Semiconductor Manufacturers Also Struggle with 'Supply Shortage'... Rising Concerns Over Raw Material Wafer Deficit

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Amid the prolonged global semiconductor shortage, concerns are growing that the supply of silicon wafers, the raw material for semiconductors, will also become insufficient. As wafer suppliers take a cautious stance on expanding facility investments to meet the surge in demand, wafer supply is expected to fall significantly short of demand, leading to supply shortages and price increases.

According to Japan's Nihon Keizai Shimbun on the 2nd, Japanese silicon wafer supplier Sumco estimated that at the beginning of last year, global semiconductor manufacturers held about 1.6 months' worth of inventory for 300mm (12-inch) wafers, but this decreased to about 1.3 months' worth as of last February. Sumco's Chairman and CEO Masayuki Hashimoto explained that these wafers are exclusively used for logic semiconductors in central processing units (CPUs) and device control, but the supply is unable to keep up with demand.

Sumco is the world's second-largest silicon wafer supplier, holding about 55% of the global market share together with Japan's Shin-Etsu. Currently, only Taiwan's TSMC and Samsung Electronics can produce semiconductors of 5nm (nanometer; 1nm is one-billionth of a meter) or smaller, and Nihon Keizai Shimbun explained that these two companies are the only ones capable of mass-producing wafers used as materials for 5nm semiconductors.

Accordingly, Sumco has reportedly been receiving strong requests from TSMC to increase production since last February. However, Sumco is taking a cautious stance on investment for production expansion. In the mid-2000s, when the semiconductor market was booming, Sumco made aggressive facility investments, but the global financial crisis in 2008 led to a sharp drop in wafer demand, resulting in large-scale losses.

Nihon Keizai Shimbun reported, "Pressure on 300mm wafers used in advanced products is increasing," but added, "Since wafers are directly linked to semiconductor quality, TSMC and others have no choice but to select Sumco and Shin-Etsu as partners, and wafer suppliers may show a firm attitude despite repeated requests for increased production." CEO Hashimoto said, "(The price of 300mm wafers) must rise by 50-60% to surpass the breakeven point for factory expansion." It is also known that Shin-Etsu, the world's number one wafer supplier, is negotiating price increases.

Nihon Keizai Shimbun stated that building a wafer factory requires an initial investment of over 50 billion yen (about 510 billion KRW), and as facilities gradually increase, the cost can reach 100 billion yen. Typically, it takes about two years from the start of construction to mass production at a wafer factory. Therefore, Nihon Keizai Shimbun predicted that if wafer manufacturers do not make large-scale investment decisions to meet demand within this year, a supply shortage crisis could occur in 2023.

This content was produced with the assistance of AI translation services.