Second-tier Taiwanese chip manufacturers have experienced low production line occupancy since the second half of last year as customers absorbed increased semiconductor component stocks that built during the pandemic. Their situation was catalyzed by a US decision to increase tariffs on imported Chinese chipsets, which has led to a surge in demand for Taiwanese produced chipsets.
According to TrendForce, semiconductor components from Chinese manufacturers imported to the US will be subjected to a 50% tariff starting from next year. Notwithstanding uncertainties in the exact procedure of applying these tariffs, it is presumed that Chinese-branded products produced outside China and the finished goods based on them assembled outside China will not be subjected to these prohibitive tariffs. The only exception might be electric vehicles, which are taxed heavily due to US customs policies.
Since producing chipsets in China for retail sale in the US would soon become unprofitable, customers have begun to consider Taiwanese contract manufacturers. Consequently, Vanguard’s conveyor occupancy is predicted to rise above 75% in the second half of this year while PSMC will reportedly maintain a range of 85 – 90%. UMC, TSMC’s major competitor, would be looking at factory line occupancy rates of 70% – 75%.
TrendForce analytics reflected contrasting trends in the semiconductor component market. On the one hand, the stockpile of products that built up during the pandemic for smartphones, televisions, and LCD monitors is being depleted. On the other hand, rising inflation rates and high refinancing rates curbing purchasing are slowing down the recovery of semiconductor component demand. Initially, TrendForce expected production line occupations to bottom out in the first quarter of the year and bounce back to reach a 70% level for 200 mm wafer production lines, and between 75% – 85% levels for 300 mm wafer lines in the second half of the year. These predictions may be influenced by impending tariff hikes in the US.
Next year, Cypress and Gigadevice plan to shift their NOR-Flash-type memory chip production to Taiwan, and are already in discussions with PSMC. UMC, a leading company in mature lithography, is expecting additional orders from European and American clients like Infineon, Texas Instruments, and Microchip. These clients have till now preferred to commission part of their production to Chinese subcontractors, but the prospect of tariff increases in the US is forcing them to reconsider and mull over contract deals with Taiwanese manufacturers.
