo incorrect projections that Samsung would serve a significant portion of the production of Apple's A8 generation SoCs, which has not turned out not to be the case.

In the mean time, TSMC's revenues continue to be a relatively high level despite Q1usually being seasonally down, with strong demand for 20 nm production, most likely reflecting continuing demand from Apple, which is offsetting weakness from Qualcomm for leading-edge processes. There have been rumours about an upcoming iPhone 6S and a lower cost iPhone 6C model which may involve substantial unit volumes. Apple's iPhone unit shipments have also been boosted by strong demand in China.

Low yield at Samsung and Exynos ramp contribute to TSMC orders

According to a source quoting sources in South Korea, TSMC's yield rate for its 16 nm FinFET process is better than that of Samsung's 14 nm process. Moreover, Samsung is seeing strong upcoming demand for it flagship Galaxy S6 smartphone, which uses the Exynos 7420 SoC produced on its 14 nm FinFET process, and most likely needs all capacity it can get to ramp up production of this SoC. Samsung also increasingly uses Exynos 7420 and other internally-developed SoCs for other product lines, such as other smartphone models as well as tablets.

Qualcomm said to have limited-time exclusive use of TSMC's 16FF+ technology

According a report by EETimes from a semiconductor industry conference in January, Qualcomm is likely to have locked up exclusive use of TSMC's 16FF+ process technology for about six months. The article appears to quote sources affiliated with Qualcomm that state that Qualcomm feels competitors such as MediaTek took advantage of previous-generation process technology (28HPM) that Qualcomm helped develop at TSMC, without having made the development investment that Qualcomm made.

However, this policy would be contrary to the principles based on which TSMC has operated for a long time, although the initial ramp of 20 nm at TSMC last year also seemed to be locked-up by another company (Apple). Its seems corporate pressure from these giant companies, backed by billions of dollars of cash, is forcing TSMC into these kinds of commitments.

The article mentions that the later access to 16FF+ won't affect MediaTek's mainstream products serving the mid-range to entry-level segments, because 28 nm technologies will continue to be used for such products in the market.

Leaked power consumption graphs suggest increased power efficiency

Power consumption graphs of current and upcoming high-end Qualcomm SoCs running a 3D game at high detail settings suggest power consumption and heat production of Qualcomm's unannounced Snapdragon 815 processor will be considerably lower than that of the Snapdragon 801 and Snapdragon 810, with Snapdragon 810 showing particularly unfavourable characteristics, as confirmed by widespread reports and reviews of Snapdragon 810-based devices.

Snapdragon 815 is unannounced and few details are known about it, with some reports suggesting the use of a next-generation Krait CPU core. Use of ARM Cortex-A72 processor cores appears to be not unlikely, since this core seems to be close to actual production. Most likely, the decreased heat production, which is likely to be associated with lower power consumption, is made possible by the use of the next-generation 16 nm FinFET process at TSMC.

Similar improvements in power consumption were observed for Snapdragon 620, which uses Cortex-A72 cores, when compared to the mid-range Snapdragon 615 SoC, which is reported to also have heating issues. Snapdragon 620, which has been announced, is also likely to have significantly higher CPU performance than Snapdragon 615 due to the use of Cortex-A72 cores, versus Cortex-A53 for Snapdragon 615, while also likely being produced on a much more efficient process (possibly  TSMC's 16FF+), since Snapdragon 615 is manufactured on a low-efficiency 28LP process.

Sources: EE Times (ISS 2015 conference report), EE Times (Apple A9 orders article), STJS Gadgets Portal (Snapdragon heat production graphs)

Updated 25 March 2015 (Add comments about 20 nm Apple production at TSMC).

No more wafer capacity shortage at TSMC?

For November 2014, TSMC somewhat unexpectedly reported a revenue decline to US$2.31 billion, 10% lower than the historical high achieved in October 2014, reversing several months of continually increasing monthly revenues at TSMC amid a shortage of capacity for clients of TSMC and continuous investments into capacity expansion.

An article in the Taipei Times from 14 December 2014 further reports on TSMC's sales in Q4 2014 and its future prospects, with a senior TSMC official saying that the decline was not a suprise, as "cautious inventory adjustment actions taken by some of our customers will bring slower fourth-quarter demand". There have been reports that some clients may have double-ordered chips in the face of the capacity shortage that existed previously. TSMC's sales in Q4 2014 will still be a quarterly record based on strong demand for 4G smartphones in China and increased demand for TSMC's advanced 20nm process technology.

TSMC's Q4 2014 revenues are still projected to be near NT$220 million (about US$7.0 billion), a sequential increase of about 5% from the previous quarter, which would complete a strong 27% increase in revenues for the whole year 2014 over the previous year, extending TSMC's leadership of the foundry industry.

TSMC's revenues for 2015 are forecast to further increase by 15 to 20%, based on strong demand for 20nm chips, new chips manufactured using its 16nm FinFET process technology and continuing demand for 28nm chips, as well as demand for trailing-edge 8" wafer capacity.

Apple ramp has peaked, Android chip vendors cautious

As mentioned in the recent articles, a likely major reason for the revenue decline in November and for Q4 2014 is that Apple's production of the Apple A8 and Apple A8X processors already peaked in October in order to achieve sufficient production in time for the 2014 holiday season. Additionally, demand from Android device vendors (such as Qualcomm and MediaTek) has not picked up, so that another sales decline for December 2014 is expected.

The decline in demand appears to be concentrated in the 20nm and 28nm HPM (High-Performance Mobile) process technologies, which were earlier in extremely short supply, and are used by Apple for its A8 SoCs at 20nm, and primarily at 28nm by Qualcomm for its high-end SoCs such as the Snapdragon 800 series and by MediaTek for various mid-range chips (such as MT6592, MT6595 and MT8135V), as well as its new 64-bit SoCs (MT6732, MT6752 and MT6795) that are currently ramping.

Decreased use of TSMC-produced chips by Samsung

An important contributor to the decline in demand for mobile processor capacity at TSMC is likely to be a decline in the utilization of TSMC-produced smartphone SoCs at Samsung. Samsung has recently been facing an overall sales decrease for its smartphone business, although Q4 2014 has been projected to see a recovery. However, Samsung is aggressively increasing the use of its own Exynos series SoCs in its smartphones, especially high-end models, after reduced orders from Apple left Samsung's advanced logic fabs underutilized.

Chips like the Exynos 7 Octa perform adequately for a high-end device and have significantly decreased Samsung's reliance on Qualcomm, which manufactures at TSMC. While Qualcomm is likely to continue to sell a large number of low-cost chips such as Snapdragon 410 to Samsung, the overall product mix from Qualcomm into Samsung has likely shifted to lower-end chips that have a significantly smaller die size, and thus require significantly less wafer capacity for a given amount of chips.

Transition to smaller die size for Qualcomm's mid-range performance-oriented SoCs

For some time, Qualcomm has had a gap in its product line, with Snapdragon 400 being used for the low-end as well as part of the mid-range segment, and a large performance and cost gap to the high-end Snapdragon 800 series, while Snapdragon 600 (without integrated baseband) was out of the picture. This resulted in a relatively large amount of high-end, large die-size Snapdagon 800 series chips being used in smartphones, even for models that do not quite require that level of performance.

However, Qualcomm has introduced new SoCs such as Snapdragon 615, an octa-core Cortex-A53-based SoC with a mid-range GPU, which can address the perfomance requirements of a significant part of the performance-oriented segment at a much lower cost, importantly while consuming significantly less wafer capacity at TSMC due the smaller die size of the SoC. This product transition at Qualcomm likely contributes to lower wafer requirements for Qualcomm at TSMC as production of smaller chips like Snapdragon 210, Snapdragon 410 and Snapdragon 615 increases at the expense of Snapdragon 801/805, and as a result contributes to TSMC's revenue decline.

Product transition at MediaTek

Meanwhile, MediaTek is also in a product transition from its 3G product line to its new product line with integrated 4G baseband. Because it has been late with integrated 4G, MediaTek has come under some pressure in China, with more of its sales being concentrated at the low of the market with SoCs such as dual-core chips for worldwide export markets, which take a smaller amount of wafer capacity.

MediaTek's new mid-range performance-oriented chips such as MT6752 and MT6795 are competitive, and have the potential to reduce overall market die size requirements and improve device cost and efficiency for the performance-oriented segment. However, they, as well as the lower-end MT6732, do not address the highest-volume low-end 4G segment, which in the near term is more likely to be addressed by Qualcomm with its Snapdagon 410 and upcoming Snapdragon 210 series, the latter of which implies with further reductions in wafer requirements due to smaller die size.

Other smartphone SoC clients at TSMC

HiSilicon has been producing increasing numbers of smartphone SoCs at TSMC for use in Huawei smartphones, but may have been affected by inventory issues, and there's also evidence of HiSilicon transitioning to more cost-effective designs such as the octa-core Cortex-A53-based Kirin 620, partly displacing its existing big.LITTLE Cortex-A15/Cortex-A7-based Kirin 920/925 series, which have a relatively large die size.

Other TSMC clients for leading-edge processes

Other companies that do not concentrate on smartphones such as Broadcom (embedded communications/networking) and NVIDIA (primarily PC-class GPUs, as well as high-end tablet SoCs) may welcome the increased capacity as it gives them increased production flexibility amid strong demand for their chips.

Not good for foundry competitors

Foundry competitors such as GlobalFoundries, which are already struggling, are not likely to benefit from the alleviation of capacity constraints at TSMC, because potential clients may now be less determined into moving part of their production from TSMC to alternative suppliers such as GlobalFoundries (as well as Samsung and UMC). Moving products to new foundries involves considerable investment and time since their processes are different from TSMC's processes, and as long as TSMC has enough capacity there is little reason for clients to not concentrate production at TSMC with its industry-leading performance.

Sources: DigiTimes (TSMC November revenues) , Taipei Times (TSMC article)

Updated December 26, 2014.

Samsung and Apple reach agreement for supply of future Apple processors

According to an article published by the Korea Times on November 17, 2014, Samsung and Apple have reached an agreement for the supply of future Apple application processors. The agreement is reported to involve Samsung supplying 80% of Apple's application processors in 2016. The fact that GlobalFoundries has also aligned with Samsung's 14nm FinFET process technology is cited as an additional motivation for Apple, in order to eliminate production capacity concerns.

Agreement will take a long time to come to fruition

However, it is clear from the article that this is long-term agreement that will take considerable time to bring financial benefits to Samsung and involves potential risks and delays given the technological advancements involved in Samsung's new 14nm FinFET process. A research report quoted in the article notes that Samsung's 14nm process for external customers will only start to contribute in the second half of 2015, illustrating that mass production for customers such as Apple is still some way off.

Given the high amount of investment required to bring its advanced 14nm FinFET process to high volume production, it is obvious that Samsung needs clear commitments from third parties that will utilize the process with significant volume. In the article, apart from Apple, Qualcomm and NVIDIA are also mentioned as potential customers.

TSMC continues to benefit from its existing leadership position

Meanwhile, TSMC, which is manufacturing Apple's current generation A8 and A8X and may also produce additional next-generation Apple chips before the Samsung agreement bears fruit, will continue to to benefit from supplying the vast majority of Apple's chips for some time, starting from its current 20nm production. Even though TSMC's 16nm FinFET process technology (evolving from 16FF to 16FF+) is less advanced in terms of feature size than Samsung's 14nm process, its more evolutionary nature most likely will allow TSMC to ramp to stable production much earlier and more smoothly (see also my earlier article), with Apple interested in using it, just as most other major SoC players. In fact Apple was reported to have a signed a multi-year deal with TSMC last year including not only TSMC's 20nm process but also its 16nm FinFET technology.

Capacity constraints at TSMC may disappear

There is also potential for the current shortage of wafer capacity at TSMC to become much less acute in the future, which would diminish one of the main motivations for Apple and other companies to invest in Samsung's production capacity. DigiTimes has already reported that chip orders for Apple's current latest generation devices have reached their peak and are already declining, which may result in a less constrained capacity environment at TSMC in the near term.

Transition to more cost-effective SoCs for performance-oriented segment may reduce wafer requirements

Another potential reason for less wafer capacity requirements at TSMC in the near future is the transition in the performance-oriented segment of the smartphone SoC market from large die size, relatively costly chip platforms such as Qualcomm's Snapdragon 800 series (more or less comparable to Apple's SoCs in terms of cost) to more economical Cortex-A53-based SoCs such as Snapdragon 610, Snapdragon 615 and MediaTek's next generation of chips.

Currently, Qualcomm supplies the Snapdragon 800 series to a large part of the market (even for segments for which its performance is greater than required) because it is less affected by the cost of the chip because of the large margins it achieves through its patent royalty schemes, as well as a performance gap in its product lines of SoCs with integrated modem. However, even for Qualcomm transitioning to less costly chips has the potential to increase profits, and in the past Qualcomm has already benefited from a somewhat similar transition to ARM's economical Cortex-A7 processor core for cost-sensitive platforms.

The new Cortex-A53-based SoCs have the potential to provide performance that is adequate for a large part of the performance segment, while being power efficient and due to the smaller die size may significantly reduce the total number of wafers required for performance-oriented smartphone SoCs.

Sources: Korea Times article, Blog article from 3 October

Updated December 5, 2014.

China tablet processor market: Intel and MediaTek projected to gain share in Q4, Allwinner continues to decline

According to a recent report by DigiTimes, shipments of tablet applications processors in China grew slower than expected in Q3 2014, increasing only by 6%, affected by affordable models from global brand-name manufacturers. DigiTimes also published a forecast with estimated shipments and market share figures for the China market in Q4 2014, with overall shipments projected to increase by a modest 4.7%.

Intel pushing into Chinese tablet market

The articles do not give a complete overview of market share figures or shipments by company, but they do provide details about the strong growth of Intel's tablet processor chips in China (most likely primarily due to a push into the Chinese white-box market), growing to 2.5 million units (7.5% share) in Q3 2014, with a projection of about 5 million units (14.5% share) in Q4, reaching the number three position in terms of market share.

MediaTek highly competitive, with capacity constraints likely to improve for Q4

While MediaTek is reported to have seen 25% unit growth in worldwide tablet processor shipments in Q3, surpassing the worldwide unit shipment of Rockchip, in China MediaTek's shipments declined, with its market share in China declining from 27.2% to 22.6%. The overall unit growth for MediaTek probably for a large part reflects the ramp of design wins for Amazon Kindle tablets that are manufactured through Taiwanese ODMs. As I explained an earlier article, the MT8135V chip used by Amazon is likely to be relatively high-cost, low-margin chip that has taken up a significant portion of MediaTek's limited wafer capacity for tablet processors at TSMC, which is the likely explanation for the shipment decline in China as MediaTek has been unable to satisfy demand for its otherwise very efficient and cost-effective solutions for both WiFi-only and 3G-enabled tablets, prioritizing shipments for Amazon and other international brand-name manufacturers.

However, DigiTimes expects MediaTek to lead the Chinese tablet processor market in Q4 2014, which would be the first time MediaTek has achieved that position. This implies fairly strong shipment growth for MediaTek in China and must be the result of an improved wafer capacity situation. That MediaTek's capacity has become less limited is apparent in its revenue numbers for October 2014, which saw a significant increase over the prior month.

Rockchip's shipments less than expected, losing leadership position in Q4

Rockchip is reported to have seen shipments decline by about 12% in Q3, much worse than the estimates reported earlier by DigiTimes and discussed in an earlier blog post, which saw Rockchip significantly increasing it leadership position in Q3. It seems the estimates for Rockchip were indeed much too optimistic, also affected by Intel's growth, whose chips to a large extent cover the segment of Rockchip's high-volume mid-range RK3188(T) chip, which is also becoming less competitive from a manufacturing cost standpoint. Rockchip is transitioning to the more cost-effective quad-core Cortex-A7-based RK3126 for the cost-sensitive market, but it appears that this will not prevent Rockchip from losing its leadership position in China to MediaTek.

Allwinner continues to decline

Allwinner's shipments declined by 10% in Q3 2014 from an already relatively low base in Q2, providing evidence that the launch of its new low-cost A33 processor has failed to meet expectations (as discussed in my earlier blog post, there have already been signs that the A33 could be the latest of several consecutive more or less failed product introductions by Allwinner dating back to 2013, all of which show evidence of severe hardware or software engineering issues), and therefore isn't helping Allwinner to recover its market share. Indeed, DigiTimes projects another 17% decline in shipments for Allwinner in Q4 2014, causing it drop behind Intel in the unit shipment ranking. Because of the failed and delayed product introductions, Allwinner has seen its product mix for the high-volume cost-sensitive segment continue to get worse, with its remaining shipments mostly consisting of almost obsolete chips sold for fire-sale prices on which Allwinner cannot make a profit. Although Allwinner has recently brought the high-end A80(T) chip to market, the volume for this chip is likely to be limited with high costs so that it most likely has only worsened Allwinner's financial situation.

Sources: DigiTimes Research (Q3 China tablet AP shipments), DigiTimes Research (Q4 tablet AP shipment projections)

MediaTek Q3 results: Affected by transition to 4G, but high level of shipments maintained in Q3 and Q4

Recently, MediaTek released its Q3 2014 financial results, and revenues for the month of October 2014 have also come in. Although MediaTek has lost some market share to due the transition to 4G, its forecast for Q4 is somewhat better than expected by financial markets and it expects to maintain a high level of smartphone SoC unit shipments.

Lateness of integrated 4G solutions impacts results, but high level of unit shipments maintained

MediaTek reported sequential revenue growth for Q3 2014 of only 6% compared to Q2 2014, a relatively low increase given normal seasonal trends. In its Q3 results conference call, MediaTek cited the transition from 3G to 4G smartphones as a reason for the relatively low growth, since MediaTek has not yet ramped production of SoCs with integrated 4G baseband and currently still relies a two-chip solution to provide 4G. Competitor Qualcomm has already been selling SoCs with integrated 4G for some time and dominates that segment, providing a threat to MediaTek's market share. I believe that a lack of wafer production capacity at TSMC was also a major contributor to MediaTek's low growth in Q3 2014, which the company has not publicly commented on.

Even though 4G growth in markets such as China has been lower than expected, the lack competitive 4G solutions means that MediaTek has lost some market share as 4G adoption grows, as was already apparent when looking new product lines from major MediaTek customers in China such as TCL (Alcatel One Touch), Coolpad, Lenovo and ZTE, whose 4G models mostly use Qualcomm Snapdragon SoCs. Some loss of market share in China is corroborated by a market share report for smartphone SoCs in China in Q3 2014 from DigiTimes Research, although MediaTek still held greater than 50% of the market.

Q4 2014 forecast better than expected

Still, MediaTek maintained smartphone SoC solution unit shipments in the 90 to 100 million range in Q3 2014 and expects similar shipments in Q4 2014, somewhat better than expected by the market. The expectation that overall revenues for Q4 2014 (which also includes MediaTek's other diverse product lines) will fall in the range between a 6% decline and 2% growth from Q3 2014 is also better than expected by the market. For Q4 2014, MediaTek expects that more than 20% of its smartphone SoC shipments will be 4G (presumably mostly reflecting the start of shipment of new integrated solutions), representing about 20 million units, reaching a full year 2014 shipment target of 30 million units. MediaTek noted volatile movements in the ASP (average sellling price) of smartphone chips due to strong competition, with limited visibility for 2015.

MediaTek disclosed that for the whole year (2014), it expects to ship about 350 million smartphone SoC solutions (of which 30 million 4G), as well as 40 million tablet SoCs. For smartphone SoCs, although China is MediaTek's largest market, the export market (reflecting smartphone SoCs sold to companies in India and other countries, with a large proportion of low-end dual-core chips) is growing in importance, with its share growing from 30% of shipments in the first half of 2014 to 40% in the second half. The increased proportion of low-end dual-core smartphone chips in Q4 (although offset by the ramp of higher-end 4G solutions) is likely to contribute to MediaTek's slight revenue decline in Q4 2014 at similar level of unit shipments.

MediaTek will be more competitive in 4G performance segments, low-cost 4G solution to follow

Looking forward, MediaTek expects the ramp of its integrated 4G solutions in 2015 to result in a better product mix, which makes sense since new chips such as MT6752 and MT6795, both with octa-core ARM Cortex-A53 CPU, make MediaTek a lot more competitive for higher-performance segments. MediaTek has also indicated that its upcoming cost-reduced MT6735 and MT6735M SoCs, which will come to market in the first part of 2015, will improve its competitiveness for the low-cost 4G market.

In the near term, MediaTek only has the MT6732 to address the lower-priced part of the integrated 4G SoC market, but this chip is relatively expensive to manufacture for a low-cost solution, being more suited for the lower part of the mid-range segment. An important reason for the relatively high cost seems to be the use of an ARM Mali-T760 MP2 GPU, which although providing good performance and power efficiency, has a relatively large die area not suited for the low-cost segment. The upcoming cost-reduced MT6735 changes the GPU to a more cost-effective Mali-T720. The manufacturing process node may also play a role. Although information is scarce, it is likely that the MT6732 is manufactured using TSMC' s more expensive 28HPM process like MediaTek's higher-end SoCs, while the MT6735 will probably be manufactured using the more cost-effective 28LP process that is more suitable for cost-sensitive applications. In its conference call, MediaTek noted that the LP process is preferable for products for the entry-level segment.

Lack of production capacity likely to have affected MediaTek

Although not publicly discussed by Mediatek, I believe lack of wafer production capacity at TSMC (primarily earlier in the year) has significantly depressed MediaTek' s sales levels for recent quarters such as Q2 2014 and Q3 2014. In its Q3 2014 conference call, MediaTek noted that it needs to work with multiple foundry partners due to its size. Reports earlier in the year from sources such as DigiTimes provided hints that MediaTek has been facing a shortage of production capacity. It has been reported that MediaTek made a failed attempt to ramp production at GlobalFoundries in 2014, which would have affected its planned capacity. DigiTimes has also reported on planned MediaTek production ramps at UMC in the face of capacity tightness. Signs that MediaTek has not been able to satisfy demand for its chips are apparent in the tablet market, for which the company has several very competitive solutions that have not shipped in the volume (especially in China) that one would normally expect in an efficient market, opening up the opportunity to take market share for companies that do not rely on TSMC for production capacity such as Rockchip and Intel.

However, MediaTek's revenues for the month of October 2014 came in at NT$21.6 billion (US$706 million), representing an increase of 16.5% from the month of September, suggesting an improvement in its capacity situation. For November 2014, revenues dropped to NT$16.8 billion. MediaTek was already conservative about its Q4 revenues when October revenues were known, so the drop is likely to have been expected by the company. Factors involved could be seasonal declines in several product segments (including its legacy product segments), production transitions (such as from MT6592 to newly ramping mid-range SoCs with 4G), competition from Qualcomm and other players with low-end smartphone SoCs within integrated 4G (a segment for which MediaTek does not have a good solution in the near term), as well as being a reflection of the wafer shortage at TSMC that may have reached its peak a few months ago.

Sources: DigiTimes (DigiTimes Research smartphone AP shipments in China in Q3 2014), DigiTimes (MediaTek Q3 results), DigiTimes (MediaTek October 2014 revenues), MediaTek (Q3 2014 conference call)

Updated December 5, 2014.

New Amazon Kindle tablets use MediaTek SoC -- but will it help MediaTek?

Amazon has introduced two new low-priced tablets for the US market, the Kindle Fire HD 6 and Kindle Fire HD 7, priced at $99 and $149 respectively. Both tablets are expected to be available in October. The new models are reported to feature an unspecified quad-core MediaTek SoC. Although some news articles suggest the use of the high-performance (but somewhat inefficient) MediaTek MT8135 SoC, about which little has been heard since its announcement more than a year ago, which would match reports from last year about Amazon using the MT8135 for future models, use of the newer and much more cost-effective and power-efficient MT8127 would make much more sense.

A recent tear-down by iFixit however proves that the tablets do use a MT8135V SoC, although the memory interface is limited to a single channel 32-bit configuration compared to the dual channel configuration originally announced for the MT8135. As will be explained below, the use of the relatively expensive (because of a relatively large die area) and not very power-efficient MT8135 featuring Cortex-A15 cores and high-performance PowerVR GPU, a SoC originally announced for high-end tablets, in low budget devices like the new Kindle models does not make economical sense at all, especially from MediaTek' s standpoint, while MediaTek's existing MT8127 would have provided clear advantages for cost and power efficiency while still meeting performance goals.

Amazon targeting different segment of the market

The new tablet models are relatively small. The 6" Kindle Fire HD 6 is one of the few tablets of that size, while smartphones of a similar size (sometimes dubbed "phablets") are becoming more popular. Both tablet models do not have cellular connectivity and require a WiFi connection to connect to the internet. The tablets have a very robust design, being considerably thicker than most tablets. There are also versions with a software and accessory package specifically targeted at children.

Amazon uses a customized version of Android KitKat, without access to Google's Play Store and other Google applications, instead focusing on its own Amazon AppStore, with a somewhat different target demographic than higher-priced tablets.

MT8315 Amazon design win reported as early as August 2013, but use of MT8127 would be more economical

Already in August 2013, reports surfaced that Amazon would be using MediaTek's MT8135 in tablets to start shipping in 2014. Amazon has confirmed that a quad-core 1.5GHz MediaTek processor used in the new models. Current specifications mention to processor cores running up to 1.5 GHz and two cores up to 1.2 GHz. The MT8135 was announced more than a year ago as a relatively high-end chip and was originally expected to be commercially available much earlier. It was MediaTek's first chip using ARM's big.LITTLE architecture, using two Cortex-A15 cores clocked up to 1.7GHz and two Cortex-A7 cores.

The MT8127, announced this spring, is based on a proven and efficient quad-core Cortex-A7 CPU configuration and adds a relatively fast GPU (although limited to OpenGL ES 2.0 API support) and is listed with a maximum clock speed of 1.5GHz.

Power efficiency of big.LITTLE MT8135 likely to be problematic

ARM Cortex-A15 cores are notorious for high power consumption, and few Cortex-A15-based SoC designs have been commercially successful for mobile applications (especially smartphones), with problematic heat production and power drain often being reported. Cortex-A15 cores also take up considerably more die area than efficient cores like Cortex-A7 or Cortex-A53, resulting in larger, more costly chips.

Although power consumption and battery life of the Kindle tablets has not yet been tested, battery life specifications by Amazon are the same as for Kindle Fire HD models from previous years. Since the MT8135V is actually used in the new models, maintaining battery life is likely to be a challenge, while if Amazon had actually chosen the MT8127, the devices would most likely have provided much longer battery life.

The case against the use of the MT8135

Even though it has been established that the new Kindle tablets do use a version of the MT8135, several drawback are apparent. Although only two Cortex-A15 cores are used in the MT8135 instead of the four present in most existing big.LITTLE designs, a small form factor tablet would most likely not allow a large battery (the Kindle Fire HD 6 in fact has only a 3400 mAh battery, limited by the form factor) and power consumption could be problematic.

The relatively high performance PowerVR Series 6 GPU in the MT8135 should also contribute to high power consumption, for example when playing games, as well as being seemingly overpowered for the relatively low screen resolution since it is heavily oriented towards the use of dual-channel memory interface and a high display resolution.

On the positive side, MediaTek has experience balancing power consumption with its CorePilot technology (for example in octa-core CPUs), although this has not yet been proven for big.LITTLE CPU designs. MediaTek also originally announced its HMP (heterogeneous multi-processing) capability in conjunction with the MT8135, with all four cores being able to run concurrently.

In addition to the relatively large die area of the CPU and GPU (resulting in a relatively large, expensive chip), as well as increased manufacturing cost due handle potentially high heat production, a hypothetical design using the MT8135 would likely be using a relatively expensive dual-channel memory interface (matching the choice of CPU and GPU), further increasing cost at several levels. However, as it turns out the new Kindle tablets limit the memory interface to 32 bits in conjunction with the MT8135V SoC used.

Consistent with the cost characteristics of the chip platform, the MT8135 was originally announced as being targeted at the mid-to-high tier of the tablet OEM market. Clearly, this does not match the $99 price of the Kindle Fire HD 6, making the actual use of the MT8135 somewhat silly.

MediaTek already transitioning away from big.LITTLE

MediaTek has also announced a big.LITTLE smartphone platform, the MT6595 using four Cortex-A17 and four Cortex-A7 cores. However,  although providing performance competitive with or surpassing current high-end platforms like Snapdragon 801, the MT6595 platform does not appear to have been widely adopted, which makes sense considering the relatively high power consumption of associated with the Cortex-A17 CPU cores and higher cost of the SoC, which make it stand out compared to other MediaTek SoCs, which tend to be low cost and power efficient.

In fact, MediaTek has already announced the MT6795, to be available this year not long after the MT6595, which does away with big.LITTLE and instead uses an efficient octa-core ARM Cortex-A53 configuration, with the other specifications being similar to the MT6595. This provides strong evidence that MediaTek is no longer focusing on big.LITTLE designs, including the MT8135, supporting the case that if MediaTek would make the decision, the new Amazon tablets in fact would not use the MT8135, but instead the newer, much more efficient MT8127.

Good game performance would have been achieved with MT8127 as well

Amazon has demonstrated relatively good performance of the new tablet models, for example when playing games, compared to competitive devices such as certain models from Samsung's Galaxy Tab 4 series. This is not unexpected, since the PowerVR Series 6 GPU in the MT8135 clearly provides high performance.

However, the Mali-450 GPU inside the MT8127 is actually a relatively recent GPU that is significantly faster than the Mali-400 commonly used in entry-level devices, and combined with the modest 1280x800 display resolution of the new Kindle tablets would have given respectable 3D game performance, not far from the performance of the actual MT8135V-equipped models. Although Mali-450 does not support the OpenGL ES 3.x API, OpenGL ES 2.0 continues to dominate, for which Mali-450 provides an efficient implementation (in terms of performance/Watt and performance/dollar).

The MT8127 is clearly a much more cost-effective (and more more power-efficient) chip. The MT8127 is likely to be dramatically more cost-effective than the MT8135, with much lower chip cost, much better battery life, and significantly lower manufacturing cost of the PCB and other manufacturing aspects, altogether a much better fit given the price segment of the new tablets.
Although the single-thread CPU performance of the quad-core Cortex-A7-based MT8127 is significantly lower than the Cortex-A15-based MT8135, this is not a critical issue in practice, and Android can already take significant advantage of multi-threading with a quad-core processor, mitigating the impact of single-thread performance bottlenecks.

Large-scale production of MT8135 does not make financial sense, unlike MT8127

Given the high manufacturing cost of the MT8135 (especially when compared to much more cost-effective tablet chips from MediaTek like the MT8127), it unlikely that MediaTek is making much of a profit on the chip even when selling millions of chips to Amazon.

In fact, because MediaTek is likely to be facing a critical shortage of wafer capacity at its foundry TSMC (being squeezed between juggernauts Apple and Qualcomm buying up capacity), the production of the MT8135, with its low profit margin, has probably cannibalized MediaTek profits as well as revenues, because, for example, for each MT8135 sold MediaTek would have been able to sell two or more much more cost-efficient and higher margin chips such as the MT8127 or MT6582.

Indeed, for this reason, the use of the MT8127 in inside the new Kindle tablets would have been much more logical. A prior commitment with Amazon for producing and shipping the MT8135, as reported previously in 2013, probably left MediaTek with no other options.

Few signs of financial gain from Amazon design win

As described in an earlier post, MediaTek's sequential revenue growth in Q3 is unlikely to be much greater than 10%, already low considering the normally expected seasonal increase expected in Q3. This provides additional evidence that MediaTek is severely affected by wafer shortages at TSMC, as well as the late introduction of smartphones SoCs with integrated 4G LTE baseband, and general price pressure on its chips. Despite probably shipping millions of MT8135V chips to Amazon, this probably has had the effect of limiting shipment of other, higher-margin MediaTek chips to other customers, because of an inability to fulfill demand. Indeed, tablets using more cost-effective MT8127 have been very slow to appear on the market, suggesting that MediaTek has been prioritizing tablet processor production of the MT8135V for Amazon because of capacity constraints. So while MediaTek has gained prestige from this design win, the financial gain is likely to be limited or even negative.

Strong prospects for new products, clouded by capacity concerns

Although the performance of MediaTek's upcoming Cortex-A53-based smartphone SoCs is likely to very competitive and they have been reported to to have gained widespread adoption in China for new designs, while also contributing to MediaTek's increasing competitiveness in high-performance segments, recent reports suggest competition for wafer capacity at TSMC will continue to be intense, bringing into question MediaTek's ability to translate any product strength (ranging from new and existing smartphone platforms to tablet chips like the MT8127) into actual sales and profit growth in the near term. If MediaTek continues to be obligated to produce the MT8135V in high volume for Amazon, that will most likely continue to negatively affect MediaTek's sales and profits.

Sources: CNET (Kindle Fire HD 6 and 7 announcement), DigiTimes (2013 MediaTek Amazon Kindle article), MediaTek (MT8127 announcement press release),  iFixit tear-down article

Updated October 24, 2014 (Update to reflect the fact that the tablets actually do use the MT8135V SoC).
Updated November 2, 2014.

Widespread adoption of MediaTek's upcoming 4G solutions, capacity at TSMC remains tight

4G smartphone prices to drop in China, MediaTek to see widespread adoption

In an article from 16 September, DigiTimes quoted a China Mobile Device official saying that the lowest prices of 4G smartphones will drop towards CNY500 ($80) near the end of the year, compared to current prices of about $160 and below. MediaTek is reported to be providing chip solutions for these devices.

Similarly, a DigiTimes article on September 15 reported that MediaTek has won general adoption of its 4G chip solutions from China-based smartphone vendors, pushing Qualcomm to offer the inexpensive Snapdragon 210 in competition. MediaTek's announced integrated 4G chips solutions include the MT6732 and MT6752. Although the MT6732 is targeting the entry-level market, its performance and cost characteristics (associated with the quad-core Cortex-A53 CPU and Mali-T760MP2 GPU) put it somewhat above the lowest-cost part of the 4G smartphone market. It is likely that MediaTek will introduce new very low cost integrated 4G SoCs in the first part of 2015, competing with Qualcomm's new low-end Snapdragon 210 platform which is expected to be shipping around that time.

Early reports also indicate that MediaTek's new high-performance SoC, the MT6795 with an octa-core Cortex-A53 configuration, dual-channel memory interface and high-end GPU, will be disruptive in terms of cost and efficiency for high-performance smartphones, with potential sales volume as high as 30 million already being mentioned for Q1 2015.

Meanwhile, according to DigiTimes demand for 3G smartphones from emerging markets continues to be strong due to the slow pace of 4G network introductions, leading some smartphone companies to again compete with 3G models after earlier focusing more on 4G-enabled models.

MediaTek sales growth respectable, but helped by MStar acquisition

The finalization of the acquisition of MStar Semiconductor has made comparisons of MediaTek's financial results less transparent. Going back to last year, MediaTek reported revenues NT$39.0 billion for Q3 2013 with strong growth of smartphone chip demand from China and emerging markets. For Q4 2013, MediaTek reported revenues of NT$39.8 billion.

For Q1 2014, MediaTek reported revenues of NT$46.0 billion, but it mentioned that the increase was largely due to the merger with MStar, which became effective on February 1, 2014. For Q2 2014, MediaTek reported revenues of NT$54.1 billion, with the increase coming from the MStar acquisition as well as revenue growth in the smartphone and tablet product lines.

The monthly revenues of NT$19.4 billion for July 2014 and NT$19.7 billion for August, and expectations for a revenue level around NT$20 billion in September, put MediaTek's estimated Q3 2014 revenues at about NT$60 billion. This reflects a sequential revenue growth rate of 11% for the seasonally stronger third quarter, compared to sequential revenue growth of 17% in Q3 2013, when MStar's product lines were not yet included.

MStar's quarterly revenues were about NT$8.5 billion in Q3 2013. Estimating the current rate of MStar-derived product lines is difficult; some MStar products (including touch screen controllers and advanced smart-TV SoCs) may have seen significant sales growth recently, while older products may have declined. Assuming a similar revenue contribution in Q3 2014 (which is only a rough estimation), an apples-to-apples comparison of MediaTek's traditional product lines would suggest year-over-year revenue growth from NT$39 billion in Q3 2013 to roughly NT$52 billion Q3 2014, a growth rate of 33%, which is respectable, but lower than the apparent 54% growth rate when the MStar acquisition is not accounted for.

MediaTek's estimated 11% sequential growth rate in Q3 is likely to have been negatively affected by the tightness of production capacity at TSMC, which matches earlier news articles from DigiTimes about MediaTek's wafer production. Without these restrictions, the growth rate may have been significantly higher.

Capacity at TSMC to remain tight

In an article on 16 September, DigiTimes reported that follow-on orders for Apple iPhone 6 devices are extending order visibility at foundry houses such as TSMC to the first quarter of 2015, particularly for 8" wafer production, which is used for chips such as LCD driver ICs, power ICs and other peripheral chips.

The article also mentions that leading-edge 12" capacity utilization (reflecting 28 and 20 nm processes used for advanced SoCs for smartphones and other applications), which was earlier expected to drift downward in Q4 2014, is now expected to continue to see high utilization, with a rebound of order from chip suppliers including Qualcomm and Broadcom.

Given the tight capacity situation that has existed in this segment for a while, this comes as no surprise since several companies are likely to have low inventories because they could not get sufficient chips from TSMC in the recent period. The priority that was given to Apple has resulted in a large amount of capacity being reserved for production of the Apple A8 SoC at 20 nm, with other players being squeezed. While Qualcomm has deep pockets and can invest billions of dollars in purchase commitments, some smaller players are likely to have had difficulty obtaining sufficient production capacity. MediaTek is an important player in this segment that is likely to have been affected by the capacity situation.

Sources: DigiTimes, MediaTek

Updated October 5, 2014 (Include early report about MT6795 adoption for high-performance smartphones).

Qualcomm announces entry-level Snapdragon 210 and 208 smartphone SoCs

Qualcomm has announced the Snapdragon 210 and Snapdragon 208 SoCs for entry-level smartphones. The new products fill gaps in Qualcomm's product line in the low end, replacing the relatively unsuccessful and outdated Snapdragon 200, allowing Qualcomm to target cost-sensitive markets without having to resort to using its more costly Snapdragon 400 and 410 platforms. The platforms use 32-bit (ARMv7) ARM Cortex-A7 CPUs cores, not the new 64-bit Cortex-A53 cores used in platforms such as Snapdragon 410. The use of Cortex-A7 cores mostly likely reduces cost compared to Cortex-A53, while remaining suitable for applications that do not put high demands on CPU performance. Both platforms are expected to be shipping in the first part of 2015.

Snapdragon 210: A more cost-effective Snapdragon 400

The Snapdragon 210 uses a quad-core Cortex-A7 CPU up to 1.1 GHz, with proven cost-effectiveness and power efficiency, with a new Adreno 304 GPU (with likely significant cost savings compared to the Adreno 305 GPU in the Snapdragon 400) and integrated 4G LTE Advanced modem, supporting carrier aggregation, with support for dual SIM. The chip targets entry-level smartphones with a display resolution up to 720p, and supports hardware decoding and encoding of 1080p H.264 video and 1080p HEVC (H.265) decoding. Performance is increased relative to Snapdragon 200 by supporting mainstream 533 MHz LPDDR3 memory. The chip is manufactured using a 28nm LP (low power) process. Overall, the specifications for a large part overlap with older quad-core Cortex-A7-based Snapdragon 400 SoCs, but with adjustments for the lower requirements of entry-level devices and significantly reduced chip manufacturing cost.

Snapdragon 208 targets entry-level 3G smartphones

The Snapdragon 208 is a cost-reduced version of the Snapdragon 210, with a dual-core Cortex-A7 CPU and a baseband that limits cellular network support to 3G. It limits video decoding and encoding resolutions to 720p, although H.265 decoding is supported, and has lower maximum resolutions for screen (960x540) and camera, and limits the maximum speed of the memory interface to 400 MHz. This chip competes with MediaTek's MT6572 platform, which has been shipping for some time and has similar features, and the MT6571.

For both platforms, Qualcomm advertises compatibility with its cost-reducing RF chips such as the RF360 and third generation 28nm RF transceiver.

Cost reduction for entry-level makes sense

Based on information such as new models announced at IFA by manufacturers targeting cost-sensitive markets such as Alcatel and Lenovo, Qualcomm is already aggressively targeting the entry-level market (primarily the part of the market that is transitioning to integrated 4G) with SoCs from its Snapdragon 400 and 410 platforms. It is likely that Qualcomm is currently subsidizing the relatively high cost of these chips (in relation to their use in entry-level devices), especially for 3G-only devices, selling them with a relatively small profit margin, which it can easily afford to through the leverage of the very high royalty rates that it strives to enforce on the wholesale price of all 3G/4G smartphones. Because Qualcomm is currently the only provider of viable SoCs with integrated 4G, it can also ask a certain premium for 4G. However, through royalties, Qualcomm is technically able to continue to achieve a high profit margin when selling the Snapdragon 400 or 410 into an entry-level platform, even when making little money on the SoC chip itself based on the nominal selling price adjusted for the entry-level segment. With the Snapdragon 210/208, Qualcomm can improve its profit margins in this segment without having to rely on patent royalties.

Competition: MediaTek

MediaTek has dominated the SoC market for entry-level 3G smartphones with efficient and cost-effective platforms such as MT6572 and MT6582. However, integrated cellular network support in these platforms is limited to 3G, and Qualcomm is currently taking advantage of MediaTek's delayed introduction of cost-effective SoCs with integrated 4G by targeting version of its Snapdragon 400 and 410 platforms at entry-level manufacturers. Despite the relatively high chip manufacturing cost in relation to the entry-level segment, Qualcomm can afford to subsidize these chips in conjunction with its royalty schemes and financial leverage. In the extremely tight capacity environment in TSMC's 28/20nm fabs, Qualcomm is also likely to have gained a larger proportion of its desired chip capacity than MediaTek, because of its ability to invest billions of dollars into purchase commitments.

MediaTek has announced SoCs with integrated 4G modems, including the MT6732 and several chips targeting higher segments, which are likely appear on the market very soon. However, the MT6732 uses slightly more performance-oriented Cortex-A53 cores and is not targeted at the lower regions of the entry-level segment like Snapdragon 210 is. Whether MediaTek will be able to effectively target entry-level 4G segments partly depends on the cost and efficiency its new integrated 4G baseband architecture. Its current stand-alone MT6290 4G modem chip, when combined with existing SoCs like MT6582, clearly does not fit the cost profile for entry-level devices.

Sources: Qualcomm, Ars Technica

Tablet processor shipment projections for Q3: Rockchip growth too good to be true?

Tablet chip growth in Q3, Rockchip expected to dominate

In a recent update on the Chinese tablet application processor market, DigiTimes reported projected growth of the tablet chip market in Q3 from seasonal demand, while chip companies are rolling out new chips with an improved cost structure.

The article projects that Rockchip's shipments will increase significantly in Q3, while its cooperation with Intel will bear fruit with plans to ship its first processors with integrated baseband processor in Q4 2014. Rockchip already was the number one provider of tablet processors in China in Q2 2014. It also mentions growth for MediaTek, a steep decline in market share for Allwinner, and growing shipments from Intel, which is likely to pass Allwinner and reach the number three position. The article is otherwise devoid of the more specific figures that DigiTimes tends to publish after the end of the quarter, and the article may be based on preliminary expectations and not reflect final numbers.

Rockchip's booming shipments too good to be true?

However, some of the information of the article appears to be based on very optimistic projections of sources very close to Rockchip. Expectations that the Intel collaboration (using an entirely new processor architecture, new and unfamiliar IP blocks, a different foundry, and a significantly more complex integrated SoC chip design than previous Rockchip products) will "bear fruit" in Q4 2014, several months ahead of the planning described in the Intel announcement press release, has to be met with skepticism. Rockchip's track record, which includes severe delays and problems bringing to market significantly less complex chips such as RK3168 and RK3288, puts further doubt on the optimistic projections.

Rockchip is continuing to rely on its existing products RK3188T, RK3168 and RK3026, which are not likely to be very cost-effective in terms of manufacturing cost. Information from the supply chain from sources such as ARMDevices does not show evidence of any new cost-effective chips from Rockchip shipping in new tablets. Only Allwinner (with their new A33 chip) and MediaTek are showing evidence of providing new chips with an improved cost structure.

It is not unlikely that Rockchip's relatively recent low-end RK3026 (a dual core 1.0 GHz Cortex-A9-based SoC manufactured using a trailing-edge 40nm process) is seeing traction in the less visible ultra-low-end market (shipping primarily to cost-sensitive end markets) and is shipping in high volume (taking over from bottom-end chips from companies such as Allwinner and Actions), partly explaining the increase in shipments. However, none of Rockchip's current line-up of chips is likely to be very cost-effective due to their design (especially the use of large, outdated Cortex-A9 CPU cores). The same design choices also make them less power-efficient (with average battery life or worse) than a number of competitive products.

Rockchip addressing cost concerns in upcoming chips

However, Rockchip appears to be finally addressing the high manufacturing cost and limited efficiency of its chips with new more cost-effective designs that will appear on the market in the near future. The quad-core Cortex-A7 RK3126/RK3128 with Mali-400 MP2 GPU, manufactured at 40nm, have recently appeared on Rockchip's website, closely matching the specifications of the recently announced A33 from Allwinner and in a more general sense SoCs that MediaTek has been shipping for some time. A roadmap of upcoming Rockchip SoCs also provides evidence of a high-performance octa-core Cortex-A53 "MayBach" SoC, which is likely to address the issues that makes the RK3288 virtually unsuitable for tablets.

Explanations for Rockchip's paradoxical market share dominance in Q3 2014

To explain to current market success of Rockchip in terms of volume shipments and market share despite chip cost concerns, one can speculate about possible explanations:

• The combination of the utter failure by Allwinner to maintain a competitive product offering (their new A33 may be too late to be significantly reflected in Q3, and may not be free from the concerns that earlier caused the A20 and A23 to be utter failures), and the chip supply shortage faced by MediaTek, which otherwise may have been able to fill much of the gap because of its competitive and cost-effective products, may have conspired to make Rockchip (which has plenty of capacity available at struggling GlobalFoundries) the only source of sufficient numbers of tablet chips in the current quarter. In principle, this would cause in temporary rebound in tablet processor prices, making the cost structure of Rockchip's solutions somewhat less problematic.

• Rockchip is buying market share, selling large numbers of chips for little profit or even losses, while taking advantage of significant debt financing, using up financing provided by partnership deals or other undisclosed sources of funds. In the Chinese technology world, similar irrational high-risk boom-and-bust schemes executed by a company are a fairly common occurrence. This may include putting in very large orders at foundries with little concern about whether the volume of chips can be sold, whether the chip design is free of defects and issues that could make it unusable, or whether a profit is actually made on sale of the chips (the only thing that counts is ambition and volume).

• GlobalFoundries has been struggling, with Rockchip being one of the few significant clients for its 28nm HKMG process outside of AMD. It is possible that Rockchip is receiving preferential treatment and significant discounts for the manufacturing of chips such as the RK3188T and RK3168, because otherwise GlobalFoundries would see even more severe underutilization of its fabs. Additionally, tight capacity at most other foundries (especially TSMC) may not only have affected MediaTek, but also many of the other smaller players in the field.

The truth is probably a combination of some of the mentioned explanations and possibly other reasons that may become more clear in the future.

Update (November 2014)

Based on a recent DigiTimes report from November 11 on tablet processor market share in China in Q3 2014, it seems the estimates for Rockchip were indeed much too optimistic, with a unit shipment decline of 12% in Q3 instead of the strong growth implied by the statements from early September. Rockchip's shipments have been affected by lower than expected overall market growth, and also by Intel's penetration of the Chinese tablet market, whose chips to a large extent cover the segment of Rockchip's high-volume mid-range RK3188(T) chip, which is also becoming less competitive from a manufacturing cost standpoint.

Although based on information from DigiTimes Rockchip still held the leadership position in terms of unit shipments in China in Q3 2014 (while being passed by MediaTek in terms of worldwide shipments, including global brand-name manufacturers), for Q4 2014 its market share will come under pressure according to a forecast by DigiTimes that says that MediaTek will take over the number one position in the Chinese market in Q4 2014, probably because of lessened production capacity constraints. Rockchip is transitioning to the more cost-effective quad-core Cortex-A7-based RK3126 for the cost-sensitive market, but it appears that this will not prevent Rockchip from losing its leadership position in China to MediaTek.

Sources: DigiTimes

Updated September 28, 2014 (Add information about upcoming, more efficient Rockchip SoCs).
Updated November 26, 2014 (Update with recent information).

Potential signs of loosening of tight wafer supply?

Loosening of supply for non-leading-edge wafers?

Recently, DigiTimes, which often provides reasonably accurate information from sources close to the supply chain, but also sometimes publishes inaccurate infomation from vague sources, has published two partly contradictory articles reflecting potential loosening of the wafer supply situation at foundry houses in Taiwan.

On 28 August, it posted an article titled "Production schedules at 12-inch fabs begin to loosen", saying that "while most 8-inch fabs of major foundries are expected to run at full capacity until the end of 2014, production schedules at 12-inch fabs, particularly those of second-tier foundry houses, are said to have begun to loosen as some IC players have been reducing their wafer start orders, according to industry sources". However, it also added that TSCM's 12-inch fabs continue to run at full capacity due to production of Apple's A8 processor.

The fact that TSMC continues to run at full capacity in its 12 inch fabs puts any loosening of supply into perpective. As it happens, all major smartphone SoC vendors (Qualcomm, MediaTek and Apple) are currently single-sourcing the overwhelming majority of their smartphone chips from precisely TSMC's 28/20nm 12-inch fabs. So there a few signs yet that the tight capacity for smartphone SoCs, and other chips depending on advanced processes at TSMC such as NVIDIA's GPUs, will be resolved in the near future.

UMC likely seeing reduced demand for 40nm and above

UMC, the other, smaller foundry in Taiwan, until recently (Q2 2014) had a 28nm wafer capacity proportion in the low single digits, meaning that its production capacity for 28nm was until recently roughly on the order of 30 to 50 times lower than TSMC, a negligable amount, although it is currently attempting to increase that capacity. The DigiTimes article may refer to reduction in demand for non-leading-edge process nodes produced at UMC's 12-inch fabs, such as 40nm and 55nm.

This reduction could be stemming from so-called "second-tier" design houses in China and Taiwan targeting consumer electronics, such as low-end chips from Chinese chip designers targeting tablets and other devices, and Taiwanese companies like Sunplus and Realtek. On example of a product segment for which there is likely to be decreasing demand is stand-alone WiFi chips used in tablets and smartphones. As SoCs integrating much of the required WiFi functionality (such as the digital processing part) from vendors such as MediaTek become dominant, stand-alone WiFi chips for applications such as tablets are seeing much lower demand. Reduction in demand for older or mature product lines from MediaTek (involving segments such as DVD players, optical storage and feature phones) and Qualcomm still produced at UMC could also be involved. TSMC's 40nm and above 12-inch capacity could also be seeing lower demand, but is continuing to be converted to 28nm.

The article specifically notes that trailing-edge 8-inch fab capacity, where products such as LCD driver ICs and power ICs are produced, remains tight across the board.

ASPs said to be trending down due to increased competition

In another article on 29 August, DigiTimes reported that average selling prices of 3G/4G smartphone SoCs, touch controller and LCD driver ICs are trending down in 3Q14, due to increased competition. The article also mentions that abundant supply of wafers from foundry houses contributes to price reductions. This statement seems to partly contradict other recent articles by DigiTimes, such as one referenced above that notes continuing tightness of 8-inch fab production (used for many LCD driver ICs), as well as 12-inch production at TSMC that continues to be fully utilized, and an earlier article saying that TSMC's production capacity was already fully booked for the year (also see my earlier blog post about this). However, more available capacity at UMC's 12-inch fabs (involving nodes such as 40nm) could be a reason for the some the noted trends.

The article also notes a slow-down in domestic demand for handsets in China in Q3, that has led Qualcomm, MediaTek, Marvell and Intel to reduce pricing. It also notes that new low-cost 3G smartphone SoCs from Spreadtrum that are rolling out are potentially contributing to competitive pressures, especially for MediaTek which dominates the segment.

Potential reduction of leading edge wafer requirements at TSMC from more economical chip designs

Even for TSMC's leading-edge (28/20nm) capacity, for which there is likely to still be a significant shortage, there are developments that could reduce capacity requirements and thus eventually largely resolve the shortage of capacity, and it is possible that the DigiTimes articles are hinting at this development.

One factor is that Apple's A8 SoC chip production volume likely to have a peak around now, in order to build inventory in time for the expected September launch of the iPhone 6 and the end-of-the-year peak selling season, and may be somewhat reduced (but still significant) going towards the end of 2014. That in itself can reduce capacity tightness as the year progresses.

Qualcomm transitioning away from uneconomical Snapdragon 800/801 platform

At the same time, Qualcomm appears to be aggressively transitioning a large part of its higher-end production from the high volume Snapdragon 800/801 platform using Krait-400 CPUs to more economical platforms such as the Snapdragon 610 and 615, which use ARM Cortex-A53 CPU cores, and later the high-end Cortex A57 + A53 based Snapdragon 808/810. Snapdragon 800/801 series SoCs have a notably large die size (118 square mm for MSM8974, even at 28nm HPM) mainly due to the large size of the Krait-400 cores, as well as other design features such as the GPU and other factors. Because Qualcomm has had a virtual monopoly in the high-end smartphone SoC segment, the high manufacturing cost of Snapdragon 800/801 SoCs has not been a major issue for Qualcomm because of the ability to sell it at a very high ASP.

Cortex-A53 CPU cores, even in an octa-core configuration, have a die size that is significantly smaller than that of a quad-core Krait-400. With likely additionally reduced size of other components such the GPU, Snapdragon 610/615 SoCs are likely to be significantly smaller than Snapdragon 800/801, as small as half the size or smaller. In this way the transition away from high volume, wafer-consuming Snapdragon 800/801 SoCs can immediately reduce Qualcomm's wafer requirements significantly, assuming a similar level of unit shipments, effectively reducing the severity of the shortage of capacity at TSMC.

Some time ago, Qualcomm already executed a similar transition by successfully transitioning its mid-range Snapdragon 400 platform from dual-core Krait-300 to quad-core Cortex-A7 CPUs, likely significantly reducing cost while improving performance. Qualcomm is currently further transitioning its mid-range platform to a quad-core Cortex-A53 configuration with the production ramp of the Snapdragon 410.

Market share gains by MediaTek for mid-range and high-end segments could also effectively reduce overall wafer capacity requirements for smartphone SoCs, because of the tendency of MediaTek SoCs to have a significantly smaller die size and cost compared to competing solutions.

Sources: DigiTimes, MEPTEC

Samsung announces 20nm Exynos 5430, used in Galaxy Alpha

Exynos 5430 built with improved process, higher efficiency

It was recently reported that Samsung has announced the Exynos 5430 SoC, manufactured using a new 20nm process. This chip, which has strong similarities with previous generation Exynos chips such as Exynos 5420 and 5422 manufactured at 28nm, is likely to be an application processor that integrates CPU, GPU and other processing cores, but does not integrate a baseband and other RF-related interfaces like modern smartphones SoCs from Qualcomm and others.

Like Exynos 542x, the chip utilizes ARM's big.LITTLE architecture for the CPU with heterogeneous multi-processing capability (HMP), also called Global Task Switching (GTS), containing four fast but relatively power-consuming Cortex-A15 cores and four slower but power-efficient Cortex-A7 cores. HMP allows all eight cores to run simultaneously without significant restrictions (previous big.LITTLE implementations use cluster migration that only allows the use of either the A15 or the A7 cores at the same time, which is less efficient). Unlike previous Exynos chips such as 542x, actual application of HMP in practice is reported to be more feasible with the new chip.

On the GPU side, Samsung continues to use a Mali T6xx series GPU, more specifically the Mali-T628 MP6 GPU. Although reasonably fast and supporting OpenGL ES 3.x according to the specifications, this GPU is likely to be less economical (more die space) and less power-efficient than next generation Mali T7xx cores, and has seen little use outside of Samsung Exynos chips. Additionally, because this GPU core came to market before the finalization of the OpenGL ES 3.1 specification, support or performance for this standard may not be optimal. However, as long as OpenGL ES 2.0 remains the dominant API for mobile devices, this may not be very apparent to most end users.

Samsung strongly motivated to use more Exynos SoCs

Samsung has several reasons to try to increase internal SoC production for devices such as smartphones and tablets, including excess capacity in their logic fabs to due the loss of Apple application processor orders, and tight supply of Qualcomm SoCs that have recently been used in the vast majority of Samsung's smartphones.

Additionally, relying less on Qualcomm chips may reduce the effective amount of patent royalties that Samsung has to pay to Qualcomm. Although Qualcomm strives to collect significant royalties on all smartphones, its licensing policy has recently come under pressure in China and other countries, and not using Qualcomm chips may make it easier to contest royalty payments. And finally, the internal production cost of the Exynos chip (assuming reasonable yield rates) added to the selling price of Intel's modem chip, may still be lower than the price that Qualcomm asks for integrated SoCs such as the Snapdragon 800 series, since it has a virtual monopoly in that segment.

Several, but not all models of Galaxy Alpha use Exynos 5430

Samsung is reportedly using the 5430 in at least some variations of the new Galaxy Alpha smartphone. Other variations, such as models targeted at the US market, still use a Qualcomm processor. In the Exynos 5430-based models, LTE modem functionality is provided by a seperate Intel XMM7260 modem chip, which is a significant departure from Samsung´s almost exclusive use of integrated Qualcomm basebands/modems recently, and marks one of the rare occasions of Intel achieving a prominent design win for chips in smartphones.

Although Samsung in the past also announced use of an Exynos chips in selected models of the Galaxy S4 and S5, in practice these were little more than token announcements, involving negligable unit volume, and you have to go back to the Galaxy S3 and S2 for more material use of Exynos chips. However, it is likely that this time, for several reasons, Samsung is again, as it needs to be, more serious about shipping material amounts of Exynos chips in smartphones.

Technological improvements over Exynos 542x

Inside the 20nm Exynos 5430, some improvements over the previous Exynos 542x chips have been reported, other than the process feature size reduction from 28 to 20nm. The Cortex-A15 cores, infamous for relatively high power consumption, have been improved from the previous r2p4 to the more recent r3p3 revision, improving power characteristics, and likely facilitating the use of HMP. ARM already offers inherently more power-efficient developments of the A15 core, such as the Cortex-A17 and Cortex-A12, but these are relatively new and still largely untested for high volume production.

Also mentioned are additional process technology improvement in Samsung's 20nm HKMG process over 28nm HKMG, including the use of gate-last instead of gate-first for high-K metal gate formation and other improvements. Samsung is quoting a 25% reduction in power consumption from the process shrink alone, and the additional improvements may further reduce power consumption. To what extent these improvents result in good power consumption characteristics and battery life in devices such as the Exynos-powered Galaxy Alpha remains to be seen.

Risks involved, and Samsung still behind on integration

Actual yield rate, process maturity and ability for high-volume production is still unclear, with a limited planned production of one million Galaxy Alphas being reported. It is obvious that Samsung is well behind TSMC in 20nm process timing, capacity ramp, process maturity and quality, since TSMC has been ramping 20nm for several months in increasingly high volume for Apple for complex, highly integrated chips that are more complex than Exynos.

SoCs manufactured by Samsung for smartphones and tablets have generally been limited to application processors, while TSMC already has been producing more complex and technologically challenging SoCs incorporating basebands and other RF-related interfaces for quite some time in high volume for customers such as Qualcomm and MediaTek, spanning the low-end to the high-end. Although Samsung has been successful with production of application processors like the A6 and A7 for Apple, the higher amount of integration offered by TSMC improves cost and power consumption significantly is probably the major reason for Apple's recent move away from Samsung to TSMC. That said, Samsung is now shipping a new cost-effective SoC chip, the Exynos 3470, that likely has an integrated baseband.

Update: Global Task Switching utilizes all cores, Cortex-A15 clocked up to 1.8 GHz

Analysis of Geekbench results for the Exynos 5430-based SM-G850F (Galaxy Alpha) shows a multi-core performance scaling factor of about 4.66 for the largely CPU-bound JPEG Compress test, suggesting that Global Task Switching is indeed implemented so that not just the Cortex-A15 cores are utilized but the Cortex-A7 cores as well when high CPU performance is required. The results (in particular the JPEG Compress subtest, when compared with other devices using Cortex-A15) are also consistent with a maximum CPU frequency for the Cortex-A15 cores of 1.8 GHz.

Update of December 5, 2014

Making a count of Exynos 5430 vs Snapdragon 801-based models after a number of months of production should given an indication of the level of production of Exynos 5430. The following is apparent:

• The Exynos 5430-based SM-G850F has a count of 1202, SM-G850M a count of 6, SM-G850Y a count of 50, SM-G850FQ a count of 39, SM-G850L a count of 85, SM-G850K a count of 26, SM-G850S a count of 72.
• The Snapdragon 801-based SM-G850A has a count of 139, SM-G850W a count of 38, SM-G8508S a count of 3.

Based on these statistics, Exynos 5430-based models dominate with a share of 89% of Geekbench entries. However, the Galaxy Alpha has shipped in far smaller numbers that the Galaxy Note 4, which has at least ten times as much Geekbench entries.

Sources: AnandTech

Updated (November 2, 2014): Provide update based on Geekbench results (GTS, CPU clock speed).
Updated (December 5, 2014): Fix Geekbench result link (was pointing to Exynos 7 Octa entry), add Exynos share analysis based on Geekbench database.

Shortage of capacity for smartphone chip production at TSMC getting worse

TSMC fully booked for the year, Apple major factor

Last week, DigiTimes reported that TSMC's production capacity for the fourth quarter of 2014 was already almost fully booked, a scenario that had not occurred for many years. The tight capacity was described as being caused by a ripple-effect due to TSMC landing CPU orders from Apple, which has also brought in other peripheral IC orders for iPhone, iPad and iWatch devices. This has forced chip suppliers for mobile devices to scramble for more wafer production capacity.

TSMC dominates low power smartphone chip production

TSMC, based in Taiwan, is the leading independent semiconductor foundry in the world, and currently dominates the production of advanced lower-power, integrated smartphone SoCs with its 28nm process technology. A significant lead with respect to process technology and production quality (especially the ability to bring leading-edge processes to high volume production well before competitors, and with higher levels of integration) has led to the proportion of smartphone SoC chips manufactured at TSMC, which was already high, to increase signficantly in 2014, primarily because of the shift by Apple of the production of its SoC chips used in iPhones and iPads (such as the A8 used in upcoming iPhone 6 models) from Samsung Semiconductor to TSMC.

TSMC has already for some time produced the vast majority of SoC chips for leading smartphone chip companies Qualcomm and MediaTek, who have a virtual duopoly for the supply of smartphone chips for the Android platform that dominates the industry (with Qualcomm serving primarily the high-end and MediaTek primarily the low-end), and with the addition of Apple now manufactures the overwhelming majority of smartphone chips worldwide.

Shortage has already affected industry, high stakes involved

However, already in April 2014 it was reported that the lead time for advanced 28nm processes (used for the overwhelming majority of Qualcomm's and MediaTek's smartphone chips) had extended to several months. The allocation of significant capacity to TSMC's new 20nm process (which is an extension of the existing 28nm process technology used by TSMC) for Apple's new chips has made the shortage of capacity even more acute.

Behind the scenes, it is likely that a high-stakes power struggle for production capacity at TSMC has been unfolding between the leading smartphone chip companies Qualcomm, Apple and MediaTek, as well as other parties depending on TSMC capacity such as NVIDIA, Marvell and Broadcom. Apple and Qualcomm are two of the richest technology companies in the world, with tens of billions of dollars of cash, and can commit billions of dollars for securing capacity (and have done so). Meanwhile, MediaTek is close neighbour of TSMC in Taiwan with intricate ties at several levels, so is not likely to be displaced.

Sources: DigiTimes