The shortage of wafer foundry capacity has been a clich é topic in the semiconductor industry in the past year. Different from the traditional manufacturing industry, wafer manufacturing is one of the most sophisticated and complex processes in the world, which involves a wide range of processes and equipment and requires a huge amount of capital support. Each round of production expansion of the fab has a long period of several months, or even more than a year. Therefore, the shortage of wafer foundry capacity can not be solved in the short term like masks, temperature guns and other commodities.
"now when we see customers every day, apart from asking us for capacity arrangements, we are asked to expand production." Mike (a pseudonym), a sales director of a large foundry, told Ji Wei.com, "but the reality is that the monthly production capacity of 8-inch expansion of 1000 chips is $10 million, while that of 12-inch expansion of 1000 chips may cost $100 million." However, there is no way to support our production expansion with market-oriented wafer prices. "
According to the latest IC Insights research report, TSMC earns an average of $1634 per wafer, more than twice as much as SMIC ($684) and UMC ($675). Obviously, as a leader in advanced technology, the price per wafer of TSMC is much higher than that of its competitors. Under this premise, TSMC relatively has the capital to expand production significantly, but only for 12 inches.
A few days ago, according to Taiwan media reports, TSMC has given priority to expanding 12-inch wafer plants rather than 8-inch plants, which is bound to aggravate the shortage of 8-inch production capacity. Taiwan media quoted sources as saying that this is due to a shortage of mature process node equipment supply, and other factories in Taiwan have also encountered difficulties in purchasing 8-inch equipment.
But is that really the case?
From 4.2% resolute
Zhao Haijun, SMIC's joint CEO, revealed at a conference call in the fourth quarter of 2020 that the company will expand its 8-inch monthly production capacity of 45000 tablets in 2021, and another 12 inches will expand 10, 000 pieces per month.
According to Ji WeChat, SMIC has scaled back its production expansion plan after it was included in the entity list, and the 8-inch 2021 production expansion was originally planned to be 70,000 pieces per month. You know, SMIC currently has an overall 8-inch monthly production capacity of about 250000 tablets, with an expansion rate of nearly 20 per cent within a year.
People in the supply chain told Ji Wei.com that most people think that the world's 8-inch devices are "out of print", but in fact, Yingcai, Lam and Tepco have made full power to enter the new 8-inch devices, some of which are made by themselves, while others license the technology to OEM contract production. Most of SMIC's 8-inch expansion purchases are new equipment, and orders are finalised before SMIC is added to the physical list, and all that remains is delivery and loading.
There is an acute shortage of 8-inch production capacity in the world, and most of the news from other factories is to increase prices or expand production by 12 inches, but only SMIC, which has a market share of 4.2%, announced plans to expand production by 8 inches. Why?
Jiwei interviewed a number of analysts and industry insiders in the upper and lower reaches of the industry chain and summed up the following four major reasons:
First, sufficient cash flow to break the market-oriented price restrictions. SMIC Science and Technology Innovation Board raised as much as 53.2 billion yuan in its initial public offering, ranking first among Science and Technology Innovation Board's initial public offerings in 2020. SMIC can get rid of the restrictions of market-oriented wafer prices and continue to promote the company's future performance by using a large amount of money raised to expand production.
Second, compared with 12 inches, 8 inches has less hindrance to production expansion. Since the beginning of the Sino-US trade war, Chinese high-tech enterprises such as ZTE and Huawei have been listed by the US Department of Commerce, and SMIC has gradually felt the turbulence and external resistance. From the delay in the delivery of EUV equipment to the fact that it was finally listed on the entity list at the end of last year, the pace of SMIC's development was forced to slow down. The US Department of Commerce pointed out that SMIC will adopt a "presumptive rejection" of products or technologies imported by SMIC for use in 10nm and below technology nodes, including extreme UV technology. A few days ago, SMIC's first batch of supply licenses are also based on mature process equipment. As the process nodes covered by 12-inch equipment are more advanced, and the expansion of the 8-inch plant will never involve advanced nodes, SMIC will focus on 8-inch production more smoothly.
Third, when the domestic substitute is just, the 8-inch market has plenty of room for growth. As of December 2020, SMIC ranked only sixth in global 8-inch wafer production capacity, with a market share of only 6 per cent, according to IC Insights. SMIC is only in the third place in the field of pure wafer foundry. Therefore, the 8-inch market still has huge room for growth, and production expansion is actually SMIC's long-term strategic choice. Nowadays, with the shortage of 8-inch production capacity and the rising prices of chips such as power management chips, IGBT, MCU and CIS image sensors, SMIC's "spring seed" is bound to usher in the "autumn harvest" under the tide of domestic substitution.
The above three points are the main reasons for SMIC's production expansion of 8 inches. With regard to the reasons why other factories do not expand production by 8 inches, but only 12 inches, Taiwan analyst Tom (a pseudonym) told Ji Wei.com that 12 inches has gradually become the mainstream size because of its higher production efficiency and lower unit consumables. Although 12-inch expansion is more expensive, the price per wafer is also higher.
In recent years, with the exception of TSMC's announcement of a new 8-inch plant next to the Nanke No. 6 plant, there are almost no new 8-inch pure wafer plants around the world. Tom said that the process nodes of the 12-inch plant cover a wider range of nodes, resulting in more flexible deployment space. In addition, new 12-inch factories are more likely to receive government subsidies, which is one of the reasons why wafers tend to build 12-inch factories, which have also been launched directly in recent years.
Influence
8-inch "We expand the enemy but not expand". With the increasing demand of domestic IC design companies and the strong desire for localization of the supply chain, SMIC's profitability will be further improved in the future.
In contrast to the 12-inch and advanced process nodes, the continuous expansion of capacity leads to an increase in depreciation, but the forced replacement of major customers in advanced processes leads to a decline in the number of wafers produced, which makes SMIC's burden even heavier. Under the crackdown of the United States, how to ensure the cautious continuation of advanced processes and complete the breakthrough in the future is an issue that SMIC needs to consider for a long time.
For China's IC design company, SMIC's 8-inch production expansion will, to some extent, alleviate the serious shortage of analog chips, power management chips, MCU and so on.
In the semiconductor equipment market, Chinese manufacturers currently only have a certain degree of competitiveness in the 8-inch market, and SMIC's vigorous expansion of 8 inches also provides a potential stage for domestic semiconductor equipment, if the products can be compared with overseas suppliers. I believe it is only a matter of time before SMIC is adopted in large quantities.
The field of semiconductor materials in China is similar to that of semiconductor equipment, especially in the silicon wafer industry. At present, the top five manufacturers of 12-inch wafers account for 97.8% of the world's total. According to IC Mtia data, the market size of semiconductor wafers in China in 2018 is 17.21 billion yuan, with an annual production capacity of 2393 million square inches, of which 12-inch wafers have a production capacity of about 201 million square inches, and 8-inch wafers have an estimated production capacity of 870 million square inches. With SMIC's 8-inch production expansion, domestic wafer manufacturers will also usher in development opportunities.
![[SMM Analysis] Stainless Steel Social Inventory Saw a Slight Buildup, While High Supply Coupled with Cautious Downstream Demand Constrained Destocking](https://imgqn.smm.cn/usercenter/bFzkj20251217171724.jpg)
