Silicon wafer pricing uptick seen continuing into 2020

Industry sources told DigiTimes that more price hikes are ahead for silicon wafers. The pricing of blank wafers is estimated to increase a further 20 percent on average this year, after already witnessing a same size increase in 2017. The price uptrend is expected to carry into 2020 as production is having a hard time to keep up with growing demand.

The sources said silicon wafer prices began to rebound in the beginning of 2017 and picked up quarter by quarter in the year, bolstered by explosive increases in demand for wafers from automotive electronics, IoT, memory, AI, and cryptocurrency mining sectors. In addition, limited capacity expansions by the world's top five suppliers have turned the oversupply into shortfall, further driving up the quotes. The world's top five suppliers - Shin-Etsu, Sumco, GlobalWafers, Siltronic and SK Siltron - together command over 90% of the global silicon wafer supply.

More expensive wafers mean higher revenue and profits for wafer suppliers, but lower profitability for foundry houses and chip designers:

With the uptrend lingering for wafer quotes, Taiwan Semiconductor Manufacturing Company (TSMC) indicated earlier that its gross margin rate may fall by 0.5-1pp on price hikes in 2018, compared to a smaller drop of 0.2pp in 2017 made possible by the annual contract signed earlier with wafer suppliers.