GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, on Monday said that most of its clients have agreed to stick to wafer prices based on multiyear supply contracts signed previously, despite concerns over an inventory pileup.
The announcement came as the company attempts to soothe investors’ concerns about a sudden reversal of an industrial boom that lasted more than two years.
Taiwan Semiconductor Manufacturing Co (台積電), the world’s largest contract chipmaker and a client of GlobalWafers, last week said that it would negotiate for lower wafer prices.
Some clients did express their intention to renegotiate for lower wafer prices or push back some wafer supplies, as excess inventory has led to slides in spot prices and stoked fears about potential downside risks, GlobalWafers said.
“On the demand front, there are more uncertainties in the first quarter of this year. So many clients saw some increases in inventories,” GlobalWafers chairwoman Doris Hsu (徐秀蘭) told reporters at a media gathering.
“After some discussions with our clients, most of them agreed to honor long-term supply contracts with GlobalWafers. That is because they are not pessimistic about business outlook for the remainder of the year,” Hsu said.
“There is still a chance to see [inventory] return to a healthy level,” she added.
GlobalWafers said that it has kept its promises by supplying agreed volumes at fixed prices over the past two years, despite spot prices skyrocketing due to severe supply constraints.
The spot prices at times reached 30 to 40 percent more than GlobalWafers’ contract prices, the company said.
The firm expects wafer shipments to change little this quarter from last quarter, Hsu said.
Meanwhile, wafer prices are to be higher, she said.
“Most of our overseas fabs are running at full utilization,” Hsu said.
GlobalWafers has adopted different business strategies from its peers, as the Hsinchu-based company builds wafer capacities and makes wafers based on customer demand or supply contracts signed with clients, which minimizes risks stemming from volatility in the industry.
More than 80 percent of its 12-inch wafers are sold on a long-term contract basis, the company said.
The firm invested US$438 million to build a 12-inch wafer fab in South Korea after receiving five-year supply contracts from clients to fill the fab’s designed monthly capacity of 150,000 wafers.
GlobalWafers started building the fab in October last year after receiving all of the clients’ prepayments.
The South Korean fab is to enter mass production in the final quarter of this year, Hsu said, adding that despite the short-term slowdown, GlobalWafers’ clients still wanted to keep construction of the fab on schedule.
However, the company has put on hold the construction of two fabs, worth a combined US$500 million, as the market situation has become unpredictable due to a US-China trade war, Hsu said.
Separately, Hsu, who doubles as president of GlobalWafers parent Sino-American Silicon Products Inc (SAS, 中美晶), said that SAS’ board of directors has approved wage increases of 4 to 10 percent.
That is likely to be a rarity, as the solar industry is suffering from a slump.
SAS, a solar module maker, was projected to remain profitable for last year after writing off NT$2.2 billion (US$71.21 million) of idle and less-advanced manufacturing equipment, Hsu said.
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