[Peace&Chips] Foundry Cold Wave, Fiercer in the 8-inch Market

TSMC Stock Decline Reflects Foundry Market Conditions
8-Inch Foundry Utilization Expected to Decrease in Second Half
8-Inch Production Capacity to Grow 8% by 2026

Editor's NoteSemiconductors, known as the rice of modern industry. Although it's a term we hear every day, it's often hard to explain. Peace & Chips will make the complex concepts and overall trends of the semiconductor industry easy to digest for you. Just bring your spoon.

Recently, the stock price of TSMC, a Taiwanese foundry (semiconductor contract manufacturing) company, has been on a decline. After steadily rising since the beginning of the year, it has been on a downward trend since June. As of the 6th, the Taiwanese stock price stood at 532 TWD, down 10.29% compared to the year’s peak of 593 TWD on June 13. The U.S. stock market is showing a similar trend.

The market interprets the decline in TSMC’s stock price as a result of continued sluggish demand in IT sectors such as mobile and PC. This reflects the challenging situation in the foundry industry. While TSMC may not fully represent the entire industry, it holds over 50% market share in the foundry sector, making it a good indicator of the industry's mood.

An 8-inch wafer used at the TSMC 8-inch foundry factory (Fab 3) in the Hsinchu Science Park, Taiwan /
[Photo by TSMC]

In particular, the legacy (mature) manufacturing process segment, the 8-inch foundry market, is reportedly struggling. Here, 8-inch refers to the diameter of the wafer (a thin silicon disc) used as the base for semiconductor chip production. Wafers are categorized by diameter into 200mm (8-inch) and 300mm (12-inch), and since larger wafers can produce more semiconductor chips, the industry mainly uses 12-inch wafers for production. 8-inch wafers are used to manufacture analog semiconductors embedded in various home appliances and automobiles, such as microcontroller units (MCUs), display driver ICs (DDIs), and power management ICs (PMICs).

Market research firm TrendForce expects the utilization rate of 8-inch foundry fabs (factories) to be only 50-60% in the second half of the year. During the COVID-19 pandemic, demand surged not only for semiconductors used in home appliances and various IT devices but also for automotive semiconductors, pushing utilization rates to 100%. However, since last year, the industry downturn has led to a decrease in utilization rates. Given this situation, major foundry players including TSMC have implemented price cuts for 8-inch manufacturing this year, among other issues.

Exterior view of DB HiTek Bucheon Campus, a domestic 8-inch foundry company / Photo by DB HiTek

The semiconductor market as a whole, including foundries, is expected to recover next year. The foundry industry anticipates improvement centered around 12-inch wafers. The 8-inch foundry segment may experience a slower recovery compared to 12-inch, but TrendForce forecasts that utilization rates for 8-inch fabs will decline until the first quarter of next year before finding opportunities to rebound in the following quarter.

The long-term market outlook is positive. Last month, the Semiconductor Equipment and Materials International (SEMI) predicted that global 8-inch foundry fab production capacity will increase by 8% from this year through 2026. This is due to the growing number of semiconductors used in automobiles and the fact that not all products we use require advanced semiconductors, so the demand for older-generation semiconductors will continue.

DB HiTek, a domestic 8-inch foundry company, has proactively expanded its capacity in preparation for this market recovery. It recently announced an increase in production capacity from 140,000 to 151,000 wafers per month. They stated, "We expanded production capacity to enable a faster and stronger rebound during the market recovery period."

This article is from [Peace & Chips], published weekly by Asia Economy. By subscribing, you can receive articles for free.

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