Mid-year trends such as China’s 618 sales festival, the launch of new smartphones in the second half of the year (2H 2024), and the anticipated holiday sales season have driven inventory replenishment in the supply chain—positively impacting foundry capacity utilization and signaling a recovery from its operational low point, according to TrendForce.

Chinese foundries have experienced a faster recovery in capacity utilization compared to their peers, thanks to trends like IC domestic substitution and policies like “China for China.” Some processes are already operating at full capacity due to high customer demand.

Additionally, the traditional peak stocking season in 2H 2024—combined with delays in expansion due to export controls on US equipment—may extend capacity tightness until the end of the year. This situation might lead to price increases for specific processes, which is a shift from the previous low-price competition strategy aimed at volume.

Price increases in Chinese foundries this time targets processes such as CIS that are relatively tight in capacity and currently priced below the market average. This adjustment aims to alleviate profit pressure rather than indicating a full recovery in demand. Even If these specific processes see successful price increases, they are unlikely to return to pre-pandemic levels.

Taiwanese foundries are benefiting from increased orders due to out of China demand, leading to better-than-expected capacity utilization rates for PSMC and Vanguard in the second half of the year. However, overall demand for mature processes remains weak, with average capacity utilization still around 70–80%—indicating no significant shortages.

Only TSMC is seeing full capacity utilization in its 5/4nm and 3nm nodes due to strong demand from AI applications, new PC platforms, HPC applications, and high-end smartphones. Its capacity utilization is expected to exceed 100% in the second half of the year, with visibility extending into 2025. Given cost pressures from overseas expansion and rising electricity prices, TSMC plans to raise prices for its advanced processes, which are experiencing strong demand.

It is worth noting that in 2024, concerns over global inflation and weak recovery in end-demand may result in inconsistent momentum in replenishing inventory. Many foundries might offer price incentives to attract customers and boost capacity utilization, leading to a decline in overall ASP.

Furthermore, a significant amount of new capacity is expected to come online in 2025, including TSMC JASM, PSMC P5, SMIC’s new Beijing and Shanghai plants, HHGrace Fab9, HLMC Fab10, and Nexchip N1A3. This increase in mature process capacity could intensify competition and impact future pricing negotiations.

By: DocMemory
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