"Building a new fab is very expensive," said Connor Liu, an analyst at SG Securities. "We believe gradually only the top IDMs will continue to build new fabs, but the small and medium IDMs will increase outsourcing to foundries. This trend will continue for the long term," he said.
While an 8-inch wafer foundry costs about US$1.3 billion, the 12-inch equivalent costs about US$3 billion.
UMC floated 90 million American depository receipts on the New York Stock Exchange in September to raise capital for the construction of its 12-inch wafer plant being built in Tainan.
"We see demand for ICs continuing to increase," said Liu. In an environment of slowed down fab expansion due to their high cost, IDMs will need to sign long-term contracts with the foundries to secure capacity and push sales growth, said Liu.
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