South Korean 8-inch chip foundries, similar to their Taiwanese counterparts TSMC and Vanguard International Semiconductor, have reduced their service prices this year due to low demand from the IT sector, according to sources. The transition of these foundries to 12-inch sizes has also contributed to the decline in service prices.

Reports suggest that South Korean chip foundries have decreased their 8-inch wafer service prices by approximately 10%. Although the timing and extent of the price drop varied among different companies, this trend was observed across the entire foundry sector, as confirmed by sources from local fabless chip companies. It is worth noting that some foundry services experienced a price drop of up to 20%.

These companies offer 8-inch wafer services primarily for the production of power management ICs, display driver ICs, microcontroller units, and other related products. However, as a consequence of decreased demand, the fab operation rate of DB Hitek in the second quarter dropped by over 23% compared to the same period last year. Samsung Foundry, Key Foundry, and SK Hynix System IC also witnessed operation rates between 40% to 50%, according to sources.

In response to the decline in demand, some companies have even shut off power to certain equipment, aiming to maximize throughput efficiency. The intentional price drop by Texas Instruments to expand its power management IC sales has also affected its competitors, claim the sources. Being advantaged by its own 12-inch foundry, the US chip maker can reduce costs by over 20% compared to the utilization of an 8-inch foundry.

The ongoing transition of South Korean chip foundries to 12-inch facilities has compelled them to offer discounts in order to maintain their 90nm and 55nm process operation rates. These companies are likely to face continued pressure from their fabless chip customers to further lower prices for the remainder of the year. DB Hitek anticipates that its operation rate will drop even further to the late-60% range during the second half of the year.