Buyers involved in supplier selection or contract negotiations with semiconductor suppliers would be well advised to check if chipmakers or their foundries are transitioning to larger size wafers in their production.
Those that are moving to larger size wafers could be in a better position to be flexible with pricing and may be better able to handle any sudden upsurge in demand. They may also be better able to compete in the future, stay financially sound, and be a long-time player in the electronics supply chain.
The transition to larger size wafers is one reason it has been a buyer’s market for many semiconductors, as lead times for many parts have been stable while average selling prices have declined. In fact, some electronics distributors and component manufacturers are lamenting that prices for semiconductors and other components are falling although unit shipments for many parts are rising.
Declining prices are affecting revenue for many distributors and chipmakers. Semiconductor revenue will end 2015 growing just .2%, according to World Semiconductor Trade Statistics (WSTS).
One example of a part that has had strong unit demand, but a declining price, is sensors. Demand for sensors has been robust for several years, as the parts are being designed into more automotive systems, industrial equipment, wearable electronics, and other Internet of Things applications. Researcher IC Insights says the number of unit shipments for sensors/actuators will end 2015 rising 10% to 16 billion, but average selling prices will fall 7% after declining 8% in 2014 and 2013.
The situation is similar with optoelectronic components such as light emitting diodes (LEDs). Unit shipments of optoelectronics are expected to end 2015 growing 12% to 216 billion, according to IC Insights. However, ASPs will fall 2% in 2015.
“These declines are eroding the overall dollar-volume growth of optoelectronics and sensors and discrete components,” says Rob Lineback, senior analyst with IC Insights.
Prices are falling because of stiff competition among suppliers who want to gain market share or at least not lose any.
“There is a lot of competition among suppliers to get those big-unit volume orders,” he explains.
Suppliers have to make and ship more parts, and their profits are under pressure.
“Suppliers have to get their own costs down,” adds Lineback.
One way they are doing that is by transitioning production to larger size wafers.
Many integrated circuit (IC) manufacturers have switched from 200mm wafers to 300mm disks for microprocessors, application-specific integrated circuits, and high-end memory ICs.
Manufacturers of lower cost discrete chips, LEDs, and sensors are transitioning production to 150mm and 200mm wafers from 75mm wafers. In fact, semiconductor manufacturer Infineon has production of some of its power transistors to 300mm wafers, Lineback says.
As semiconductor suppliers and their foundries move to larger size wafers it effectively has resulted in more chip capacity, which is one reason ASPs have fallen.
In some cases, semiconductor manufacturers re-equipped existing fabs to handle 300mm wafers, while others have built new fabs for the larger size wafers and found other parts to build at the older 200mm facilities.
In some cases, equipment from the older fabs is sold to other chipmakers for production of parts that don't need to use 300mm wafers, such as discretes and sensors.
Besides helping reduce prices, the extra capacity has resulted in more stable lead times for many semiconductors and greater continuity of supply, which is good news for buyers.
Although buyers should check the wafer migration plans of suppliers on their approved vendor lists, they also should consider qualifying new suppliers that are moving production to larger wafers.