Market concerns about the risks of repeated supply chain orders or inventory adjustments have never been eliminated, but so far, major upstream semiconductor manufacturers have not revised their views and have even gained clearer visibility, indicating that demand for semiconductor production capacity remains high.

Doris Hsu, Chairman of GlobalWafers, which is poised to become the second largest in global market share, recently pointed out that the order visibility of GlobalWafers extends to the end of 2022, with robust customer demand in 2023. Long-term contracts continue to be signed, and the estimated value of orders in hand has exceeded NT$100 billion.

GlobalWafers' market capitalization and year-on-year (YoY) revenue in recent years

Recent confidence boosting statements from major semiconductor companies

After the semiconductor and electronic technology industries embraced a super boom lasting over a year, the market has recently indicated that demand for notebooks (NB), tablets, and TVs will slow down quarter by quarter. Reversal signals have emerged in related chips, including memory, display panels, and panel driver ICs. The first half of 2021 marked the operational peak for many manufacturers, with growth momentum for numerous players expected to wane in the second half of the year and become even more pronounced in 2022.

However, according to semiconductor industry players, for more than a year, the global semiconductor industry has been experiencing a boom with demand outstripping supply, yet the true situation is difficult to accurately grasp. In fact, judging from the recent confidence-boosting statements and assessments of supply and demand conditions by major semiconductor manufacturers, demand for semiconductors has not decreased, and production capacity remains insufficient to meet demand.

TSMC believes that the pandemic has accelerated digital transformation, making semiconductors even more indispensable in daily life. It optimistically expects the semiconductor market (excluding memory) to grow by approximately 17% year-on-year in 2021, and the wafer fabrication industry to grow by around 20% year-on-year. In US dollar terms, TSMC is confident it will surpass the 20% annual growth rate of the wafer fabrication industry.

In addition, in the long run, the annual compound growth rate from 2020 to 2025 is expected to reach 10% to 15%. Meanwhile, TSMC has also fully launched a multi-billion-dollar expansion plan to meet the strong demand arising from 5G, AI, automotive applications, and HPC. Intel also believes that the semiconductor shortage will peak in the second half of 2021, and although it will gradually improve, chip production capacity will not return to healthy supply-demand levels until 2023.

Additionally, Hsu Hsiu-lan, Chairwoman of GlobalWafers—which will become the world's second-largest silicon wafer manufacturer after merging with Germany-based Siltronic—also expressed optimism, stating that she is not concerned about a reversal in demand. Currently, GlobalWafers has order visibility extending to the end of 2022, with robust customer demand projected through 2023 and long-term contracts continuing to be signed. In addition to having an estimated backlog of orders exceeding NT$100 billion, the company will raise its quotes in response to sharp currency fluctuations and soaring international freight rates, reflecting costs and maintaining profitability.

Xu Xiulan emphasized that customers have even higher market visibility than GlobalWafers and currently believe that future demand will be quite robust and healthy. Therefore, they all hope that GlobalWafers will actively expand production, and many customers have also signed long-term contracts to ensure a stable supply for more than three years.

Based on existing long-term contracts, the value of outstanding orders is estimated to exceed 100 billion yuan. Currently, the supply of 12-inch epitaxial wafers is the most constrained. To meet customer demand, GlobalWafers plans to invest US$800 million in expansion, with an estimated capacity increase of 10-15%. A small portion of the new capacity is expected to come online in 2022, while the majority will be available from mid-to-late 2023. This timeline aligns with the new capacity rollout planned by global wafer manufacturers in 2023.

Apart from the confidence of major silicon wafer and foundry manufacturers that semiconductor demand has not reversed and industry visibility extends at least through 2023, the leading packaging and testing company, Advanced Semiconductor Engineering (ASE) Holding, even pointed out that current demand is stronger than expected. Not only will production capacity remain tight in the second half of the year, but the shortage situation will persist at least until the end of 2022, with the earliest chance of returning to normal occurring in 2023.

Semiconductor industry players said that the continued optimism and large-scale expansion efforts of several major manufacturers have once again debunked the market's conservative argument about a demand reversal in 2022. While demand for end products such as notebooks (NB) and TVs may decline, and issues related to the shortage and surplus of certain components do exist, the demand for various applications including automotive, IoT, and servers continues to grow. Overall, total chip demand remains strong, and the inventory levels of IC design companies will remain relatively low through 2022.