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Silicon wafer manufacturers have collectively announced expansion plans, and the domestic 12 inch silicon wafer industry needs to seize the growth opportunity

Silicon wafer manufacturers have collectively announced expansion plans, and the domestic 12 inch silicon wafer industry needs to seize the growth opportunity

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  • Time of issue:2022-08-12
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(Summary description)The semiconductor industry is entering a new round of inventory adjustment. The sluggish demand for consumer terminals such as displays, PCs, and mobile phones has led OEM manufacturers such as TSMC and MediaTek to make judgments that customers will adjust their inventory in the coming quarters. Meanwhile, the material links located at the top of the semiconductor industry chain, such as silicon wafers, have also faintly felt the trend of market segmentation and structural changes.

Silicon wafer manufacturers have collectively announced expansion plans, and the domestic 12 inch silicon wafer industry needs to seize the growth opportunity

(Summary description)The semiconductor industry is entering a new round of inventory adjustment. The sluggish demand for consumer terminals such as displays, PCs, and mobile phones has led OEM manufacturers such as TSMC and MediaTek to make judgments that customers will adjust their inventory in the coming quarters. Meanwhile, the material links located at the top of the semiconductor industry chain, such as silicon wafers, have also faintly felt the trend of market segmentation and structural changes.

  • Categories:News
  • Author:
  • Origin:
  • Time of issue:2022-08-12
  • Views:0
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The semiconductor industry is entering a new round of inventory adjustment. The sluggish demand for consumer terminals such as displays, PCs, and mobile phones has led OEM manufacturers such as TSMC and MediaTek to make judgments that customers will adjust their inventory in the coming quarters. Meanwhile, the material links located at the top of the semiconductor industry chain, such as silicon wafers, have also faintly felt the trend of market segmentation and structural changes.

The silicon wafer market saw steady progress in the first half of the year

Silicon wafers are the largest and most widely used semiconductor materials, known as the cornerstone of the semiconductor industry. In the past two years, the digital economy and IT demand driven by epidemic prevention and control have brought the semiconductor industry, including silicon wafers, into a dividend period of oversupply. But since the beginning of this year, factors such as weak global economic growth, international situation, and inflation have prompted the semiconductor industry to move from soaring to rational adjustment. The market demand for silicon wafers of different sizes has also differentiated.

Overall, silicon wafers have made steady progress in the first half of this year. The International Semiconductor Association SEMI pointed out in its latest quarterly report on the silicon wafer industry that global silicon wafer shipments reached a historic high of 3.7 billion square inches in the second quarter of 2022, an increase of about 5% compared to the same period last year.

Silicon wafer shipments from Q1 2021 to Q2 2022

Data source: SEMI

Top silicon chip companies also delivered impressive results in the first half of the year. The second quarter financial report released by Global Wafer on August 2 shows that the revenue for the second quarter ended June 30, 2022 was $584 million, an annual increase of 15.3%; The net operating profit was $213 million, an annual increase of 50.3%. In the first half of 2022, the cumulative consolidated revenue was 1.127 billion US dollars, an annual increase of 12.8%; The net operating profit was $409 million, an annual increase of 49.7%. The annual growth rates of revenue, operating gross profit, and operating net profit for the second quarter and first half of 2022 of Global Wafer reached double digits and reached historic highs.

On July 27th, Shinyue Japan released its first quarter (April 1-June 30) financial report, showing that the electronic materials business with semiconductor silicon chips as its core had net sales of 211.1 billion yen (approximately $1.583 billion), a year-on-year increase of 31.0%, and operating income of 77.5 billion yen (approximately $581 million), a year-on-year increase of 36.6%. Xinyue Chemical pointed out that the semiconductor market, which showed significant growth in 2021, maintained a growth trend in the first fiscal quarter. Facing strong customer demand, Xinyue maximized its shipment of semiconductor materials such as silicon wafers and photoresists.

Xinyue's Net Sales of Electronic Materials in the First Quarter of 2022 increased by 31% year-on-year

Data source: Xinyue Financial Report

But it should also be noted that the sluggish consumer market has begun to have an impact on the demand for small-sized silicon wafers of 6 inches and below. A spokesperson for Universal Wafer stated at the July legal conference that downstream customers have had different inventory conditions, reflecting some vacancies in small-scale silicon wafer production lines for Universal Wafer. The demand for 8-inch and 12-inch silicon wafer production lines is still very healthy. Xu Xiulan, Chairman of Global Wafer, stated that there is significant pressure on 6-inch customers to adjust their inventory. The demand for 8-inch and 12-inch products is healthy, and production is still ongoing according to long-term contracts. The company's inventory also maintains a healthy level.

The different market trends of silicon wafers of different sizes are closely related to their application fields. Lu Jin, Executive Deputy Secretary General of the China Electronic Materials Industry Association, told China Electronics News that 12 inch large silicon wafers are mainly used for chips in advanced manufacturing processes such as logic chips, storage chips, and RF chips. 8-inch silicon wafers are mainly used in the production of analog ICs, power discrete devices, logic ICs, MCUs, display driver ICs, image sensors, and other products. The current downstream applications of 6-inch and below semiconductor silicon wafers are mainly concentrated in the field of power devices (diodes, rectifier bridges, thyristors), sensors, optoelectronic devices, and other discrete devices.

This means that chip products using advanced manufacturing processes are concentrated in the application field of 12 inch silicon wafers, while the growth momentum of the semiconductor market outside of consumer electronics, such as high-performance computing and automotive electronics, mainly uses advanced manufacturing processes, which can to some extent offset the impact of slowing consumer electronics demand on 12 inch silicon wafers. In addition, OEM factories with advanced manufacturing capabilities tend to lock in long orders, which provides more guarantee for the revenue of top silicon wafer manufacturers.

Long orders such as Shinyue, Shenggao, and Global Wafers have locked in the market, with long-term orders signed with customers lasting up to 8-10 years. Currently, the inventory situation is stable, with 8-inch and 12-inch production capacity maintaining full capacity, and orders for small-sized silicon wafers below 6 inches have been shortened compared to before. Domestic enterprises mainly supply small and medium-sized silicon wafers of 8 inches and below, which has had a certain impact on the market, "Lu Jin said.

Silicon wafer manufacturers collectively announce expansion plans

Although the semiconductor industry has experienced fluctuations, silicon wafer manufacturers have announced plans to expand production and build factories in the first half of this year. Global Wafer announced in June that it will build a 12 inch silicon wafer factory in Sherman, Texas, USA, with a maximum production capacity of 1.2 million 12 inch silicon wafers per month. The production capacity is expected to start in 2025. Xinyue Chemical announced in February that it will invest over 80 billion yen (approximately $600 million) in equipment for its silicon wafer business. SK Siltron also announced in March this year that it will invest 105 trillion won (approximately $840 million) in the next three years to expand its 12 inch silicon wafer production capacity. The new production line is expected to be mass-produced in 2022. Previously, SUMCO announced at the end of 2021 that it plans to invest 228.7 billion yen (approximately $1.715 billion) to increase the production scale of 12 inch semiconductor silicon wafers.

It is not difficult to see that 12 inches have become the focus of expansion for top silicon wafer manufacturers. Global Wafer stated that although the uncertainty brought about by epidemic prevention and control and the situation in Ukraine has slowed down the demand for consumer products, the semiconductor industry, as a key factor in maintaining social operations and supporting daily life, is still supported by communication infrastructure and digital transformation, enabling it to maintain its resilience. The demand for terminal products such as automobiles, industry, and cloud computing continues to grow, providing structural support for the long-term growth momentum of the industry. Coupled with the rapid development of technology to create more functions, the unit silicon content has also increased, which will drive up the demand for large-sized wafers.

Lu Jin also told reporters that in the future, there will be an increasing demand for semiconductor products in terminal applications such as automotive electronics, communication, industrial internet, cloud computing, and big data, which can provide structural support for the long-term growth momentum of the industry. Since the second quarter of this year, there has been a loosening in the utilization rate of wafer foundry production capacity. Recently, except for mainstream processes such as 22/28 nanometers, other mature process production capacity has become loose, and mature process customers have begun to adjust orders. The demand for advanced process technology will bring greater growth space for large-sized silicon wafers.

The domestic 12 inch silicon wafer industry should seize the opportunity for growth

Faced with the aggressive attitude of international enterprises, domestic enterprises are also increasing their layout of 12 inch silicon wafers. The Shanghai silicon industry is expected to increase by 5 billion yuan to raise funds for the research and development and advanced manufacturing projects of 12 inch high-end silicon wafers for integrated circuit manufacturing, as well as the pilot project of 12 inch high-end silicon based material research and development, in order to further enhance the technical capacity and production scale of 12 inch large silicon wafers. Lyon Micro plans to issue convertible bonds to raise funds of no more than 3.39 billion yuan for projects such as the annual production of 1.8 million 12 inch semiconductor silicon epitaxial wafers, further increasing the proportion of 12 inch silicon wafers in the company's products.

At present, in order to seize the growth opportunity of the domestic 12 inch silicon wafer industry, further breakthroughs need to be sought in technology, industry chain, customer relationships, and other aspects.

Zhang Binlei, senior analyst at Xinmou Research, told China Electronics News that the larger the size of a silicon wafer, the higher the threshold. In terms of technology, large silicon wafers involve a series of physical parameters such as purity, geometric thickness, flatness, warpage, curvature, surface particle count, metal residue, resistivity, resistance change rate, doping concentration, and doping uniformity. At the industry chain level, chip manufacturing companies have strict requirements for the quality of various raw materials and are very cautious in selecting suppliers. They will benchmark the silicon wafer parameters of major global suppliers and require domestic manufacturers to try their best to achieve them before conducting testing and verification, and then start small-scale production. Only after there are no problems can they enter the supply channel. The fastest cycle can take 1 to 2 years. If there are problems midway and the wafer process is adjusted, all work must be redone. At the customer relationship level, once the wafer manufacturer and silicon wafer supplier establish a supply relationship, they will not easily change suppliers, and both parties establish a feedback mechanism to meet personalized needs, which poses a challenge for new suppliers to strive for more market share. Therefore, the domestic industry chain needs to provide more support to domestic silicon wafer manufacturers in the verification work of silicon wafers.

Currently, domestic silicon wafer manufacturers are systematically strengthening their market competitiveness. Lyon Micro stated in its annual report that it will introduce high-end technical talents and other means, continuously increase investment in technology research and development, strengthen technology accumulation, and achieve new major breakthroughs in new technologies, products, and processes, adding momentum to the company's sustainable development. It will accelerate the completion of the second phase of the 6-inch and 12-inch silicon wafer production lines in 2022. Li Wei, Executive Vice President of Shanghai Xinsheng Semiconductor, a subsidiary of Shanghai Silicon Industry, stated in a media interview that he will carry out technology research and development from both depth and breadth to further improve the product system and break through process technology. Continuously breaking through in production capacity, technology, processes, products, customers, and other aspects.

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