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8-inch wafer foundry opens price increase mode until next year Q2

November 11, 2020

Foundry production capacity is in short supply, including TSMC, UMC, Advanced Semiconductor Manufacturing Co., Ltd., and Power Semiconductor Manufacturing Co., Ltd. and other foundries in the fourth quarter. The orders will be fully booked. At present, in addition to TSMC’s clear decision not to raise prices, UMC has confirmed last week that 8-inch wafer capacity is insufficient. This year, it has raised prices in response to the additional demand of IC design plants, and will be more comprehensive next year. At the same time, recent orders for chips for smartphones and automobiles have been released significantly, foundry is under pressure, and production capacity has become tighter. The subsequent packaging and testing plants also have orders queuing, which has caused chip price increases. Follow up the price adjustment to pass on the cost pressure...


Since the beginning of the year, due to the impact of the new crown epidemic, the global increase in home office and online education has led to an increase in the demand for notebook computers and tablet products, which has driven the growth of demand for driver ICs and other semiconductor products. In addition, Huawei has aggressively promoted before the ban takes effect. The OEM negotiates production capacity, and orders for small and medium-sized enterprises are delayed. Under the situation of multiple factors, the global 8-inch wafer production capacity is tight.

 

In order to ensure sufficient production capacity, many IC design manufacturers have begun to actively book production capacity for next year, and some long-term orders have even been placed in the second quarter of 2021.

 

Some IC design manufacturers said that the current foundry production capacity is very tight, and the delivery time has been extended a lot. The previous delivery time was about two months, but at this stage it has reached four months. Even with such a delivery date, it is still being snatched wildly, otherwise there will be a huge risk of delivery failure.

 

Among them, the 8-inch production capacity is the most popular, especially in the Chinese mainland market, where the market has fully launched a price increase model. Following Chipone North and Fuman Electronics, the industry also reported that Novatek, the leader in panel driver ICs, and Duntek, the world’s largest touch IC manufacturer, raised product prices, and Novatek’s increase rate reached 10%-15%. The increase depends on different customers.


8-inch wafer foundry capacity continues to be tight


Hua Hong Semiconductor has three 8-inch wafer fabs with a monthly capacity of approximately 180,000 wafers; it has a 12-inch wafer fab with a monthly production capacity of 40,000 wafers. CICC's recent survey minutes on Hua Hong Semiconductor show that the 8-inch wafer production line is operating at full capacity.

  

As the supply of 8-inch wafers exceeds demand, some manufacturers have also increased product prices. According to Free Finance reports, UMC’s 8-inch wafer foundry price was originally 20% cheaper than TSMC. Recently, the price has increased significantly. Some customers in urgent need of capacity have been increased by more than 30%. The current average foundry price is also catching up. Go to TSMC.


8-inch price increase is good for UMC and SMIC

  

In addition to TSMC clearly not raising prices, but manufacturers including UMC, Power Semiconductor Manufacturing Co., Ltd. have gradually increased prices, and the back-end packaging and testing plants have also reported price increases. For example, UMC has confirmed last Thursday (29th) that the 8-inch wafer capacity is insufficient. This year, the price has been raised in response to the additional demand of IC design plants, and it will be more comprehensive next year.


SMIC also mentioned in the announcement of the third quarter of 2020 that one of the reasons for the substantial increase in revenue is the increase in the price of 8-inch wafers. The gross margin guidance has been raised from the original 19% to 21% to 23% to 25%.

  

Many IC manufacturers increase product prices


Due to the price increase of foundries and the substantial increase in terminal demand, many manufacturers have increased the prices of driver IC products.

  

The major domestic display driver IC manufacturer Ji Chuang North issued a price increase notice to downstream customers. Chipone North stated, "Due to the sharp increase in wafer costs, our company has to respond to market changes in a timely manner to adjust product prices, in order to work with partners across the industry chain to jointly respond and resolve current cost pressures and challenges."

  

According to the price increase notice, all basic models of Chipone North (including dual latch) constant current driver ICs will be increased by 0.01 yuan; row driver ICs will be increased by 0.01 yuan; PWM driver ICs will be increased by 0.02 yuan. All price adjustments will be implemented on October 12, and all new orders, undelivered orders and the balance of undelivered orders will also be implemented at the adjusted prices.

  

The global leader in touch ICs, Duntai Technology, has also reported price increases. It is understood that Duntai Technology has annual shipments of more than 200 million units and possesses display driver chip technology. Its cooperating foundry manufacturers include TSMC and UMC With Power Semiconductor Manufacturing Co., Ltd. Duntai pointed out that some wafer foundries will gradually increase their prices in the second half of the year and will reflect this part of the cost to customers, and a small part of it has already begun to reflect.

  

In addition to the above-mentioned manufacturers' price increases, other IC design companies are also considering price increases. Zhongying Electronics said that the entire supply chain driving IC chips does have some recent price increases, which are more commonly transmitted from upstream to downstream, and the company is no exception. ELAN MICROELE, a well-known laptop touch panel and TDDI manufacturer, said that it is assessing to increase the company’s IC quotation to reflect the cost. The company’s strategy is to meet the demand as much as possible while the production capacity is as high as possible. Cooperate with foundry.


At the same time, upstream IC design factories and IDM factories began to negotiate with customers to increase chip prices on the grounds of passing on costs. Among them, panel driver ICs, power management ICs, MOSFETs, etc. have determined to increase prices by 10-20% in the first quarter of next year, and price increases for CMOS image sensors (CIS), microcontrollers (MCU), Wi-Fi network chips, etc. have sounded .


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Industry insiders pointed out that due to the low average gross profit margin of LCD driver ICs and the low foundry prices, at the critical moment when orders are full, foundries will give priority to orders from customers with higher profits, while driver IC orders are often Will be postponed. It is reported that due to the overcapacity of foundry production capacity, some IC customers' delivery period has been extended from about 2.5 to 3 months to 3 to 4 months, or even more than half a year.

  

It can be seen that in the context of tight wafer production capacity, LCD driver IC price increases are imperative. At present, most IC manufacturers increase product prices. In the future, the possibility of product prices will continue to rise.

  

Regarding how long the shortage of display driver ICs will last, a manufacturer told reporters, “Currently, driver ICs are still in short supply. At this stage, it should not be relieved until mid-2021. The future market direction will gradually shift to AMOLED."


The packaging and testing plant emphasizes full capacity, implying price increases


Wu Tianyu, the chief executive of packaging and testing leading ASE Investment Controls, also stated that the production capacity is fully loaded at the law meeting last Friday, emphasizing that this situation will continue into the first half of the year. "In order to meet customer demand, (ASE) expects that capital expenditure will reach its peak in the fourth quarter. Among them, the packaging capacity will be the tightest. It is expected to be fully loaded into the first half of next year, which will benefit the average selling price of next year. At the same time, the fourth quarter revenue is expected. It will grow another 8% and write a new single-season high."


According to industry analysts, although ASE has not directly mentioned price increases, the dark schematic diagram is obvious. But generally speaking, the tighter production capacity means that manufacturers have a greater right to speak in prices, that is, it does not rule out the possibility of price increases or price increases.

 

Helpless in capacity expansion


However, with the passage of time and the explosion of application demand, especially the explosion of CIS sensors in 2019, the demand for 8-inch wafer foundry production capacity has increased by leaps and bounds, which has led to the expansion of the production capacity of major manufacturers. Far below the growth rate of market demand. In addition, affected and restricted by historical development and various objective factors, this pace of capacity expansion also presents a state of being able to spare but not enough. The main reasons are as follows.

 

First, there is strong demand for analog chip applications, especially with the gradual landing of the Internet of Things, 5G and new energy vehicles, for power devices (mainly IGBTs and MOSFETs), as well as CIS sensors, OLED panel driver ICs, and TWS headset Bluetooth chips The demand is quite strong, giving 8 inch wafers more business opportunities.

 

Secondly, the 8-inch wafer foundry capacity and delivery time have always been tight. The 8-inch line production capacity of major foundries is generally tight, and most of the analog and discrete device markets are controlled by major IDM manufacturers, such as Infineon and Texas Instruments (TI). However, due to limited capacity, these IDMs usually The order is outsourced to Foundry factory.

 

At the same time, in the process of shifting from 6 inches to 8 inches, part of IDM's main production capacity was focused on 12-inch lines, and no additional 8-inch lines were added, so 8-inch products had to be outsourced. Therefore, most IDM's expansion rate is lower than the demand growth rate, and the proportion of outsourcing will be higher and higher, which will exacerbate the situation that the supply of OEM orders exceeds demand.

 

Moreover, the supply of related equipment is insufficient (many equipment factories no longer produce 8-inch wafer processing equipment. Therefore, in recent years, second-hand 8-inch wafer equipment is very popular worldwide, especially in mainland China), 8-inch silicon The limited output of films is also the reason for the tight production capacity of the overall market.


The foundry production capacity is in short supply. Generally speaking, the chip delivery period will be extended by another 2-4 weeks, and the delivery period of some chips has reached more than 40 weeks. Although TSMC has stated that it will not raise prices, UMC and Power Semiconductor Manufacturing have successively increased prices, and packaging and testing plants have also increased prices. Among them, panel driver ICs, power management ICs, metal oxide half field effect transistors (MOSFETs), etc. have determined to increase prices by 10-20% in the first quarter of next year, CMOS image sensors (CIS), microcontrollers (MCU) , WiFi network chips and other price increases sounded.


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The hot and strong growth on the demand side, as well as the shortage of the supply side (silicon wafers, foundry capacity and equipment supply, etc.) have jointly created a situation in which the 8-inch wafer market is in short supply in the past two years. Judging from the current and foreseeable future, this situation is still difficult to alleviate.

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