As semiconductor demand continues to slow down and inventory destocking pressure remains high, IC design companies have gradually loosened the order volume of wafer foundry in wafer foundry. After the first drop of mature process wafer foundry in mainland China fell by more than 10% in July, the relevant price reduction wave has spread to Taiwanese manufacturers in China, mainly consumer chips in some mature process, with a cumulative decline of 20% recently. As the order-cutting storm continues, there may be room for bargaining for continued corrections in the future.
Currently, the main mature process wafer foundry manufacturers in Taiwan include UMC, World Advanced, Liji Electric, etc. Regarding the news that the quotation has plunged and 20% of the orders, UMC said yesterday that the wafer shipments this quarter and the average unit sales price (ASP) denominated in US dollars will remain the same as the outlook for the previous quarter, and the capacity utilization rate in the fourth quarter will also maintain a healthy level.
World Advanced emphasized that although the average sales unit price in the third quarter was under pressure, it remained stable.
Lijipin mentioned at the Fashu meeting that although the capacity utilization rate this quarter has declined, it will continue to improve production efficiency, negotiate with long-term customers, adjust product portfolios and accelerate the finalization of new products. However, before this, Liji Electric had stated that there is currently no price reduction plan.
Even though local mature process foundry manufacturers have not yet let go of their quotations on the table, some IC designers have privately revealed that in order to cope with the weakening of market demand, some foundry factories in Taiwan, China proposed a plan to "increase order volume and give preferential prices." It is worth noting that when OEM prices were reduced in July this year, in order to maintain production capacity, some industry insiders also proposed to order three final designs and get one final design. Buy three get one equals a disguised price reduction, which is also to maintain capacity utilization. However, judging from the current market situation, it is unlikely that more films will be added to the IC design side.
IC Design Company also stated that they are now facing the dilemma of having to cut wafer foundry orders and cannot see when the market conditions will bottom out, so they must keep enough cash to hold on and cannot lose money. Perhaps the semiconductor market conditions can be adjusted after the second half of this year, but it is normal that it may not be able to recover until the first half of next year. Perhaps it will not be better until the second half of next year. Moreover, in the past two years, due to the insufficient supply of wafer foundry capacity, some wafer foundry cumulative quotations increased by more than double. Now, even if they are down 20%, they are still at a relatively high level.
At this stage, the order volume of IC design companies to the foundry factory can no longer meet the original long contract requirements, but the wafer factory also stated that it will not implement the breach of contract fine for the time being, "not to hurt everyone's feelings."
According to Isaiah Research data, the production capacity of mature processes is indeed loose in the second half of the year. Taking 8 inches as an example, the average capacity utilization rate in the second half of the year will fall to 95~100%, and the capacity utilization rate of some wafer factories will drop to around 90%. On the other hand, the capacity utilization rate of the 22/28nm process will still fall on average at around 100% in the second half of the year, and the capacity utilization rate of some wafer factories may drop to 95~100%, and there is also a loose production capacity.
TSMC has previously clearly stated that it has seen the supply chain take action to lower the inventory level. It is estimated that customer inventory adjustments will last for several quarters and may not end until the first half of next year. At that time, the market generally believed that consumer electronics had declined severely due to the impact of the epidemic and inflationary pressure, and the mature wafer foundry process may not escape the fate of price decline.
Today's foundry giant TSMC has also reported that it has to consider shutting down some EUV lithography machines as the capacity utilization rate of 5nm begins to decline. The company has a total of about 80 EUV lithography machines and plans to shut down 4 of them by the end of this year to save huge electricity expenditure.
Recalling the fact that TSMC is now expanding its 28nm process capacity, it is also more inferred that the severity of TSMC's reduction in advanced process capacity is likely to be because of the rapid shrinkage of revenue brought by advanced process processes, TSMC had to expand its 28nm mature process capacity to make up for the losses of advanced processes.
Not long ago, TSMC executives also said that because they mastered advanced process processes, they would not be affected by the global oversupply of chips. However, just two months later, TSMC began to plan to shut down some advanced lithography machines to save operating costs. Such a huge change occurred in a short period of time, which shows that the demand for semiconductor market is unpredictable.
However, the market environment does not have to be too pessimistic. As new industries such as HPC (high-performance computer), new energy vehicles, IoT (Internet of Things) gradually become new growth drivers, it is very likely to make up for the gap in mobile phone orders, but we still need to continue to observe the market situation in the first half of next year.
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