Chip demand is so intense that one supplier has sold out of 300mm silicon wafers through 2026. As Bloomberg first reported, Japanese company Sumco has entered into long-term agreements to cover its entire manufacturing capacity for 300mm wafers for the next five years.
“The strong demand for 300mm wafers from both logic and memory customers continues to outstrip capacity,” Sumco said in an earnings call, adding that it expects wafer supplies to remain tight, despite a new factory going online.
Although Sumco wants to build more capacity, the problem is a shortage of chip manufacturing equipment. “All of these equipment makers are already fully booked up,” Sumco CEO Mayuki Hashimoto said during the call. “So lead times are getting longer and it’s increasingly difficult to source equipment.”
“This is why despite our investments to increase capacity, we will only start to see gradual increases in output starting in the second half of 2023, and it will take until 2025 until we are fully wrapped up,” he added.
In the meantime, Hashimoto noted “it’s relatively easy to raise prices” on wafer supplies, citing the ongoing demand. As a result, the company is increasing wafer pricing this year by 10%. The price will also continue to rise over the next few years before hitting a peak in 2024.
In the earnings call, Sumo also pointed out customers have been trying to order more wafer supplies, but the company had to refuse, citing a delay in delivering “production equipment” to the manufacturing facilities. “Our customers have been pressing us to increase production, but unfortunately we do not have room to increase production volume,” Hashimoto said. “I believe our peers are in the same boat.”
The statements signal the ongoing chip shortage may persist far longer than anticipated. Hashimoto attributed the 300mm wafer demand surge to server chips and the growing adoption of 5G smartphones.
“So pulling all of this together, our view is that even in 2026 there will still be shortages,” Hashimoto added.
However, Sumco is only one of several suppliers that produce silicon wafers, which CPU processors are built on. The company has a 21.9% share of the market, according to the Taiwan-based GlobalWafers, a rival producer. GlobalWafers, which has a 15.2% share, plans on spending $3.6 billion on new manufacturing facilities over the next two years. So there are signs other industry players are stepping up to meet the demand.
“The new production lines are expected to ramp up in the second half of 2023 and to be expanded on a quarterly basis,” GlobalWafers announced earlier this month.
Nevertheless, leading wafer producer Shin-Estu has warned that its own wafer supplies will be tight for years to come. “Currently, the company continues to operate at full capacity, but we are unable to completely meet demand,” Shin-Etsu said in an earnings call last month.
The company, which has 29.4% share, is slated to lease some existing manufacturing capacity in 2022 and 2023. But its new factories won’t go online until 2024 and beyond.
“It is difficult to significantly increase production capacity in short term, because many types of wafer manufacturing equipment are unique to each company and the manufacturing capacity of equipment manufacturers is also limited,” Shin-Etsu said. The other problem is the costs for raw materials and construction parts are going up.
“The amount of investment per unit is considerably higher than when we considered investment a year ago,” the company added.
