Amid the surge of investments in the semiconductor sector, China's focus on mature process technologies is essential. In a recent interview in Shanghai, SEMI China President Lung Chu noted that by 2027, China is expected to remain the largest spender globally on 12-inch equipment, with total investments surpassing US$100 billion.
Despite a 1.9% year-on-year decline in global semiconductor equipment sales in 2023, China has experienced counter-cyclical growth, achieving a remarkable 28.3% increase primarily driven by robust capacity expansion. Chu expressed optimism about China's ongoing significant role in the development of the global semiconductor industry.
However, whether this pivotal role for China will have a positive or negative impact in the future remains uncertain. The continuous ramp-up of new capacities in China, actual utilization rates, and their effect on pricing are indicators to watch moving forward.
An industry insider analyzed that due to restrictions on imports of advanced processes like extreme ultraviolet (EUV) lithography, China will focus intensively on boosting production capabilities in the 7-14nm range while solidifying its technological strength. Meanwhile, the 14-28nm mature process segment remains a critical point for local substitution and accelerated capacity expansion.
The hotspots for expansion mainly include SMIC's fabs in Shanghai and Beijing, Huahong's wafer fabs 9 and 10, and Nexchip.
By 2025, Chinese wafer foundries are expected to be the primary contributors to the global increase in mature process capacity, with projections indicating a 6% rise among the top ten global mature process foundries.
As China's capacity continues to expand, it is estimated that by the end of 2025, Chinese wafer foundries' mature process capacity will account for over 25% of the top ten players, with the most new capacity added at the 28nm and 22nm nodes. Notably, special process technologies within Chinese wafer foundries are developing rapidly on high-voltage platforms, with mass production of 28nm already achieved in 2024.
Nevertheless, the recovery of mature processes above 28nm currently shows only moderate signs of improvement. In the second half of 2024, average capacity utilization is expected to increase by 5-10pp compared to the first half. However, the overall annual average utilization rate will remain below 80%. Coupled with the urgent need for new capacity to fill orders, this situation may exert pressure on prices for mature processes.
Looking ahead to 2025, uncertainties still loom. Visibility for orders in the semiconductor mature process sector is limited to approximately one-quarter. It is anticipated that the capacity utilization rate for mature processes will exceed 75% in 2025, contingent upon factors such as the recovery of the Chinese economy and improvements in customer ordering behavior.
Given the urgency for localized production in China's integrated circuit (IC) sector, some wafer fabs are adjusting their pricing strategies in response to customers' localization demands and pressures, which could lead to an ongoing tug-of-war between both parties.
