“Knockout match” in mature and compound semiconductors

The semiconductor industry must brace for a shock as manufacturing capacity for mature and compound semiconductors comes online in China, industry observers warn. Talking to Nikkei, Needham analyst Charles Shi likens the situation to what happened in the solar industry 10-15 years ago, with cheap products flooding international markets. IDC analyst Galen Zeng is already seeing signs of oversupply.

Prices for 6-inch silicon carbide (SiC) wafers have come down 1,500 dollars a piece to 500 dollars or below in just two years, a sales representative from a German chip equipment maker shared. Some firms are already using 8-inch wafers even though they can’t meet the required quality standards yet. Taking advantage of defects tending to diffuse toward the edges, they cut the wafers to 6 inches while they perfect their production process.

“Sometimes I wonder how that could be sustainable, but it seems it’s a very cruel knockout match,” the representative said. “We expect many Chinese players as well as foreign players will get hurt. Many of them already have, and eventually many will have to exit these bloody games.”

The Chinese push in mature (silicon) semiconductors is prompting similar concerns. According to Trendforce data published in December, China’s global market share is set to increase from 31 percent in 2023 to 39 percent in 2027.