A woman watches a mask—a part used in wafer conception—at a show room of the 12-inch United Microelectronics Corp (UMC) factory in Tainan, southern Taiwan.
Enlarge / A girl watches a masks—a component utilized in wafer conception—at a present room of the 12-inch United Microelectronics Corp (UMC) manufacturing facility in Tainan, southern Taiwan.

Sam Yeh | Getty

United Microelectronics Company (UMC), the world’s fourth-largest contract chipmaker, is increasing its capability to provide mature know-how chips in trade for monetary ensures, in response to the scarcity gripping the worldwide semiconductor provide chain.

UMC mentioned it will add capability for manufacturing 20,000 wafers a month at 28 nm, one of many course of know-how nodes worst-hit by the worldwide chip scarcity, at an present fabrication plant, or “fab,” in Tainan.

The funding will drive up the corporate’s capital spending for this yr by 53 p.c to $2.3 billion, however it’s made underneath a deal that commits a number of of UMC’s largest clients to pay deposits upfront and assure sure orders at a set worth.

The deal is extremely uncommon for contract chipmakers. The pliability to allocate capability to orders from totally different clients has lengthy been a cornerstone of their profitability.

However that mannequin has come underneath fireplace as first automakers and now a rising vary of different sectors have been unable to safe sufficient chips from foundries resembling UMC and Taiwan Semiconductor Manufacturing Firm (TSMC), the worldwide trade chief.

UMC mentioned the deal was an “revolutionary, win-win” association. “It will strengthen our monetary place to seize the market alternative,” Jason Wang, UMC president, informed traders.

TSMC mentioned this month it will make investments $100 billion in new capability over three years. Intel lately introduced a $20 billion funding program underneath which it needs to problem TSMC in providing contract chipmaking providers.

However the international chip scarcity is anticipated to proceed unabatedly. UMC mentioned its capability utilization fee was 100% within the first quarter and would stay there in the interim. The corporate expects common promoting costs of its chips to rise 10 p.c this yr in contrast with 2020.

“There’s a supply-demand imbalance in mature nodes,” mentioned Liu Chi-tung, UMC chief monetary officer. “We have now seen plenty of capability growth in superior nodes, however corporations haven’t addressed the mature nodes. There are many vital parts on these nodes.”

SK Hynix, the world’s second-largest reminiscence chipmaker, plans to deliver ahead a few of its deliberate capital expenditure for subsequent yr to the second half of this yr to fulfill surging chip demand.

The South Korean firm mentioned on Wednesday that demand was stronger than anticipated and forecast the imbalance in demand and provide to worsen in coming quarters. It expects D-Ram chip provides to stay tight all year long and forecast a sooner than anticipated restoration in demand and costs for Nand reminiscence chips.

Whereas the UMC deal is aimed toward battling the scarcity, it’s anticipated to take at the very least two years to take form, highlighting the depth of the constraints on the semiconductor provide chain.

Though the fab devoted for the capability growth already exists, mass manufacturing is anticipated to begin solely within the second quarter 2023 as a result of key instruments are briefly provide too. “We’re working with our suppliers. There’s a lead time for tools,” Wang mentioned.

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