SUMCO expects higher wafer prices

Silicon wafer supplier Formosa SUMCO Technology Corp (台勝科) yesterday said it expects wafer prices to climb by a double-digit percentage this year as a supply shortage persists amid robust demand for chips used in cars, and industrial and Internet of Things devices.

The company said it sees no signs of demand receding anytime soon after an upcycle that has lasted five quarters, which propelled wafer prices amid an explosive growth in demand.

The uptrend in prices might carry into next year as global chipmakers, from China in particular, are opening new factories to expand capacities to cope with end-market demand, it told investors.

“Silicon wafer demand will continue to grow over the next two years through 2020, buoyed by resilient global GDP growth of between 3 and 4 percent a year,” Formosa SUMCO vice president R. S. Chao (趙榮祥) said.

“We have order visibility through the end of 2018. There is a good chance of seeing price increases, given unresolved supply constraints,” Chao said.

Outlook for the next five years to 2022 is also promising, Formosa SUMCO said.

Silicon wafer demand is to increase at an annual compound rate of 5 percent, or 6 percent from last year to 2022 based on a SUMCO Techxiv Corp foracast, Chao said.

However, customers gave a more ambitious growth forecast of 9.7 percent, he said.

China has the strongest growth potential, as demand is to soar 1.35 times during the period, Chao said.

In addition to South Korea’s SK Hynix Co and Samsung Electronics Co, Chinese memory chipmakers Fujian Jin Hua Integrated Circuit Co (晉華電子), Innotron Memory Co (合肥長鑫) and Yangtze Memory Technologies Co (長江存儲) are gearing up to build new plants, Chao said.

About 10 percent of Formosa SUMCO’s 12-inch wafers were exported to China last quarter, from almost nothing last year, the company said.

SUMCO has about a 47 percent stake in Formosa SUMCO, while Formosa Plastics Corp (台塑) owns about 29 percent.

Formosa SUMCO plans to spend NT$1.6 billion (US$53.4 million) this year to boost production efficiency to increase capacities, the company said.

That is a significant increase from a budget of about NT$500 million to NT$600 million last year.

To make sure that customers have access to a stable supply, Formosa SUMCO said it is also considering adjusting its pricing strategy by signing six-month supply contracts with certain clients, Chao said.

The company usually negotiates prices with customers every quarter, he said.

Strong demand has helped the company grow its net profit by 58 percent quarter-by-quarter to NT$1.14 billion last quarter, compared with NT$712 million in the final quarter of last year, the firm said.

On an annual basis, net profit more than tripled from NT$289 million. That translated into earnings per share of NT$1.45 last quarter, up from NT$0.92 a quarter earlier and NT$0.38 a year earlier.