[News] Taiwanese Foundries UMC and VIS Reportedly to Face Higher Depreciation Pressure Starting from 2025

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As TSMC keeps advancing in the most cutting-edge nodes, its foundry peers in Taiwan may have to deal with multiple challenges. In addition to the price war launched by their Chinese rivals, Taiwanese foundries focusing on legacy nodes, including UMC and TSMC’s affiliate VIS, will face significantly increased depreciation pressure starting from 2025, as per a report from Commercial Times.

According to the report, amid their ongoing expansion efforts, major mature process foundries in Taiwan will face increased depreciation pressure afterwards. Sources cited by the report suggest that UMC’s depreciation cost is expected to increase by more than 20% year-on-year in 2024, while its depreciation in 2025 may reach a new high.

In the third quarter, UMC’s depreciation expenses reached NTD 12.059 billion (roughly USD 369 million), a near six-year high. Its accumulated depreciation for the first three quarters of 2024, on the other hand, totaled NTD 32.802 billion (roughly USD 1 billion), a year-on-year increase of 18%, as noted by the report.

The report indicates that UMC’s depreciation expenses in 2024 are expected to exceed NTD 45.3 billion (nearly USD 1.4 billion), and the total depreciation in 2025 may surpass NTD 54.4 billion (nearly USD 1.7 billion), creating operational pressure for the company in the coming year.

On the other hand, VIS announced in June a joint venture with NXP to build a 12-inch fab in Singapore. According to its press release, the construction is set to begin in the second half of 2024, with mass production expected by 2027. The initial investment for the fab is approximately USD 7.8 billion.

As per Commercial Times, VIS’ Singapore factory will begin depreciation in 2026, with the company’s depreciation expenses expected to surge from 2026 to 2027. As the depreciation period for lands, factories, machinery and equipment may last for decades, the report indicates that from 2026 onwards, VIS will also experience operational pressure due to depreciation.

And it is certainly not the only challenge for these foundries to tackle. According to a previous report from the Economic Daily News, prices for 12-inch wafers from Chinese foundries led by SMIC, Hua Hong Group, and Nexchip have been slashed by as much as 40% recently, compared to the offer from Taiwanese companies.

According to TrendForce, Chinese foundries are set to drive the bulk of mature process capacity growth in 2025, thanks to China’s domestic IC substitution policies. It is estimated that the capacity of the world’s top 10 mature process foundries will increase by 6% in 2025, though pricing pressures will persist.

Read more

• [News] SMIC Reports Record Q3 Revenue, Cautious on Expansion Amid Overcapacity Warnings
• [News] SMIC, Hua Hong Reportedly Pressure Taiwan Foundries with up to 40% Discount on Mature Nodes

(Photo credit: UMC)