China pure-play foundries see sharp decline in fab utilization

Monica Chen, Hsinchu; Rodney Chan, DIGITIMES Asia 0


SMIC and other Chinese pure-play foundries have recently seen dramatic decreases in fab utilization rates, according to sources at fab toolmakers.

With demand weakening and utilization rates falling, TSMC and other foundry houses, including China-based SMIC and Hua Hong, are slowing down their capacity expansions.

Chinese foundry houses face extra pressure, the sources said. Their utilization rates are nosediving, and worse still - government subsidies have dried up, the sources said, adding that they will have to wait until the government releases its next wave of subsidies.

The Chinese economy has yet to recover and consumer confidence remains low. There are many industry sectors that need the government to bail them out, but the government resources are limited, the sources said.

With government financial support stalling and utilization rates plummeting, the Chinese foundry houses have had no choice but suspend their capacity expansion plans, the sources said.

SMIC has been expanding capacity mostly in Beijing, Shenzhen and Shanghai. In 2022, it announced a plan to invest US$7.5 billion to build a 12-inch fab in Tianjin with monthly capacity of 100,000 wafers for manufacturing nodes from 0.18um to 28nm.

SMIC and other Chinese foundry houses highly depend on orders from local chip clients. But demand in the handset and consumer electronics markets remain in the doldrums, and demand from the automotive, networking and IoT market segments is also weakening, the sources said.

In Taiwan, TSMC has not lowered its capex budget but it is still slowing down the pace of expansion at home in order to prevent over-capacity. The sources said TSMC has delayed equipment and materials orders for the capacity expansion projects by six months to one year.

Vanguard International Semiconductor (VIS), Powerchip Semiconductor Manufacturing (PSMC) and United Microelectronics (UMC) have also delayed or scaled down their expansion plans. UMC, whose utilization rates dropped to 70% in the first quarter of 2023, has said it has already implemented strict measures for cost control and will push back some spending plans.

VIS has set its 2023 capex budget at about NT$10 billion (US$325.2 million), down 50% from the 2022 spending. PSMC's first-quarter 2023 utilization rates decreased to 60%. PSMC sharply axed its capex in 2022. Although it has increased its capex budget for 2023, it has pushed back the schedules for volume production at its new fabs.