Orient: AI-driven demand for power IC and other products is expected to continue to drive the growth of mature process requirements.

Orient released a research report stating that some investors are primarily concerned with the push of AI computing power chips on advanced process wafer foundry outsourcing, while they are not paying enough attention to the push of AI demand on mature process wafer foundry outsourcing. The bank believes that the demand driven by AI for power-related ICs is expected to continue to drive up the demand for mature process wafer foundry outsourcing. Orient's main points are as follows: Event According to TrendForce, some wafer fabs are optimistic that 8-inch capacity will become tight by 2026, and have informed customers that they will raise outsourcing prices by 5-20%. AI driving demand growth for power ICs, expected to continue driving up demand for mature processes From the demand side, due to the incremental demand brought by AI server power ICs, and the trend of localization of ICs in mainland China driving up the demand for BCD/PMIC from local wafer foundries, the utilization rate of 8-inch capacity at some wafer fabs has significantly increased since mid-2025. In 2026, the computing power and power consumption of terminal applications such as servers and side AI are expected to continue to increase, further stimulating the growth of power IC demand needed for power management. In addition, recent concerns in the PC/laptop supply chain about the growth in demand for AI server peripheral ICs possibly leading to pressure on wafer fab capacity have prompted early stocking of PC/laptop power ICs, and even non-power-related components, which is expected to further boost demand for mature process wafer foundry outsourcing. The degree of annual reduction in 8-inch capacity in 2026 is expected to expand, driving mature process capacity to become tight In terms of supply, TSMC has gradually reduced its 8-inch capacity starting in 2025, with the goal of partially shutting down some factories by 2027; Samsung also started reducing 8-inch production in 2025. TrendForce estimates that the global 8-inch capacity will decrease by about 0.3% in 2025, and the degree of capacity reduction in 2026 will further expand to 2.4%. With some reduction in 8-inch capacity and continued growth in demand, TrendForce estimates that the average utilization rate of 8-inch capacity globally in 2026 will rise to 85-90%, surpassing 75-80% in 2025. As the supply and demand relationship for 8-inch continues to improve, some wafer fabs are optimistic that 8-inch capacity will become tight by 2026, and have informed customers of raising outsourcing prices by 5-20%. TrendForce believes that unlike the price increase in 2025 that only targeted certain old processes or technical platforms, this time it is a comprehensive price adjustment for all customers and process platforms. According to Qunzhizixun, as supply of 8-inch foundry capacity begins to decrease from 2027, it is also expected to promote more applications of the original 8-inch process to mature processes such as 12-inch 90/110nm, leading to a gradual tightening of the supply and demand for related processes and driving prices up. Domestic wafer fabs are expected to continue to benefit from domestic substitution in the industry chain The current trend of localization in IC manufacturing in mainland China continues. According to Semiconductor Manufacturing International Corporation's performance in Q3 2025, the iterative effects of industry chain switching continue, with analog chips, Ethernet, WiFi, storage controllers and other products quickly gaining market share in domestic products, and the company's market share of some customers continues to grow as part of the process of domestic substitution, the company has gained incremental orders. Looking ahead, domestic wafer fabs are expected to continue to benefit from domestic substitution in the industry chain at the order level and fully benefit from the rise in outsourcing prices. Investment recommendations and investment targets With the price increase of some mature processes and the growth in demand driven by AI. Related targets: Wafer manufacturing companies: Semiconductor Manufacturing International Corporation, HUA HONG SEMI, Nexchip Semiconductor Corporation, China Resources Microelectronics, Beijing YanDong MicroElectronic, Xilinx Integration, etc.; Semiconductor equipment companies: Advanced Micro-Fabrication Equipment Inc. China, NAURA Technology Group, Piotech Inc., Acm Research(Shanghai), Inc., Hwatsing Technology, Skyverse Technology, etc. Risk Warning: AI deployment falls short of expectations, consumer electronics demand falls short of expectations, domestication progress falls short of expectations.