Wafer foundry may soon appear large-scale oversupply

According to several market analysis agencies, wafer foundry may face oversupply from the second half of this year.

Taiwan Semiconductor Manufacturing Corporation (TSMC), Globalfoundries, Samsung and UMC added too much fab capacity. “The wafer fab market is actively pushing for fab expansion plans and it is very likely that the oversupply situation will be caused in the foundry market in late 2011 or early 2012,” said market research firm Gartner in a research report earlier.

HSBC agrees. Another company, IBS Inc. For TSMC, Globalfoundries, Samsung and UMC, detailed wafer foundry capacity analysis was conducted. “The conclusion from the analysis is that in the second half of 2011, the second half of 2012 and even 2013, there will be a large-scale overcapacity,” said Handel Jones, president of IBS.

“This is a typical example of companies trying to get higher market share and over-optimism in aggregate demand. Capacity has expanded significantly, but demand growth has been relatively slow,” he said. "These companies are likely to experience losses caused by overcapacity."

In the second half of 2011, IBS estimated total wafer demand to be approximately 127,000 wafers per month. However, the company also warned that when the industry can supply capacity may reach 262,000 / month. This includes technologies such as 45/40nm, 32/28, and 22/20nm.

IBS estimates that in the second half of 2011, the total demand for 45/40nm will be 109,000 wafers/month, but then the supply capacity will reach 145,000 wafers/month. At the same time, the total demand for 32/28nm is 18,000 wafers/month, but then the available capacity will reach 100,000 wafers/month. At the same time, the industry's total demand for 22/20nm has not yet emerged, but the capacity that can be supplied will reach 17,000 wafers/month by then.

Do not expect that OEMs will slow capital expenditures. And don't expect that the yield will improve dramatically. "After TSMC increased its budget for 2011 by 35%, Samsung LSI announced a 42% increase, and GlobalFoundries' capital expenditures also doubled. Until 2012, we did not see any sign of slowing competition among foundries." Barclays Capital analyst. J. Muse pointed out in a report.

At the same time, the current changes in the foundry market are also elusive. "While the first quarter sales of TSMC and UMC are in line with analysts' expectations, these analysts' forecasts are generally low," said VLSI Research.

The report pointed out that sales of TSMC in the first quarter decreased by 4% from the previous quarter, but grew by 14% over the same period of last year. UMC’s sales were weak, down 10% from the previous quarter and only 5% higher than the same period last year. But more importantly, TSMC's view of this year's outlook has changed from optimistic to more cautious. The company revised its forecast for the non-volatile memory IC product line this year to 4% from its previous growth rate of 7%, and claimed that the demand for the second quarter was due to the impact of the Japan earthquake and China’s inflation and the European debt crisis. Will continue to slow down. However, despite the revision of its outlook, TSMC still insists on its 2011 capital expenditure plan.

According to VLSI Research, the foundry's attitude is cautious. The end-customers of these foundries, Asian OEMs, had mixed operating results in the first quarter. Leading laptop ODMs declined by 12% in the first quarter, but this was slightly better than expected. The mobile phone company experienced a 7% decline this season, but this is slightly better than the 10% seasonal decline. However, in the display area, due to the failure of weak ASP and 3D TVs, sales were also lower than expected.