With geopolitics threatening to interrupt supply chain security, China's semiconductor supply chain has realized the importance of silicon wafers, which account for nearly 30% of chip manufacturing costs. The National Silicon Industry Group (NSIG), China's largest domestic silicon wafer manufacturer, has recently been approved for long-term capacity planning. It aims to increase its monthly capacity from 300,000 wafers to 1.2 million wafers to support Chinese wafer fabs' expansions in 2024 and 2025.
Among the global suppliers of silicon wafers, the top two are Japan's Shin-Etsu Chemical and Sumco, each having a market share of around 25%. Taiwan's GlobalWafers is third with a market share of 17%, and Germany's Siltronic is fourth with a market share of 13%. Along with Korea's SK Siltron, these five companies have a total market share of over 90%. There are also other suppliers like FST, Wafer Works, and Episil, though they have limited supply to China.
In the past, China's domestic silicon wafer industry lagged behind the international market. However, it has been catching up fast in recent years. With production lines achieving mass production at scale starting in 2014, China's silicon wafer market has entered the rapid development phases. In particular, companies like NSIG and Li-on are breaking through in 12-inch silicon wafer manufacturing processes and mass-production bottlenecks.
Industry sources analyzed that the global annual demand for silicon wafers is approaching 8 million units, with China accounting for approximately 12-15%, which is roughly 1 million units per year. Previously, China relied heavily on imports, but as domestic manufacturers grew, the self-sufficient supply of 12-inch wafers has reached 700,000-800,000 units. Despite that, it's still not enough to fulfill the annual demand for Chinese wafer fabs.
NSIG EVP and Zing Semi chairman Li Wei believes that when looking ahead to 2025-2026, silicon wafer demand will increase rapidly due to the active production expansion of local wafer fabs. This is also why NSIG plans to increase its monthly production capacity from 300,000 units to 600,000 units by the end of 2023.
Data showed that in 2022, NSIG's monthly capacity of 300,000 units achieved near full production and full sales. For 2022 as a whole, the company sold 3 million units, with a cumulative shipment of over 8 million units. NSIG estimated that by the end of 2023, its monthly capacity of 600,000 units will be in place. This is early preparation for the market recovery and wafer fab expansion in 2024-2025.
Furthermore, industry sources indicate that NSIG's expansion ambition goes far beyond this. It has already received approval from officials to establish a maximum monthly capacity of 1.2 million units, two to three times its current capacity. As its capacity grows, it can satisfy the silicon wafer demand for sectors like logic chips, memory, and CMOS image sensors (CIS).
NSIG believes that with this plan, it can be the fastest-growing corporation in the industry and become the sixth-largest silicon wafer supplier worldwide, disrupting a market that was previously dominated by the top 5 players.
NSIG president Chiu Tzu-Yin pointed out that consumer electronics demand, headlined by smartphones, remains sluggish. In contrast, some sectors like NEVs are still growing rapidly. The pressure felt by downstream customers has gradually made its way to the silicon wafer industry.
"The industry was very prosperous the last two years, which resulted in a silicon wafer supply shortage and customers stockpiling in response. It'll take some time to clear this excess inventory. Therefore, 2023 will be a more challenging year," stated Chiu.
Regardless, Shanghai Zing Semi's 12-inch plant will undergo its previously planned expansion. Chiu remains confident in the company's decision to invest in a semiconductor industry downturn. Once the industry bounces back, the future will be bright.
