The price of wafer foundry services will increase next year!

The COVID-19 has accelerated the digital transformation. Led by the megatrend of 5G and high-performance computing (HPC), the global semiconductor production capacity will fall short of demand in 2021, but it will also lead to the problem of chip shortage in the electronic production chain. In order to ensure the production capacity of wafer foundry, IDM factories and IC design factories have expanded their orders to strive for more wafer investment. Companies such as UMC, TSMC, and World Advanced have all raised prices in 2021, with an average increase of 20-30%. However, TSMC has not made any price increases in 2021, and wafer foundry prices remain unchanged from 2020.

Although semiconductor factories worldwide have increased their capital expenditures to expand production capacity, equipment lead times have been significantly extended to over 9 months, resulting in limited capacity expansion from 2021 to 2022. With the expectation that chip shortages may continue until 2023 to 2024, TSMC has decided to raise wafer foundry prices when negotiating new contracts with customers for 2022. Mature process prices will increase by 15-20%, advanced process prices will increase by about 10%, and new prices will be applied to wafer shipments in 2022.

According to IC design industry insiders, in the fourth quarter, due to adjustments made by wafer foundries in response to the situation of long and short materials in wafer production, except for UMC, which raised prices again, no other industry players adjusted their prices. After the news that TSMC will raise its wafer foundry prices for 2022 came out, other wafer foundries that were originally inactive have recently taken new actions, including UMC, TSMC, and World Advanced, which will follow suit with price increases in the first quarter, with an average increase of over 10%, indicating that wafer foundry prices will rise comprehensively in 2022.

The wafer foundry industry pointed out that the production capacity for the first half of 2022 has been fully booked by customers, and over 90% of the production capacity for the second half of 2022 has also been sold out, with order visibility visible for the second half of 2022. Due to the industry's optimism that the shortage of chips will continue beyond 2023 after the easing of the epidemic and the lifting of economic restrictions, more than half of customers choose to sign 2-3 year contracts. Industry insiders have stated that a comprehensive price increase for wafer foundries in the first quarter of 2022 is a foregone conclusion, and if long-term contracts are not signed, the price increase will be even higher.

Jibang Technology, a market survey agency, said that the demand for semiconductors led by 5G has gradually fermented since the second half of 2019. In addition to the increasingly tense geopolitical factors, it will extend to the COVID-19 in 2020, accelerating the demand for global digital transformation. The epidemic has driven panic stocking, which has brought structural changes to semiconductor supply and demand, resulting in a serious shortage of wafer foundry capacity. So far, the situation has not stopped.

It is estimated that the annual average production capacity of 8-inch global wafer foundry will increase by about 6% in 2022, and 12 inch will increase by about 14% annually. Among them, more than half of the 12 inch new production capacity is currently the most scarce mature process, and it is expected that the extremely tight chip shortage wave at this stage can be relieved.