GlobalWafers says long-term orders healthy


August 25, 2021

GlobalWafers Co (環球晶圓) yesterday said that it has secured orders of more than NT$100 billion (US$3.58 billion) by signing long-term supply agreements amid growing concern that a shortage of silicon wafers might be a headache that arrives on the heels of a chip crunch.

As of June 30, the company had received about NT$19 billion in initial payments from customers who have signed long-term agreements, GlobalWafers said.

The world’s third-largest supplier of silicon wafers asks customers to make a prepayment, usually 20 to 30 percent of the overall order.

The orders it has received are about five times the prepayments so far, the company said.

“We have high and long order visibility, not only for the second half of this year, but also for next year and the year after,” GlobalWafers chairwoman Doris Hsu (徐秀蘭) told an online media briefing. “Demand will not be a concern over the next few years.”

“Many customers urged us to expand capacity to cope with future demand,” Hsu said.

GlobalWafers, whose clients include Taiwan Semiconductor Manufacturing Co (台積電) and GlobalFoundries, said that most of its customers asked for stable wafer supply for at least three years amid fears that capacity expansion would not catch up with rising demand.

GlobalWafers said that it is already facing tight capacity for most of its wafer products.

The prices on the new supply contracts are above average, as the company has to factor in foreign exchange risks and increasing costs of manufacturing, amid rising expenses for shipping, chemicals and other materials, Hsu said.

Hopefully, the price hikes would also help offset higher expected deprecation and amortization costs in 2023 and 2024, she said.

Over the next two-and-half years, GlobalWafers plans to spend about US$800 million on brown-field capacity expansion in Taiwan, Japan, South Korea and the US to meet increasing demand, the firm said.

The investment would boost its 12-inch wafer capacity by 10 to 15 percent, mostly in the middle of 2023, which would add more than the 100,000 advanced 12-inch wafers that some analysts have predicted, it said.

GlobalWafers also hopes to improve its gross margin, Hsu said.

Based on healthy outlooks for demand and pricing, some analysts have projected that gross margin might reach 40 percent next year, Hsu said.

“We might reach that goal, if there are no significant ups-and-downs in foreign exchange rates and shipping costs,” she said.

GlobalWafers reiterated that it expects to wrap up the acquisition of German wafer manufacturer Siltronic AG by the end of this year.

GlobalWafers is still waiting for final regulatory approval from competition watchdogs in China, Germany, Japan and the US, it said.