UMC reached a chip foundry agreement with Qualcomm for the next 6 years
As the second-largest foundry in Taiwan, the gap between UMC and TSMC has been growing. However, in the past year or so, with the global spread of the coronavirus, demand in the semiconductor industry has been strong, and UMC’s recent bargaining and supply capabilities have also become stronger, and prices have increased many times in the past period of time.
Prior to this, UMC has started large-scale investment in order to increase production capacity. Unlike other fabs, UMC focuses on mature process nodes while retaining the ability to upgrade advanced process nodes. In addition, UMC has reached capacity agreements with major chip companies for the next 6 years, adopting the capacity margin model, and paying a certain percentage of advance payment for the planned chip production in the future, so as to ensure the supply of basic production capacity within a few years. Through the binding of the interests of both parties, UMC has invested $3.6 billion to expand the production capacity of the Fab 12A fab in Tainan, Taiwan, which uses the 28nm process node.
There are 8 chip design companies rumored to have reached an agreement with UMC. According to DigiTimes, this list includes companies such as Qualcomm and Samsung in addition to the previously exposed MediaTek and Realtek. Among them, Qualcomm is more special, because there is not much cooperation with UMC in the past, and the relationship is relatively ordinary. At the same time, this long-term agreement is different from Qualcomm’s regular replacement of foundries to reduce costs and increase bargaining power.
Over the past year or so, Qualcomm has had a certain degree of impact on its earnings due to the supply of chips from different processes. According to industry rumors, Qualcomm’s orders with Samsung were lower than expected due to lower-than-expected yields, so it returned to TSMC to seek capacity, but TSMC’s capacity was fully loaded, and it needed to increase prices and wait. On the contrary, MediaTek is favored by many equipment manufacturers due to stable shipments, which puts a certain pressure on Qualcomm.
