Orient Securities has released a research report stating that while some investors primarily focus on the pull from AI computing chips on advanced process wafer foundries, they pay insufficient attention to the boost in demand for mature process wafer foundry services driven by AI needs. The firm believes that AI is driving demand for power-related Integrated Circuits (ICs), which is expected to continuously propel an increase in demand for mature process wafer foundry services. The main viewpoints of Orient Securities are as follows:
According to TrendForce, some wafer fabs are optimistic that 8-inch capacity will shift to tightness by 2026 and have notified customers of impending foundry price increases ranging from 5% to 20%. From a demand perspective, the incremental demand from power ICs for AI servers, coupled with the trend of IC localization in Mainland China boosting demand for local wafer foundries' BCD/PMIC processes, has led to a significant improvement in the capacity utilization rates of 8-inch fabs for some manufacturers since mid-2025. Entering 2026, the increasing computing power and power consumption of end applications like servers and on-device AI are expected to continue stimulating growth in demand for power ICs required for power management. Furthermore, recent concerns within the PC/laptop supply chain that growing demand for peripheral ICs in AI servers might strain fab capacity have prompted early stockpiling of power ICs and even non-power-related components for PCs/laptops, which is anticipated to further elevate demand for mature process wafer foundry services.
On the supply side, TSMC began gradually reducing its 8-inch capacity in 2025, aiming for a complete shutdown of some facilities by 2027; Samsung also initiated reductions in 8-inch production in 2025. TrendForce forecasts that global 8-inch capacity will decrease by approximately 0.3% year-over-year in 2025, with the rate of decline expected to widen further to 2.4% in 2026. Against the backdrop of decreasing 8-inch capacity and continuously rising demand, TrendForce estimates that the global average capacity utilization rate for 8-inch fabs will climb to 85-90% in 2026, an improvement over the 75-80% seen in 2025. Due to the anticipated continued improvement in the supply-demand dynamics for 8-inch wafers, some fabs are optimistic that capacity will become tight in 2026 and have notified customers of price increases ranging from 5% to 20%. TrendForce notes that unlike the price hikes in 2025, which were targeted only at specific older processes or technology platforms, this round constitutes a comprehensive price adjustment applicable to all customers and process platforms. According to Sigmaintell, as 8-inch foundry capacity supply begins to decrease starting in 2027, it is also expected to encourage the migration of more applications originally using 8-inch processes to mature processes on 12-inch wafers, such as 90/110nm, leading to a gradual long-term tightening of supply and demand for these related processes and driving a recovery in prices.
The trend of IC manufacturing localization in Mainland China continues. According to SMIC's Q3 2025 earnings call, the iterative effects of supply chain switching are ongoing, with products like analog chips, Ethernet, WiFi, and memory controllers currently in a phase where domestic products are rapidly capturing market share. The company's market share with some customers continues to grow, and SMIC is securing incremental orders as part of the domestic substitution process. Looking ahead, domestic wafer fabs are expected to continue benefiting from the industrial chain's domestic substitution at the order level and fully capitalize on the rising foundry prices.
Investment recommendations and targets highlight the price increases for some mature processes and the demand growth driven by AI. Related targets include: Wafer manufacturing companies: SMIC, Hua Hong Semiconductor, Nexchip, China Resources Microelectronics, Yandong Micro, Silan Integration, etc.; Semiconductor equipment companies: AMEC, NAURA, Piotech, ACM Research, Hwatsing, Skyverse, etc. Risks include slower-than-expected AI adoption, weaker-than-expected consumer electronics demand, and slower-than-expected progress in domestic substitution.
