Surge in Semiconductor Demand Propelled by China's 'Old-for-New' Policy

The Chinese government's "Old-for-New" policy, introduced last year to stimulate the economy, is having a significant impact on the semiconductor industry, particularly in South Korea. This policy, which provides subsidies for consumers who return old products when purchasing new electronic devices, has led to a surge in sales of Chinese electronic devices since the beginning of the year. As a result, the demand for semiconductors has increased, leading to a notable rise in production orders for companies like DB HiTek.

DB HiTek, a South Korean company specializing in semiconductor manufacturing, has seen its Bucheon plant become fully operational due to the increased demand driven by China's domestic consumption policy. The combined operation rate of DB HiTek's Bucheon and Sangwoo plants is now close to 85%, marking a nearly 10 percentage point increase from the 74.4% operation rate recorded in the third quarter of last year. This uptick in activity is a direct response to the market boom in January, as noted in the company's recently released investor relations materials.

"The Chinese business is expected to see favorable demand due to the market boom in January," stated a company official. The company anticipates that the overall operation rate for the year will reach the mid-to-high 80% range, reflecting the positive impact of the Old-for-New policy on their operations.

The semiconductor industry is a critical component of the global electronics supply chain, with foundries like DB HiTek playing a vital role in manufacturing older semiconductor technologies used in various electronic devices and automobiles. The increased operation rates at DB HiTek's plants indicate a recovery in the semiconductor market, which had been affected by last year's economic downturn. In 2022, DB HiTek's operating profit decreased by 26.52%, recording 195 billion won due to the challenging economic conditions.

The ripple effect of China's policy is also being felt by other semiconductor manufacturers. SK Key Foundry, another 8-inch wafer foundry in Korea, reports an operation rate exceeding 80%, driven by increasing orders from fabless companies in the U.S. and Europe. These companies, which design semiconductors but outsource manufacturing, are seeing a rise in demand as they supply parts to China, further contributing to the recovery in operation rates.

An industry insider commented, "Orders from fabless companies in the U.S. and Europe, which supply parts to China, are also increasing, leading to a recovery in operation rates." This trend underscores the interconnectedness of the global semiconductor supply chain and highlights the importance of foundries in meeting international demand.

As the semiconductor industry continues to respond to these economic stimuli, the current operational trends suggest a positive outlook for companies like DB HiTek. The increased demand for semiconductors, fueled by policies like China's Old-for-New, is expected to sustain the industry's growth and contribute to the broader economic recovery.