Electronic Components Distributor Predicts Gradual Recovery in Chip Manufacturing for Second Half of 2023
JP Morgan released a three-point analysis on wafer foundries that may be useful for electronic components distributors. First, the utilization rate of wafer foundries is expected to maintain 70-80% in the first half of the year, with 12-inch wafers performing better than 8-inch wafers, and a rebound is expected in the second half of the year. Second, destocking has been successful, and downstream supply chain inventory peaks have passed. However, the inventory peaks of no-fab semiconductor manufacturers are expected to occur in the fourth quarter of last year or the first quarter of this year. Third, wafer foundry prices remain stable, which can help manufacturers achieve profitable performance.
The destocking situation has been successful, and the utilization rate of wafer foundries is expected to slowly recover in the second half of the year. Destocking will continue until the first half of this year, but the pace of order reduction has slowed compared to three to six months ago. The inventory peak of downstream components has already passed in the second half of last year, and it is expected that the inventory peak of no-fab semiconductor manufacturers will occur in the fourth quarter of last year or the first quarter of this year. Looking ahead, with the destocking of no-fab semiconductor inventory expected to come to an end in the first half of this year and the recovery of demand for end products such as televisions and mainland Chinese smartphones, the utilization rate of wafer foundries is expected to stabilize in the second half of this year.
In terms of advanced wafer foundry processes, demand for mature 12-inch wafer foundry processes (28nm-90nm) is expected to be stable in the first half of this year compared to 8-inch wafer foundry processes. Some 12-inch wafer demands are still tight, such as 28nm for OLED DDIC and 40nm eFlash for MCU used in cars. The utilization rate of UMC's 28nm is currently stable, but Samsung's CIS and ISP orders may affect UMC's 28nm demand in 2023-2024.
World Advanced's utilization rate in the first quarter is expected to drop to 50-55%. However, the demand situation will rebound in the next few quarters after the demand for LDDIC bottoms out in the first quarter. As a result, the utilization rate of 8-inch wafers can be increased from the second quarter. In the long run, due to strong demand for 8-inch wafers in mainland China, World Advanced will be one of the main operating forces after 2024.
In terms of TSMC's advanced wafer foundry processes, the 3nm production progress is faster than expected, with 30,000-40,000 wafer starts per month in April. The utilization rate of 5nm will decrease to 80-85% in the first half of the year due to Apple's products entering the off-season. However, new products from customers such as AMD, Nvidia, and Qualcomm will fill the gap in the second half of the year. The utilization rate of 7nm is weak due to weak demand for personal computers and smartphones, but it is expected to rebound in the second half of the year due to inventory replenishment.
Although the current industry outlook is still in a downturn, wafer foundry prices remain stable. Looking ahead, overall mature process prices will still be about 20% higher than pre-pandemic levels, which is advantageous for most wafer foundry operators to achieve profitable performance.
