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The semiconductor foundry industry faces recession as six-month advance orders fall sharply

Demand for foundry work is starting to decline. Some factories are not reaching 100% utilization of their processes. This is contrary to what was set earlier this year when all pre-orders for 2022 were completed. With the memory semiconductor market stagnating, it is predicted that even the foundry market, which is responsible for the system semiconductor ecosystem, is starting to suffer.

As the price of raw materials for foundry processes continues to rise, the market will inevitably face a decline in revenue.

The number of foundry process orders for semiconductor fabless (design-only fabless semiconductor companies) is dropping dramatically. Some of these companies have reached the point where “six-month advance orders” are not sustainable. One person from the 8-inch foundry industry said: “We can not yet guarantee all six-month advance orders to ensure the customary foundry process. A reduction in demand next year is inevitable. Another person said, “Some processes are not running at 100 percent utilization. We are responding to existing customer orders; however, new orders are down significantly.”

Some representative foundries in Korea include Samsung Electronics, DB HiTek and Key Foundry. SK Hynix Systems IC moved to Wuxi, China, and is focusing on orders from fabless companies in China. SK Hynix has received orders for at least six months to at most one year at the beginning of this year. It is experiencing the bottleneck effect of production capacity not being able to keep up with demand.

The boom in the foundry industry did not last six months. This is because the downstream industries of major system semiconductors such as smartphones and personal computers have been hit by the global recession. The outlook for foundry finished products (sets) that will be equipped with additional semiconductor products such as power management semiconductors (PMIC), display driver chips (DDI), and radio frequency (RF) chips has deteriorated. The bottleneck effect on demand for automotive semiconductors is also being addressed, such as microcontroller units (MCUs) that have been playing a key role in the healthy finished vehicle market.

The foundry industry does not expect the drop in demand to be reflected in this year’s earnings, as there is sufficient volume to fill existing orders. The industry is also benefiting from the results of high exchange rates. However, a recession is inevitable starting next year, as the cost of raw materials needed for foundry processes is rising while demand is falling. An industry source said, “Purchase prices for raw materials such as silicon wafers, various materials and industrial gases are rising 10 percent per quarter.”

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Threza Gabriel
Threza Gabrielhttps://www.techgoing.com
TechGoing is a global tech media to brings you the latest technology stories, including smartphones, electric vehicles, smart home devices, gaming, wearable gadgets, and all tech trending.
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