The production capacity of the round foundry market is in short supply. The industry giants will raise prices in April, and the domestic chip leader will have explosive growth in 2020.

Chip giant TSMC intends to raise prices

According to media reports in Taiwan, TSMC’s 12-inch wafers will increase their prices in April, with an increase of about US$400 per wafer, or about RMB 2,617. At the same time, TSMC will also adopt a quarterly adjustment method, that is, by the end of this year, TSMC wafer prices are expected to increase three times.

Nihon Keizai Shimbun learned on April 1 that Taiwan Semiconductor Manufacturing Company (TSMC), the world‘s largest semiconductor foundry company, will cancel its discounts to customers from orders at the end of 2021, and will increase prices by several percentage points in fact. It is reported that TSMC revealed to customers that in order to cope with the expansion of global semiconductor demand, it will initiate a large-scale investment of 100 billion US dollars in the next three years. The reason for the price increase is the increase in manufacturing costs.

TSMC has previously adjusted the price of 8-inch wafers. This time, the price of 12-inch wafers has risen by about US$400. According to the quarterly increase, if the price increases for three consecutive quarters, the cumulative increase will reach 1,200 US dollars, but it is still smaller than the one-month increase of the second-tier manufacturers. In this regard, TSMC said on March 28 that the company is committed to providing customer value and does not comment on price issues. After the surge before the Spring Festival, TSMC’s stock price has now fallen significantly, with the latest market value of approximately RMB 3.6 trillion.

TSMC, which "never raises prices lightly", is said to have raised prices mainly because compared with second-tier manufacturers such as UMC, the price has been increased twice since last year, and TSMC’s price has become the cheapest one. Other second-tier manufacturers, TSMC has never commented on prices.

According to a report released by the research organization IC Insights a few days ago, TSMC’s demand for advanced processes such as 5nm and 7nm has increased significantly. Last year, the average sales price per wafer rose to US$1,634 (approximately RMB 11,000), becoming the industry’s first, with a year-on-year increase of more than 6 % Hit a record high, more than twice the price per wafer (US$684) of SMIC, and UMC on the island was also one of the manufacturers whose average chip price rose last year, an increase of about 8.87% year-on-year.

Taiwanese media DIGITIMES Research predicts that driven by 5G, high-performance computing (HPC) and digital transformation, the foundry industry still has strong growth momentum this year. The annual output value is expected to exceed 80 billion US dollars, a year-on-year growth rate of up to 13%.

Facing the wafer shortage, Toshiba plans to start construction of a 300mm wafer manufacturing plant. On March 10, Toshiba said it was preparing to start construction of a 300mm wafer manufacturing plant. The production line plans to start mass production in the first half of 2023. Since the demand growth rate is greater than the capacity growth rate, and applications such as 5G and AI drive more demand, the foundry market is short of production capacity, and the cost of building a new fab is high, and it takes at least three years from construction to mass production. The “far water” of newly-built production capacity cannot save the “near fire”. The problem of shortage of production capacity may indeed continue until after 2022.

The overall performance of wafer concept stocks in 2020 has increased significantly

From the perspective of domestic industrial development, benefiting from the timely prevention and control of the domestic epidemic, the wafer industry chain resumed work and production in a timely manner, and China‘s integrated circuit industry continued to maintain double-digit growth. According to statistics from the China Semiconductor Industry Association, China‘s integrated circuit industry sales in 2020 will be 884.8 billion yuan, a year-on-year increase of 17%.

Data treasure statistics show that there are 16 A-share companies in China that have deployed wafer-related industries. SMIC is the leader in the wafer industry. According to the global market sales ranking of the pure wafer foundry industry in 2020 announced by IC Insights, SMIC ranks fourth in the world and the first among mainland Chinese companies. According to the annual report data disclosed on the evening of March 31, the company achieved operating income of 27.471 billion yuan in 2020, a year-on-year increase of 24.8%; realized net profit of 4.332 billion yuan, a year-on-year increase of 141.5%. The revenue contribution of 28nm and below technologies will increase from 4.3% in 2019 to 9.2% in 2020.

Zhonghuan is one of the largest manufacturers of semiconductor silicon wafer materials in China. In 2020, the company‘s 12-inch wafers have made major breakthroughs in key technologies and product performance and quality. It has been mass-produced and supplied to major domestic digital logic chip and memory chip manufacturers; traditional The business of silicon wafers (5-inch, 6-inch, and 8-inch) for power semiconductor products has grown steadily and is supplied to domestic and international users. In 2020, the company‘s silicon wafer shipment area will increase by more than 30% year-on-year.

Judging from the published annual reports, express reports and forecast data, the overall performance of wafer concept stocks in the past year has shown an overall growth trend. 14 of the 16 wafer concept stocks are expected to grow by more than 20% year-on-year in net profit in 2020, accounting for 87.5%. The net profit of Shanghai Silicon Industry, SMIC, and China Resources Micro is expected to double. The net profit of Shanghai Silicon Industry in 2020 is 87 million yuan, a year-on-year increase of 196.84%, ranking first. During the reporting period, Shanghai Silicon Industry‘s operating income, driven by the increase in sales of 300mm semiconductor wafers, and the combined influence of the company‘s acquisition of Xinao Technology in March 2019, increased by approximately 21.36% over the same period of the previous year.

Judging from the recent stock price performance, wafer concept stocks are still in an adjustment state. According to data, since March, shares such as Haite High-tech, Jingsheng Electromechanical, North China Innovation, Shanghai Silicon Industry, and Longji have fallen by more than 5%, and only Zhonghuan and Saiwei have increased by more than 10%. Compared with the high point during the year, the retracement rate of 10 shares exceeded 20%, accounting for more than 60%. The top five with the highest retracement are Shanghai Silicon Industry, North China Innovation, Longji, Dinglong, and Haite High-tech.