Recently, it has been reported in the IC industry that TSMC and its investment in World Advanced have successively lowered the price of 8-inch wafer foundries, with a maximum drop of up to 30%. Later, it was reported that Korean wafer foundries (including Dongfang Hi-Tech, Key Foundry, etc.) also began to generally lower the price of 8-inch foundries, with the highest being as high as 20%.
Summer is in full bloom, but 8-inch wafer foundries are experiencing a new round of “severe cold”. In addition to the inherent sluggish demand factors, some analysts pointed out that the “price war” launched by Texas Instruments (TI) in the analog chip market has also played a role. important role. The reason why TI is able to initiate price competition is the yield and cost advantages brought by the 12-inch production line.
Larger wafer size helps price competition
Compared with 8-inch wafers, the area of 12-inch wafers has increased by 2.25 times. After the initial investment in the production line has been recovered and the yield problem has been overcome, 12-inch wafers can significantly reduce the cost of a single chip. As a leader in the field of analog chips, TI is the first factory to lay out a 12-inch production line.
As early as 2009, TI became the first analog original factory to obtain 12-inch production capacity by purchasing the original Qimonda equipment. After several acquisitions and upgrades to the original production line, by 2020 about half of TI’s analog devices will be produced on the 12-inch production line, which directly helps TI’s gross profit margin increase to more than 60%. Today, TI’s ability to launch price competition is also due to the strong supply capacity brought by the 12-inch production line.
In the future, TI will also continue to expand its 12-inch production line to continue its advantages. According to the plan, TI will add four new 12-inch fabs in Texas, USA, to continuously expand product supply and reduce production costs. In recent years, the wafer foundry model has increasingly penetrated into the material production process, but TI has always insisted on upgrading its own production capacity and controlling the output of most materials in its own hands, which is more conducive to cost reduction. Reduction, improvement of delivery time and assurance of quality control. All in all, what TI wants to achieve in its long-term efforts is to maintain its cost advantage over competitors and maintain its leading position in analog.
Compared with TI, the analog chips produced by most 8-inch production lines lack the potential to further optimize costs, and it is also difficult to expand production capacity. When the demand is low and TI launches price shocks, it is even more forcing the wafer generation The factory negotiates prices with IC design customers in the attitude of “reporting to the group for heating”. However, during this period of sluggish demand, the price of 12-inch OEMs is also loosening, and they can already compete for 8-inch customers downward, which will further deepen the price challenge faced by 8-inch.
12 inches will usher in greater expansion
During the “core shortage tide” that appeared in 2020, the price of 8-inch foundry had a round of surge. With the successive outbreaks of epidemics around the world, the demand for home office and online education has increased sharply, resulting in a sharp increase in the supply and demand gap for 8-inch products such as display driver chips and power management chips (PMICs), and 8-inch foundry production capacity is also in short supply. Under the effect of the law of supply and demand, the price of 8-inch foundry will rise all the way from the second half of 2020, and will continue to rise until the first half of 2022.
However, the continuous transition from small-sized wafers to larger-sized wafers in the semiconductor manufacturing industry has become a trend, and this wave of growth of 8-inch wafers is just an episode. With the establishment of the 12-inch mainstream in the 2010s, the output of upstream equipment factories for 8-inch equipment is close to exhaustion, and the expansion of wafer foundries can only compete for limited second-hand equipment. In addition to the existing production lines being fully occupied, if IC design customers want to obtain more production capacity, they can only upgrade their solutions to 12 inches or wait in line.
For wafer foundries, the demand is sluggish, and the demand for superimposed car cores is lacking. Expanding the 12-inch production line is a profitable choice. For example, 90% of UMC’s capital expenditure of US$3 billion this year will be used for 12-inch Production capacity, and the new production capacity to be released this year is exactly the 22/28 nanometer process suitable for the car core. Almost all of PSMC’s capital expenditure of about US$1.9 billion this year will be used for 12-inch production lines.
In terms of original IDM factories, the 12-inch layout initiated by TI has become popular. Among them, ON Semiconductor currently has two 12-inch factories, and the implementation of the Fab-Liter model also concentrates resources on the layout of 12-inch production lines. Infineon currently has two 12-inch fabs, and will invest 5 billion euros this year to build a new 12-inch fab in Dresden. As the original factory of the head car core, the layout of ON Semiconductor and Infineon is intended to expand the production capacity of key components such as power and analog to meet the huge demand of the new energy vehicle industry. As for the new plant invested by TSMC, Bosch, NXP, and Infineon in Germany recently, it is also aimed at 12-inch production to provide more “core” power for the automotive industry.
According to the industry research organization TrendForce’s forecast last year, the global average annual production capacity of 8-inch wafer foundries will increase by about 3% this year, while the growth rate of 12-inch wafers is expected to be 8%. During the industrial adjustment period, the growth rate of both will be reduced compared with last year, but the growth rate of 12-inch production capacity is still significantly stronger than that of 8-inch.
Immediate impact and consequent thinking
Taking the lead in laying out 12-inch production lines in the industry, TI has the strength to suppress competitors in price competition, and now its influence is transmitted to the foundry industry, which shows its influence. With the advent of the car core era, the layout of 12-inch production capacity has become the consensus of the IC manufacturing industry. Both the original IDM factory and the foundry industry are starting to expand production capacity in order to gain more market share in the future. The continuous expansion of chip supply will also make “chip shortage” gradually a thing of the past. Emerging industrial chains such as automobiles, medical care, and AI will gain more comprehensive supply chain support due to the efforts of chip companies.