Recently, the chip industry price rises wave after wave, grab goods, panic order has become the industry's daily purchasing. Back to the source, this chip price increase is related to upstream wafer capacity. The shortage of 8-inch wafers has been particularly acute since October last year, which has led to tight supply of downstream chips and massive price increases. In this context, the International Electronics Business Review analyzes the current supply and demand trends of 8-inch wafers from more than 30 companies and more than 90 8-inch wafers (see the end of the article for more details).
Where is the demand for 8-inch wafers coming from?
Since the second half of last year, wafer capacity has been tight. Everyone is talking about demand for 8-inch wafers, but what exactly does that demand include? Specifically, it is mainly caused by multiple factors superimposed. International Electronic Business Situation has a detailed analysis below.
First, the "home economy" triggered by the COVID-19 pandemic has strengthened applications such as home working, online education and video conferencing. Electronic products such as laptops and tablets are selling well, driving up demand for CIS, power devices and power management devices. Data released by several research institutions show that the global PC market is accelerating due to the impact of the pandemic. According to Gartner, 275m PCS were shipped worldwide last year, up 4.8% from a year earlier and the highest growth in a decade.
Secondly, 2020 is the first year of 5G commercial use. Smart phones will be transferred from 4G to 5G, which is equipped with more RF, CIS and other devices. Taking the number of RF PA chips (ranging from 6μm to 65nm) as an example, 2G/3G mobile phones are equipped with 1-2, 4G mobile phones are equipped with 3-6 on average, and 5G mobile phones can even be equipped with 16. In mid-2020, Counterpoint Research reported that smartphone CIS sales had increased eightfold over the previous decade. It is estimated that CIS shipments for smart phones will exceed 5 billion in 2020.
Table 1. Requirements for RF and CIS devices in 5G and 4G mobile phones
According to Digitimes Research, about 280 to 300 million 5G phones were sold globally last year (20 million 5G phones were shipped in 2019). Fabless giant Qualcomm has also predicted that global shipments of 5G phones will exceed 1 billion by 2023.
Third, new energy vehicles drive IGBT, SiC and SJ MOSFET demand. According to McKinsey, the average power component in a conventional vehicle costs $118, compared with $387 for a pure electric vehicle, which costs 3.28 times more.
Separately, Ye Shengji, deputy secretary-general of the China Association of Automobile Manufacturers, said in December that China's new-energy vehicle sales are expected to grow by more than 30 percent to 1.8 million units by 2021.
Assume that each new energy vehicle (including pure electric vehicles and hybrid electric vehicles) has an average power semiconductor cost of $370. In 2021, $666 million of power device demand will be channeled to 8-inch wafers in NEVs alone.
FIG. 1 Cost structure of power components for each pure electric vehicle and conventional vehicle (Chart: International e-commerce data source: McKinsey)
Then, 5G base stations drive MOSFET, power management IC demand to increase significantly. The cumulative number of 5G base stations opened in China exceeded 700,000 in October last year. When 5G signal frequency is higher than 4G base stations, its signal attenuation speed is also faster, which requires that the deployment density of 5G base stations should not be lower than 4G base stations. Currently, there are 3.14 million 4G base stations in China, and it is estimated that 6 million 5G base stations will be built to achieve nationwide 5G network coverage.
Finally, the capacity of cloud computing centers increases demand for power semiconductors. 5G commercial use is bringing massive data explosion, which also puts forward requirements for the expansion of cloud service data centers, and will drive the demand for power management modules.
In addition to the above factors, other needs deserve attention. For example, under the dual pressure of the international trade situation and the COVID-19 epidemic, some enterprises choose to sign long-term supply contracts in advance in order to ensure the stable supply of goods in the future. There is a clear trend of shutting down 6-inch wafers. TI, Renesas, ADI and other manufacturers plan to shut down all or part of their 6-inch wafers in the next 1-3 years, leading to demand for 8-inch wafers. By the end of 2020, there have been more than 10,000 chip design companies in China, which will also exacerbate the shortage of related wafer production capacity.
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Figure 2 Global 8-inch wafer market demand structure % Tabulated: International electronic business situation Source: SEMI, Annual report
On the basis of SEMI and annual reports of enterprises, the global 8-inch wafer market is mainly composed of seven types of devices, among which MOS logic devices account for 25%, simulators account for 22%, photoelectric devices account for 16%, discrete power devices account for 15%, micrologic devices account for 9% and memory devices account for 8%. Sensors account for about 5 percent.
These devices have good applications in the rapidly growing 5G mobile phones, automobiles, the Internet of Things and other fields, putting tremendous capacity pressure on the upstream 8-inch fabs.
New wafer capacity will reach a new high, but it will not fill the gap
For a long time, 8-inch wafers were considered backward production lines, and their key equipment was plagued by shutdowns. The number of 8-inch wafers produced globally peaked at 200 in 2007, according to SEMI. In 2008, the number of 8-inch lines began to decline due to the global financial crisis; By 2015, only 178 production lines remained worldwide.
As the Internet of Things system was gradually rolled out in 2015, the demand for intelligent products and industrial/automotive electronic applications surged, bringing about a substantial increase in MCU, power management IC, fingerprint recognition IC and other devices. Since then, there has been news of tightness in the 8-inch wafer industry, and some vendors have started to ramp up their investments in 8-inch wafers. By 2020, global 8-inch production lines had recovered to 191, equivalent to 2008 levels, and were projected to reach 202 in 2021, surpassing the 2007 peak.
· Limited transfer from 8-inch wafers to 12-inch wafers
Generally speaking, the larger the size of the wafer, the lower the cost per chip. In the long run, with the same yield, the larger the wafer area, the higher the profit margin. For their part, manufacturers are more likely to invest in 12-inch wafers if conditions permit. Meanwhile, some chips based on 8-inch wafers are switching to 12-inch wafers, but progress is slow, with less than a third of analog and mixed-signal devices making the transition.
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However, there is a significant difference in the process between 8-inch and 12-inch wafers, which are more difficult to control and cost to build 12-inch wafers. The smaller the process, the higher the mask cost and design cost. Taking the data of TSMC as an example, the smaller the process, the more layers each mask group needs. For example, each mask group needs 29 layers in the 130nm process and 74 layers in the 7nm process. In addition, design costs, embedded software costs, and capacity climbing costs all increase significantly as the process becomes smaller. Therefore, limited by cost and special process, a considerable number of devices are still manufactured based on 8-inch wafers, such as power devices, emulators, power management chips, CIS, fingerprint recognition chips, display driver ics, etc.
· 12-inch wafers may also be in short supply
At the same time, the 12-inch wafer production line continues to grow. SEMI's latest 300mm (12-inch) fabs Outlook report shows a conservative estimate of 38 new 12-inch fabs from 2020 to 2024, with 11 new fabs in Taiwan and eight in mainland China, not including low-probability or rumored fab projects. At that time, the world will have 161 12-inch wafers capable of producing more than 7 million wafers a month. In response, IC Insights estimates that global new 12-inch wafer capacity will reach the equivalent of 20.8 million 8-inch wafers. Most of the new capacity comes from storage companies such as Samsung, SK Hynix and Changjiang Storage.
Whether they're 8 inches or 12 inches, they're getting bigger every year. Even so, it will not fill the gap. In December last year, "International Electronics Business Situation" made a report on wafer production capacity, quoting Huang Chongren, chairman of China Semiconductor Manufacturing Co., LTD., to express: "Wafer production capacity has been extremely tight, downstream manufacturers' demand for production capacity has reached a panic level, it is estimated that from the second half of 2021 to the second half of 2022, logic, DRAM market will be out of stock to an unimaginable degree."
Recently, some analysts say that 12-inch wafers may also face a production crunch. The reason is that in the first half of last year, when the epidemic first broke out in China, many manufacturers were conservative in their market prediction, product planning and inventory. And after the domestic epidemic control, consumer electronics, server, automotive electronics demand rebound, 12 inch wafer high-end chip consumption will increase significantly. According to International Electronics Business, the most prominent problem in the wafer industry is that the speed of new capacity on the supply side cannot keep up with the rapid growth of demand.
The wafer capacity squeeze extended into the first half of 2021
While 8-inch fabs are being expanded, new capacity requires a number of processes and elements. The construction of a new wafer manufacturing production line requires continuous investment of large amounts of money to build the plant, purchase equipment, debug the process, research and development process, etc., as well as a professional team to operate and manage.
Currently, there are very few suppliers of 8-inch wafers, and companies are expanding mainly on used equipment. At the end of last year, Surplus Global estimated that there were about 7 million used eight-inch wafer-making units on sale worldwide, but demand now stands at more than 10 million. The data suggests that manufacturing facilities for 8-inch wafers are also under strain. As a result, International Intelligence does not expect a significant increase in 8-inch wafer production in the near term. We also expect wafer foundry capacity to remain tight through at least the first half of 2021.
Finally, "International Electronic Business Situation" has collected a large amount of 8-inch wafer production capacity information through the official websites of various enterprises, research institutions and other channels, and based on this, made the following table (for readers' reference only, does not constitute investment advice).
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