Enlarge / A lady watches a masks—an element 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 supply mature know-how chips in change 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 12 months 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 hard and fast value.

The deal is extremely uncommon for contract chipmakers. The pliability to allocate capability to orders from completely 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 equivalent to UMC and Taiwan Semiconductor Manufacturing Firm (TSMC), the worldwide trade chief.

UMC mentioned the deal was an “progressive, win-win” association. “This may strengthen our monetary place to seize the market alternative,” Jason Wang, UMC president, instructed buyers.

TSMC mentioned this month it will make investments $100 billion in new capability over three years. Intel not too long ago introduced a $20 billion funding program underneath which it desires to problem TSMC in providing contract chipmaking providers.

However the international chip scarcity is anticipated to proceed unabatedly. UMC mentioned its capability utilization charge was one hundred pc within the first quarter and would stay there in the intervening time. The corporate expects common promoting costs of its chips to rise 10 p.c this 12 months in contrast with 2020.

“There’s a supply-demand imbalance in mature nodes,” mentioned Liu Chi-tung, UMC chief monetary officer. “We’ve seen a lot of capability enlargement in superior nodes, however corporations haven’t addressed the mature nodes. There are many crucial elements on these nodes.”

SK Hynix, the world’s second-largest reminiscence chipmaker, plans to carry ahead a few of its deliberate capital expenditure for subsequent 12 months to the second half of this 12 months to satisfy 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 geared toward battling the scarcity, it’s anticipated to take not less than two years to take form, highlighting the depth of the constraints on the semiconductor provide chain.

Though the fab devoted for the capability enlargement already exists, mass manufacturing is anticipated to start out 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 gear,” Wang mentioned.

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