February Semiconductor Industry News Roundup: Another wave of price increases, geopolitical and pandemic concerns affecting market sentiment

February is the shortest month of the year, and because of the Spring Festival holiday, there are only three weeks of working time. But there is much to be said about these short three weeks, and they all determine the future direction of the chip market. First of all, the shortage and price increase are no longer limited to IC materials; flash memory has also joined the price increase trend. In addition, the situation in Russia and Ukraine and local epidemics have also plagued the supply chain, exacerbating the expected shortage.

With so many things happening at the beginning of the Year of the Tiger, the entire Q1 is destined to be "not a quiet season," and even the market trend for the whole year cannot escape the impact of these events in February. In short, the market is now turbulent, and the challenges for distributors, traders, and end users are self-evident.

IC and flash memory prices rise in February

Microchip sent a letter to inform agents of a price increase on March 1;

Phison flash memory module price increase of 15%;

Western Digital flash memory price increase;

Micron flash memory contract price increased by 17%-18%, spot price increased by more than 25%;

Infineon sent a letter hinting at a price increase.

Price increases in February involved both IC materials and flash memory. Among the major IC material manufacturers, Microchip and Infineon, the former formally announced a price increase, while the latter is still in the process of brewing. Both attribute the reasons to upstream factors. Since last year, foundries have repeatedly raised prices, and this has not stopped. In addition, local epidemics have caused logistical difficulties, affecting the distribution of finished materials to various demand points.

According to the market report released by Richtek Electronics in mid-February, the lead times for MCUs from Microchip and Infineon are both 45 weeks or more, with the longest reaching more than 52 weeks. Infineon, as a major automotive electronics manufacturer, also has lead times of around 40 weeks for various MOSFETs, IGBTs, and automotive analog and power chips, with the longest exceeding 52 weeks. Another major automotive electronics manufacturer, NXP, is no exception, with its MCUs and automotive materials all showing shortages, even tighter than before the Spring Festival.

With Microchip and Infineon issuing letters, follow-up industry manufacturers will follow suit. At the same time, the impact of the Kioxia/Western Digital raw material contamination accident continues to ferment, pulling flash memory into the price increase wave. In February, flash memory manufacturers Western Digital and Micron, as well as module manufacturer Phison, successively raised prices, indicating a rapid response from the supply chain and a sharp reversal in flash memory price trends. Research firm TrendForce tightened its Q1 flash memory price drop expectations and adjusted its Q2 contract price expectations to an increase of 5%-10%, immediately correcting the expectation of oversupply.

In addition to the Kioxia/Western Digital accident, there were new variables affecting the IC industry in February. The conflict between Russia and Ukraine has led the industry to pay attention to the supply risk of important semiconductor materials, and some IC companies have already spoken out about this.

The Russia-Ukraine conflict triggers new price increase expectations

The escalation of the Russia-Ukraine conflict affects the supply of special gases used in semiconductor production lines. Ukraine supplies 70% of the world's neon and 40% of krypton, both important lithography gases. In addition, Ukraine also supplies 30% of the world's xenon, used in semiconductor etching processes.

Regarding the issue of special gas supply, UMC, SK Hynix, and Micron have all made statements, expressing a generally optimistic attitude and emphasizing diversified supply strategies. ASML, as a lithography equipment manufacturer, also uses a small amount of neon, 20% of which comes from Ukraine. ASML said it is looking for other sources to mitigate the risk.

Relevant reports indicate that the global semiconductor industry's lithography gas inventory can be maintained for six months without problems. The main concern now is that these gases may continue to rise in price. Not only special gases, but the Russia-Ukraine conflict also puts upward pressure on other bulk commodities. Silicon, copper, and aluminum are closely related to semiconductors; if they rise, it will inevitably increase the cost of chip manufacturers again.

Previously, Infineon released price increase expectations. Soon, in late February, reports indicated that some international IDMs had increased the prices of automotive MCUs by an average of 20% at the beginning of the first quarter of 2022, and would implement a similar price increase in the second quarter, involving Infineon, NXP, Renesas, ST, and TI. Judging from this, it is inevitable that more price increase letters will be received later, and the supply in the spot market will also be affected. This is a major challenge for distributors, traders, and downstream end users.

The epidemic continues to plague the industrial chain

In mid-February, the epidemic in Suzhou caused many manufacturing companies in the industrial park to shut down. The main ones in the chip industry were the foundry UMC. On the 14th, UMC announced the shutdown of Suzhou Hejian Manufacturing Company, which resumed operations ten days later on the 24th. IC Trade Network learned that Suzhou Hejian is an 8-inch wafer fab, mainly producing PMIC, MCU, and driver IC products.

Regarding the specific impact of Hejian's shutdown, TrendForce pointed out that the shutdown affected UMC's overall quarterly capacity by 4%-5% and global 8-inch capacity by 0.4%-0.5%. The impact on both UMC and the industry is relatively minor. In addition, this shutdown was not a sudden accident, and the factory area can still maintain a certain operating rate, and the wafers on the production line do not need to be scrapped. Considering this, there is even less to worry about.

The impact of Hejian's shutdown is largely clear, but at most it will not further exacerbate the shortage and price increase of related chips. Due to the problems of supply exceeding demand and insufficient expansion equipment, the supply of 8-inch chips such as PMIC, driver ICs, and WiFi chips is still insufficient, becoming a "bottleneck" in the electronics supply chain. In the pattern of "long and short materials," they occupy one pole of "short materials" together with MCUs.

Following the chip manufacturing industry, the epidemic has affected the trading and circulation of chips. A new round of epidemics broke out in Shenzhen in late February. On February 25, the Huaqiangbei market underwent a round of closed inspections, and all personnel were subjected to nucleic acid testing and confirmed to be negative before being unsealed. From then on, all buildings entering the market must provide a nucleic acid report within 24 hours, which means that all merchants must undergo nucleic acid testing every day.

Entering the first week of March, the Huaqiangbei area was placed under control due to the trajectory of confirmed cases, and the market property announced that it would be closed for four days from March 3 to 6. After opening on the 7th, merchants must present a negative nucleic acid test certificate for each of the four days of closure to enter the market. Regarding the Shenzhen epidemic, market dynamics, and its impact, the industry is on edge, and IC Trade Network will continue to monitor.

Other important industry events in February

The EU released the Chips Act, mobilizing more than 43 billion euros in investment

SoftBank plans to list Arm before March next year

Murata announced the acquisition of US Resonant

TSMC increased investment in its Japanese joint venture factory to US$8.6 billion

Infineon invests €2 billion to expand production of third-generation semiconductors

CXMT increases investment and starts production of 17nm DDR5 memory

Insufficient DDL supply from South Korean manufacturers affects BOE's screen production capacity

Samsung investigates issues with low yield rates in its 4nm process

Luxshare Precision raises 13.5 billion yuan for semiconductor packaging and other projects

Bosch adds €250 million investment to expand chip production

Apple and ASE Technology are discussing the packaging of Apple's self-developed 5G baseband chips

UMC announces a new 22nm fab in Singapore