Amid the sluggish market environment, chip foundries in China and Taiwan, as well as South Korea, are lowering their prices to retain customers. This market trend is attracting the attention of European and American semiconductor people and will not be ignored by American politicians.
According to the Electronic Times, in order to obtain orders for new production capacity, Mainland China's Semiconductor Manufacturing International Corporation, Hua Hong Semiconductor and Jinghe Semiconductor lowered the price of tape-out services to chip design companies in Taiwan last year. Industry sources said many Taiwanese IC designers were attracted by the low prices and began placing orders with mainland foundries. Industry insiders also reported that Samsung, GlobalFoundries, UMC and Powerchip have seen customers cancel orders and transfer them to mainland China wafer fabs.
Since traditional and mature nodes in mainland China are not subject to the U.S. export ban, lower foundry costs are attractive to Taiwanese IC design companies that want to improve cost competitiveness.
This forces UMC and Powerchip Semiconductor to lower their prices in advance to compete. UMC’s 12-inch wafer foundry service prices have dropped by 10-15% on average, led by the 40-nanometer process node. UMC’s 8-inch wafer foundry service prices will be reduced by an average of 20%, and the price adjustment will take effect in the fourth quarter of 2023.
TrendForce said in a recent report that Samsung foundry offers price cuts of 10% to 15%.
The downturn in the semiconductor market and fierce competition are the reasons for the across-the-board price cuts. In the past two years, the semiconductor industry has entered a correction period to digest excess inventory. Production and prices have fallen sharply, and the utilization rate of wafer foundries has dropped sharply.
TSMC was the only exception that did not see a significant decline in price changes. Other companies working on mature nodes eventually had to cut their foundry quotations and resume sales discount strategies to maintain a certain utilization rate.
Mainland China's semiconductor foundry companies have encountered unprecedented and complex geopolitical blows in recent years. Under the high pressure of the US ban, Qualcomm and some international automakers began to choose to abandon foundries in mainland China and shift orders to TSMC, UMC, World Advanced and Powerchip. Samsung Electronics and GlobalFoundries also benefited from the wave of transferred orders.
Faced with U.S. export restrictions, mainland China is unable to obtain advanced node EUV to develop 7nm chips, and since 14nm immersion DUV equipment is also banned, mainland China is forced to focus on fully expanding its mature process business and plans.
Several mainland Chinese companies, including SMIC and Hua Hong, have taken advantage of the domestic market and prioritized processing orders from mainland Chinese IC designers. They are actively expanding production at mature process nodes by building new factories.
Pressure on foundries to cut prices is driving chip prices lower across the semiconductor industry. Many Taiwanese IC design companies are optimistic about this and expect local suppliers to maintain a price reduction trend, which may ease operational pressure and enhance competitive advantages.
At the geopolitical level, the U.S. Congress is already urging the Biden administration to impose high tariffs to prevent mainland China from dumping mature technology chips and infringing on the interests of U.S. companies.