TSMC Freezes 28nm Process Unit Price
The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. -- Ed.
The foundry price hikes that have been going on for a year are coming to an end. It is known that TSMC has decided to freeze the unit price for its 28nm process in 2H21. We expect to see foundry supply increases and demand growth slowdown from 2H21.
TSMC freezes 28nm process unit price
According to industry insiders, TSMC has decided to freeze the unit price of its 28nm process in 2H21. From 2H20 until recently, foundry players have raised their unit prices each quarter—UMC and Powerchip hiked their prices by 10~30% each quarter. However, it appears as though the foundry unit price increases that have been going on for a year are coming to an end.
On the demand side, Chinese government investigations into the semiconductor distribution market have impacted demand. The Chinese government points out that one of the reasons for the supply shortage is speculative demand at some distribution retailers. In 2021, the prices of some automotive MCUs have risen more than 10 times. As the industry is circulating the observation that the government will start investigating the speculative demand, the inventory held by distributors began to appear on the market.
Foundry supply-demand balance in 2H21
On the supply side, foundry companies’ capex, which have been increasing sharply since 2H20, should impact the market from 2H21. In 2021, capex growth by foundry player stands at +74% y-y for TSMC, +100% y-y for UMC, and +100% y-y for Samsung Electronics (SEC). TSMC’s 40K wpm capacity at its Nanjing fab in China will be put into operation in 2H22. SEC’s P2 30K wpm and S4 15K wpm capacity expansions will begin production in 2H21. UMC is increasing capacity at its 28K wpm P6 fab by using advanced payments from clients.
The balance between supply and demand in the foundry industry, where supply has been greatly short of demand, is expected to be balanced in 2H21. The memory semiconductor market, where currently demand exceeds supply, should shift to oversupply in 1Q22 after seeing supply-demand balance in 4Q21. DRAM contract price growth is forecast at +1% q-q for 4Q21 and -10% q-q for 1Q22.