Fabless semiconductor companies and integrated device manufacturers (IDMs) are facing sticker shock as foundries, emboldened by rising plant utilization and improving demand, have begun hiking wafer prices in a bid to recoup their investments.
The latest quarterly report from the Fabless Semiconductor Association (FSA) points to a steady return of wafer pricing power to foundries, enabling them in the third quarter to jack up prices an average of 3% from the preceding three-month period.
While prices rose across the board, fabless companies typically are paying more for wafers than IDMs because IDMs often buy "a higher quantity of wafers per order than fabless companies," the report noted.
"Overall, on average, companies paid more for wafers in terms of price ranges in the third quarter, compared to the second quarter," the FSA said. "In the third quarter, the average price of the majority of all wafers ordered was between $2,000 and $4,999 compared to $1,000 and $1,999 paid in the first and second quarters."
The sharpest increases have occurred for wafers built on 0.13-micron process technology. Since the first quarter of 2003, average prices for wafers made at 0.13 micron have risen more than 21%, to $3,587, according to the FSA. In the third quarter alone, prices jumped 8%.
Little wonder foundries are racing to introduce the latest wafer processes. For many of these companies, the strongest growth is coming in the leading-edge technology areas where capacity utilization has reportedly climbed above 90%, compared with the industry average of approximately 80%.
Earlier this month, Chartered Semiconductor Manufacturing Ltd. hurled itself into the 90nm arena with its NanoAccess technology, jointly developed with IBM Corp.
Even relatively older process technologies have solid legs. In the third quarter, ASPs for wafers produced at 0.18 micron rose to $1,763 from $1,718 in the prior quarter, although they are still below the $1,873 recorded in the first quarter. ASPs for 0.50-micron wafers dipped in the third quarter to $645 after rising in the second quarter to $729. However, prices for 0.60-micron wafers surged to $563, recovering from a sharp drop to $490 in the second quarter.
Last week, Silterra Malaysia Sdn. Bhd. reported that demand for its 0.18-micron-and-below process technologies rose to a record high during the third quarter, and said it expects this to continue at least through 2004.
"The increased demand is broad-based," said Steve Della Rocchetta, executive vice president of worldwide sales and marketing at Silterra, Kulim, Malaysia. "We are getting more orders and for higher volume from all of our customers for a variety of applications, including consumer products, enterprise networking chips, display drivers, and storage controllers."
Silterra said it sees capacity utilization at its Fab 1 climbing above 90% in the fourth quarter and remaining buoyant through 2004.
Other industry data from research companies indicated that total semiconductor capacity utilization will continue to recover through the rest of the year, and by the fourth quarter of 2004 will be close to 90%.