Silicon wafer supplier Formosa Sumco Technology Corp (台勝科) yesterday gave an upbeat outlook for the current quarter, as it expects that deteriorating supply constraints would continue to drive up wafer prices, which would help it defy a slowdown in consumer electronics demand.
The company said chip demand is strongly underpinned by exuberant demand from 5G-related devices, automotive electronics and power management chips, which most semiconductor companies consider long-term growth engines.
Customers’ silicon wafer inventories are running low due to prolonged supply-demand imbalances over the past few quarters, the company said in a presentation at an investors’ conference.
Photo: Reuters
“Tight supply of 12-inch silicon wafers for logic and memory chips aggravated during the second quarter. The company is unable to allocate any wafers for customers who did not ink long-term supply contracts,” Formosa Sumco said. “We are also unable to catch up with customers’ demand for 8-inch wafers.”
Formosa Sumco expects supply constraints to extend at least into this quarter, leading to further price increases on the spot market, the company said.
Formosa Sumco, which was founded by Japan-based Komatsu Ltd and Taiwan’s Formosa Plastics Group (FPG, 台塑集團) in 1995, said wafer demand exceeded supply last quarter, which drove up 8-inch and 12-inch wafer spot prices.
The company signed more long-term supply agreements with customers last quarter, extending the coverage to most of its silicon wafers, it said, adding that the contract prices have picked up during the first three months of this year.
Formosa Sumco budgeted NT$18.9 billion (US$643.1 million) for capital spending this year, far exceeding last year’s investment of NT$1.4 billion, as it is seeking to set up a new 12-inch fab in Yunlin County’s Mailiao Township (麥寮) that would cost NT$28.26 billion.
The company aims to ramp up output, with the new factory scheduled to start production in 2024.
The new investment also reflects Formosa Sumco’s bullish view about the silicon wafer market for the coming years.
The company yesterday said that the silicon wafers scarcity would likely persist, given robust market demand and decreases in customers’ wafer inventories.
Global supply of 12-inch silicon wafers would be 3 percent below market demand this year, it said, adding that the supply gap might widen to about 10 percent next year.
Geopolitical tensions, as well as COVID-19-induced supply chain disruptions and lockdowns in China, have affected consumer electronics demand, the company said, but added that this would not dampen customers’ demand for silicon wafers, as they are adjusting product portfolios to cope with the weaker consumer market.
Formosa Sumco shares rose 2.32 percent to NT$265 yesterday, outperforming rival GlobalWafers Inc (環球晶圓), whose stock price rose 0.64 percent to NT$626.
The TAIEX slid 0.73 percent.
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