China's wafer will focus on mature chip technology

According to import and export data for the first half of 2023 released by China Customs, China has canceled orders for a total of 51.6 billion chips, which is equivalent to a daily decrease of 290 million chips, a drop of up to 18.5%. At the same time, the amount of imported chips decreased by US$33.3 billion, a year-on-year decrease of 17.0%. This situation should arise due to the dual effects of the overall surplus of the chip market in 2023 and the localization of chips.

According to TrendForce, there are currently 44 fabs in China and 32 will be expanded in the future, mainly targeting mature processes. 

TrendForce said that the challenging economic outlook this year and ongoing inventory problems have led to a slowdown in demand, especially in the automotive and industrial control fields.

Fabless and other IDMs face severe constraints on inventory digestion. IDM wafer foundries have launched new capacity, are consolidating outsourcing orders, and are once again reducing orders to wafer foundries. In 2024, overall recovery in capacity utilization faces challenges given the expected adverse economic environment.

TrendForce said that from 2023 to 2027, the ratio of global mature (>28nm) to advanced (<16nm) processes is expected to hover around 7:3. Driven by policies and incentives to promote local production and domestic integrated circuit development, China's mature process capacity is expected to grow from 29% this year to 33% in 2027. Leading the trend are SMIC, Huahong Group and Hefei Giants such as Nexchip.

According to data from TrendForce, in addition to the 7 wafer fabs that have temporarily suspended production, China currently operates 44 wafer fabs (25 12-inch wafer fabs, 4 6-inch wafer fabs, and 8-inch wafer fabs). and 15 production lines). In addition, 22 wafer fabs are under construction (15 12-inch wafer fabs and 8 8-inch wafer fabs). In the future, SMIC, Nexchip, CXMT and Silan plan to build 10 wafer fabs (9 12-inch wafer fabs, 1 8-inch wafer fab). Overall, by the end of 2024, my country aims to establish 32 large-scale fabs, all of which will focus on mature processes. 

Looking at the distribution of wafer foundries in China, the Yangtze River Delta region accounts for nearly half of the total, mainly concentrated in provinces such as Shanghai, Wuxi, Beijing, Hefei, Chengdu and Shenzhen.

In terms of production capacity, statistics show that China currently operates 31 12-inch fabs, including 12-inch fixed-capacity fabs under construction. The monthly production capacity is approximately 1.189 million wafers. Compared with the planned monthly production capacity of 2.17 million wafers, the capacity utilization rate of these fabs is close to 54.48%, and there is still a lot of room for expansion.

In addition, from a cost perspective, the cost of producing 12-inch wafers is about 50% higher than that of producing 8-inch wafers. However, the chip output of the 12-inch wafer is almost three times that of the 8-inch wafer, resulting in a cost reduction of approximately 30% per chip. As manufacturing processes improve and yields increase, the cost of 12-inch wafers is expected to fall further in the future.

According to SEMI data, China has maintained rapid development in 8-inch silicon wafers. It is expected that by 2026, China's 8-inch silicon wafer market share will increase to 22%, and its monthly production capacity will reach 1.7 million wafers, ranking first in the world. By the end of 2025, Huahong, Sien, Silan, Yangdong Microelectronics, GTA Semiconductor, SMIC, Zhongke, Zhongke, Huazhong, Huade, Yiji and other companies are expected to build nine new 8-inch wafer fabs.