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Taiwan chip foundries to see 10-20% price cuts due to Chinese competition

32 new Chinese foundries to go online next year, creating glut in mature chips

TSMC chip wafer. (Taiwan Semiconductor Manufacturing Company photo)

TSMC chip wafer. (Taiwan Semiconductor Manufacturing Company photo)

TAIPEI (Taiwan News) — Taiwanese chip foundries are expected to see significant price cuts on mature semiconductor production in the first quarter of 2024 due to fierce competition from Chinese and South Korean foundries.

An estimated 32 new process wafer fabs will go online in China next year, creating a massive capacity glut, reported the Commercial Times. In anticipation of this surge in capacity, industry insiders said that Taiwanese wafer foundries are preparing for a price war with China's Hua Hong Semiconductor and South Korea's Key Foundry by slashing prices by 10% to 20% in the first quarter of 2024.

Differing from previous sales discounts, United Microelectronics Corporation (UMC), Vanguard International Semiconductor Corporation (VIS), and Powerchip Semiconductor Manufacturing Corporation (PSMC) have introduced a new model of profit-sharing for IC design, emphasizing diversification. This includes tactics such as bundling volume without fixing prices and postponing wafer production, with the hope of positioning themselves to seize opportunities in the potential recovery of the consumer electronics market next year.

According to industry insiders, mainly due to the pessimistic market conditions in the first quarter and the impact of the extended holiday period, demand in the next quarter may not only be "cold" but "frozen." China's Hua Hong Semiconductor and South Korea's Key Foundry are reportedly aggressively competing on prices.

"This downturn is the bottoming out of an L-shaped trend. If orders are snatched away by mainland Chinese manufacturers before the recovery, we can only watch others take orders after the recovery," said one source. Therefore, Taiwan's three major mature process wafer foundries will reportedly be forced to cut prices next quarter.

In the past, domestic mature process manufacturers maintained stable prices but offered discounts if the shipped volume exceeded the ordered volume. However, in order to bolster high capacity utilization rates and secure orders early, they will no longer adhere to stable pricing in the first quarter of next year.

Instead, they have adopted a new tactic of directly lowering prices by 10% for orders of 10,000 or more wafers. IC design industry experts estimated that the top manufacturers will take the lead in reducing prices, and other peers will follow suit.