Topco Scientific, a Taiwan-based semiconductor material distributor, has seen a significant increase in orders from Chinese foundries whose 12-inch fab utilization rates have risen above 90%.
Topco chairman Jeffrey Pan noted that the semiconductor market has rebounded since hitting bottom in the first quarter of 2024. This is due to the strong demand for AI and HPC applications.
Orders from China's wafer foundry sector, where 12-inch fab utilization rates have reached more than 90%, have been very robust, driving Topco's sales and fueling optimism about the company's sales for the entire 2024, Pan said. He said orders have been coming from China's foundry houses supporting both new fab projects and existing fab upgrades. The number of 12-inch wafer fabs in China is estimated at 42.
Growth in China faster than in Taiwan
Growth in Taiwan has been slower. Inventory for the 8-inch segment is still relatively high, while inventory for the 12-inch segment has dropped much. DRAM production utilization rates have shot up significantly. In Japan, new fab capacity is coming online, with overall demand to be strong in 2024.
Pan said order momentum has been much stronger in 2024 compared to 2023. Customers in China had previously deferred taking delivery of shipments, but they have now stepped up their orders. A certain Chinese maker, for example, previously saw its inventory pile up to 12 months, but it has now dropped to 5-6 months, Pan said, adding that order momentum from China is generally better than that from Taiwan.
Pan said Topco has no plans to adjust prices in response to competitors' pricing campaigns. He said Topco can keep prices stable thanks to Long-Term Agreements (LTA) signed with customers.
Topco Quartz Products (TQP), an affiliate of Topco, has spent NT$1.5 billion (US$46.37 million) expanding a plant in Chiayi, southern Taiwan, eyeing rising demand for quartz products along with advances in semiconductor manufacturing processes. Installation of the new capacity has been completed. Pan said the plant is undergoing Product Change Notification (PCN) and is also stepping up the verification process. Its capacity will increase by 20-30%, with volume production expected to start in early 2025.
For the overseas market, Topco senior CEO Dennis Chen said that apart from the Japanese city of Kumamoto, the company also has plans to establish a new office in Nagoya, Japan. TSMC is building a wafer foundry hub in Kumamoto.
Topco is accelerating its deployments in the US, Japan, and Southeast Asia, seeking to build a semiconductor supply chain platform through mergers, acquisitions, and strategic partnerships, Chen said.
Strong sales
The recovery in the semiconductor industry has shored up shipments of silicon wafers, photo resists, quartz products, and wafer carriers. Topco disclosed that its shipments to overseas customers grew significantly in March, all following the terms in the LTAs. In April, sales reached a monthly record of NT$4.68 billion, rising 13.1% sequentially and 18.5% year on year. Overseas customers' new production capacity is expected to fuel Topco's sales.
Topco is also keenly developing new materials eyeing orders from major backend houses and expanding their advanced packaging capacity.
Topco's sales for the first quarter of 2024 decreased 2.5% sequentially and 4.5% year-on-year to reach NT$11.93 billion, the third highest-ever for the same period. Net income for first-quarter 2024 went up 22.3% sequentially and 4.7% year-on-year to reach NT$775 million, hitting a new high for the same period. Gross profit margin for first-quarter 2024 also climbed to a record high for the period at 14.1%.
Article translated by Rodney Chan
