South Korea's 8-inch wafer fabs see utilization fall under 50%

Amy Fan; Willis Ke, DIGITIMES Asia 0

Definitely not eight inches. Credit: DIGITIMES

The capacity utilization rates of 8-inch wafer fabs in South Korea are halved from their 2022 levels, with the exception of DB Hitek, due to sluggish demand for information technology (IT) devices and related semiconductors. Some foundries have tried hard to improve the utilization rates via price cuts, yet with limited effect, and some reportedly have even shut down part of their fab equipment, according to news reports from South Korea.

The Elec, citing industry sources, recently reported that 8-inch wafer capacity utilization rates at South Korean foundries such as Samsung Electronics, SK Hynix System IC and Key Foundry are currently around 40–50%, down sharply from nearly 90% seen in 2022.

DB HiTek's capacity utilization rate has also experienced a 10% decline from early 2023 to the current 65–75%, which, however, still pales significantly against a high utilization of 95% seen in the third quarter of 2022.

Industry insiders in South Korea pointed that global economic downturn has led to sluggish demand for IT devices, becoming the main reason for the remarkable decline in the utilization rates of 8-inch wafer foundries in South Korea.

The insiders noted that some foundries have closed down some production facilities in response to a decline in capacity utilization, which is regarded as an unusual move since South Korea suffered a financial crisis in 1997. They continued that in terms of wafer foundry nature, it is not common to shut down equipment as restarting production lines typically involves significant risks and costs.

A research conducted by SK Securities also pointed out that the main reason for low capacity utilization rates at 8-inch wafer fabs in South Korea is the sluggish demand for traditional mobile chips. Another reason rests with the overall price cuts by 12-in wafer fabs for traditional process nodes, as some 8-inch orders have been switched to 12-inch fabs, more or less affecting the utilization rates for 8-inch wafer fabs.

When it comes to traditional foundry processes, 8-inch and 12-inch wafer fabs are now competing for orders in chip segments such as display driver ICs (DDI), CMOS image sensors (CIS), and power management ICs (PMIC). Generally speaking, 12-inch wafers are more advantageous than 8-inch ones in reducing production costs.

Industry insiders in South Korea believe that the situation of low capacity utilization at 8-inch wafer foundries is likely to persist for a while. They said there is still a surplus of inventory for products manufactured using the traditional processes on 8-inch wafers, and the demand from customers remains weak. On the other hand, the rebound in 12-inch wafer foundry services is primarily focused on advanced processes, while average capacity utilization rate for 12-inch wafer fabs using traditional processes is approximately 70%, which is also lower than the level in 2022.