Despite foundry quotes at 8-inch fabs in Taiwan and China to see 20-30% hikes in the third quarter of 2018, IC design houses across the Taiwan Straits are gearing up to vie for foundry capacities to support their shipments and maintain revenue growth, according to industry sources.

The sources said that capacity shortfalls at 8-inch fabs have evolved from a short-term phenomenon into a medium and long-term trend. This is because suppliers of automotive electronics, IoT chips, MCUs, MOSFET chips, fingerprint recognition chips, sensor chips and LCD chips have rushed their foundry orders to the fabs since the beginning of 2018, but capacity expansions at the fabs are undermined by the growing difficulty in buying foundry equipment.

In vying for capacity support, some IC design houses have even sent staff to station, on a long-term basis, in 8-inch fabs of Taiwan Semiconductor Manufacturing Company (TSMC), Vanguard International Semiconductor and United Microelectronics (UMC). And China's Semiconductor Manufacturing International Corp (SMIC) and Hua Hong Semiconductor, as well as Taiwan's second-tier foundry houses such as Powerchip Technology, Mosel Vitelic, and Episil Technology have often seen customers stand in long lines waiting to negotiate over capacity supply and shipments delivery.

Strongly affiliated IC designers

Industry watchers said that some strongly affiliated IC designers such as Novatek Microelectronics, ITE Tech, Banner Span, Faraday Technology, and Pixart can more easily get better capacity support from 8-inch fabs than other rival peers.

They continued that other IC design firms as Powerchip-reinvested Zentel Electronics and Silicon Optronics, and Winbond-reinvested Nuvoton Technology are also in a better position to win more foundry capacities through the assistance of their parent companies.

While 8-inch fabs have announced 20-30% hikes in foundry quotes starting in the third quarter of 2018, most Taiwan IC design houses are not expected to pass the increased costs to their downstream customers, as they are facing increasing competition from rapidly emerging China IC designers.

In fact, most Taiwan IC design houses are considering absorbing the increased costs as possible as they can. They are afraid that their quote hikes may prompt downstream customers to shift orders to China competitors, despite the performance, stability and yield rates of chips offered by China players still lagging behind them, industry watchers indicated.

As a result, the watchers continued, Taiwan IC designers are expected to see their gross margins eroded by the hikes in foundry quotes to be enforced in the third quarter, with their annual profit prospects for 2018 to be dimmed more or less.

By: DocMemory
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