United Microelectronics Company (UMC), the world’s fourth-largest contract chipmaker, is increasing its capability to provide mature know-how chips in change for monetary ensures, in response to the scarcity gripping the worldwide semiconductor provide chain.
UMC stated it will add capability for manufacturing 20,000 wafers a month at 28 nm, one of many course of know-how nodes worst-hit by the worldwide chip scarcity, at an present fabrication plant, or “fab,” in Tainan.
The funding will drive up the corporate’s capital spending for this yr by 53 % to $2.3 billion, however it’s made underneath a deal that commits a number of of UMC’s largest clients to pay deposits upfront and assure sure orders at a set worth.
The deal is very uncommon for contract chipmakers. The pliability to allocate capability to orders from completely different clients has lengthy been a cornerstone of their profitability.
However that mannequin has come underneath hearth as first automakers and now a rising vary of different sectors have been unable to safe sufficient chips from foundries corresponding to UMC and Taiwan Semiconductor Manufacturing Firm (TSMC), the worldwide business chief.
UMC stated the deal was an “modern, win-win” association. “It will strengthen our monetary place to seize the market alternative,” Jason Wang, UMC president, instructed traders.
TSMC stated this month it will make investments $100 billion in new capability over three years. Intel just lately introduced a $20 billion funding program underneath which it desires to problem TSMC in providing contract chipmaking providers.
However the world chip scarcity is predicted to proceed unabatedly. UMC stated its capability utilization fee was one hundred pc within the first quarter and would stay there in the meanwhile. The corporate expects common promoting costs of its chips to rise 10 % this yr in contrast with 2020.
“There’s a supply-demand imbalance in mature nodes,” stated Liu Chi-tung, UMC chief monetary officer. “We’ve seen plenty of capability enlargement in superior nodes, however firms haven’t addressed the mature nodes. There are many important parts on these nodes.”
SK Hynix, the world’s second-largest reminiscence chipmaker, plans to convey ahead a few of its deliberate capital expenditure for subsequent yr to the second half of this yr to fulfill surging chip demand.
The South Korean firm stated on Wednesday that demand was stronger than anticipated and forecast the imbalance in demand and provide to worsen in coming quarters. It expects D-Ram chip provides to stay tight all year long and forecast a sooner than anticipated restoration in demand and costs for Nand reminiscence chips.
Whereas the UMC deal is geared toward battling the scarcity, it’s anticipated to take at the least two years to take form, highlighting the depth of the constraints on the semiconductor provide chain.
Though the fab devoted for the capability enlargement already exists, mass manufacturing is predicted to start out solely within the second quarter 2023 as a result of key instruments are in brief provide too. “We’re working with our suppliers. There’s a lead time for gear,” Wang stated.