Opportunities for Silicon Wafers Lie in Structural Upswing

The recovery of the silicon wafer industry is supported by data, yet the core of this upcycle is not simply price increases.
It is a structural upswing driven by AI, HBM, advanced logic, power management, and capacity expansion at domestic wafer fabs.
In its 2025 year-end analysis, SEMI pointed out that AI applications have boosted demand for advanced epitaxial wafers for logic devices and polished wafers for HBM.
In the first quarter of 2026, demand for silicon wafers related to AI data centers remained robust and began to extend to power management devices.
In 2026, demand for advanced-process semiconductor silicon wafers solely for AI is expected to reach 1 million pieces per month, accounting for more than 10% of global total demand for 12-inch silicon wafers.
As NAND Flash stacking moves toward 400 layers, the widely adopted two-wafer bonding process has directly doubled the silicon wafer requirement per chip.
The wave of intelligentization and electrification of new energy vehicles has triggered an explosive demand for automotive-grade MCUs, power devices, and analog chips, whose manufacturing is rapidly shifting to 12-inch platforms.
According to SEMI, global 12-inch wafer capacity will reach a record 11.1 million pieces per month by 2028, with over 40% of the new capacity coming from mature-process lines for automotive-grade and industrial-grade chips.
In sharp contrast to expanding demand, overseas giants are strategically scaling back in the mature-process sector.
In March 2026, SUMCO suddenly announced the postponement of construction plans for two new wafer fabs and even voluntarily gave up more than 50 billion yen in Japanese government subsidies.
Its management clearly stated in the announcement that it would concentrate all resources on advanced-process products of 2nm and below in the future, abandoning capacity expansion in mature processes.
Similarly, overseas leaders such as Shin-Etsu Chemical and GlobalWafers have also focused all their recent expansion plans on advanced processes. Instead of expanding, mature-process capacity is being gradually optimized and reduced.
This strategic shift has left a highly certain market space for domestic 12-inch silicon wafer manufacturers.
The reversal of the supply and demand structure has been reflected in prices. A research report from CITIC Securities clearly judged that the volume growth logic of the silicon wafer industry was fully validated in 2025, and the price increase logic is expected to officially start in the second quarter of 2026.
This sets higher requirements for domestic silicon wafer enterprises. AI servers not only need GPUs, HBMs, and high-speed interconnections, but also a large number of power management, analog, storage, sensing, and interface chips.
Front-end advanced logic and storage drive demand for high-end 12-inch silicon wafers, while back-end power management and power devices boost demand for heavily doped, epitaxial, low-defect, and high-reliability materials.
The growth potential of silicon wafer enterprises will increasingly depend on product structure. Those only producing ordinary lightly doped polished wafers are prone to price competition.
Only by entering segments such as epitaxial wafers, SOI, heavily doped power wafers, low-oxygen high-resistance wafers, and CIS wafers can manufacturers enhance the value per wafer.
Domestic 300mm semiconductor silicon wafers still face structural shortages in high-end wafers, heavily doped epitaxial wafers, low-oxygen high-resistance wafers, argon-annealed wafers, high-pixel CIS wafers, and SOI wafers, which represent the value space for the next stage of domestic substitution.

Domestic Players Achieve Substantial Breakthroughs Through Barriers

For a long time, 12-inch silicon wafers have been a core weakness in China's semiconductor industry chain, with the global market long monopolized by five overseas manufacturers including Shin-Etsu Chemical and SUMCO. The industry's CR5 remained as high as 76% in 2025.
However, during the 2025-2026 industrial cycle, this pattern has witnessed a fundamental reversal.
The substitution of domestic 12-inch silicon wafers has entered a stage of large-scale implementation across the entire industry chain, supported by substantial breakthroughs by domestic manufacturers in the three core barriers of technology, customers, and capacity.
As a leading domestic 12-inch silicon wafer manufacturer, Shanghai Industrial Silicon Co., Ltd. sold 6.4163 million pieces of 300mm silicon wafers in 2025, a year-on-year increase of 27.01%, with revenue of 2.439 billion yuan.
Its products have achieved large-scale mass production of 11N-grade purity, with defect density reduced to 0.12-0.15/cm² and yield rate stabilized at over 98%.
It has not only passed the full-process verification of SMIC's 28nm process but also completed R&D and verification of silicon wafers for 14nm logic chips, officially joining the advanced-process supply chain. Long-term orders for the 28nm production line have been locked until 2028.
Zhonghuan Leading has also made remarkable progress. Its 12-inch lightly doped silicon wafers have passed certification from international top customers such as TSMC and Infineon, with current monthly capacity of 700,000 pieces, planned to expand to 1 million pieces in 2026, accounting for over 30% of procurement by domestic power device manufacturers.
Shanghai HJQ's sales of 12-inch epitaxial wafers surged 83.03% year-on-year in 2025, with mass supply to ON Semiconductor, Huahong Grace, and others. Its new production line in Zhengzhou will be put into operation in June 2026.
Layang Micro has achieved a milestone breakthrough: its 12-inch automotive-grade silicon wafers have passed AEC-Q100 certification, making it the first domestic manufacturer to achieve mass supply of 12-inch automotive-grade silicon wafers, successfully entering the supply chains of carmakers including BYD and NIO.
The ultra-long 2-3 year certification cycle for automotive-grade products means long-term and stable cooperation once entering the supply chain, opening up a high-margin, highly certain incremental blue ocean for domestic manufacturers.
The acceleration of domestic substitution is underpinned by strong demand from capacity expansion in domestic wafer manufacturing.
SEMI predicts that China's mainland 12-inch wafer capacity will increase to 3.21 million pieces per month in 2026, accounting for approximately one-third of the global total capacity.
Among them, the capacity of domestic wafer fabs such as SMIC, Huahong Group, and CXMT will increase to about 2.5 million pieces per month, corresponding to an annual silicon wafer demand of over 30 million pieces.
A Reuters report in February 2026 showed that SMIC added 50,000 pieces per month of 12-inch capacity in 2025 and plans to add another 40,000 pieces per month by the end of 2026.
Its capacity utilization rate reached 95.7% in the fourth quarter of 2025, indicating that domestic wafer manufacturing is still in an expansion phase, with rising demand from local customers for stable material supply.
At present, leading domestic silicon wafer manufacturers have fully entered the supply chains of mainstream domestic wafer fabs, with increasing procurement proportions. The three major semiconductor industrial belts in the Yangtze River Delta, Beijing-Tianjin-Hebei region, and central and western China have formed a localized supporting closed loop of "wafer manufacturing - silicon wafer supply".
After years of deep cultivation, domestic 12-inch silicon wafers have entered a period of concentrated capacity release, with the large-scale capabilities of leading manufacturers continuously rising.
TCL Zhonghuan's semiconductor material business shipped over 1,200 MSI in 2025, with revenue of 5.707 billion yuan, a year-on-year increase of 21.75%, ranking among the top in the industry in both revenue and shipment volume.
Shanghai Industrial Silicon's 300mm silicon wafers cover all mainstream application fields including logic, storage, and power.
Xi'an Yichai's revenue reached 2.649 billion yuan in 2025, a year-on-year increase of 24.88%, with its second factory having a capacity of 200,000 pieces per month.
However, the industry still faces structural challenges: competition in mid-to-low-end products is intensifying, and supply gaps remain in high-end silicon wafers, SOI wafers, and other fields.
Most enterprises are still under pressure from depreciation, R&D, and prices during the scale-up period, which is an inevitable growing pain for domestic silicon wafers to cross the scale threshold.
Continuous capacity expansion of domestic wafer fabs around mature processes and specialty technologies has brought intensive verification and adoption opportunities for domestic silicon wafers.

The extreme demand for supply chain security in automotive electronics, industrial control, and other fields has fully leveraged the advantages of local manufacturers in compliance, cost, delivery, and service.

Conclusion:
SEMI predicts that by 2030, the global market size of 12-inch silicon wafers will exceed 20 billion US dollars, with China accounting for more than 40%.
For domestic silicon wafer manufacturers, the next 3-5 years will be a critical period determining the industry landscape.
The proportion of prime wafers, proportion of high-end epitaxial wafers, core customer coverage rate, capacity utilization rate, and cash flow quality will determine the trend of domestic substitution.

Partial references: CITIC Securities Research: Semiconductor Silicon Wafers Usher in Another Upcycle, Optimistic about Accelerated 12-inch Domestic Substitution; SEMI: Global 12-inch Silicon Wafer Market Size Outlook 2030; Semiconductor Industry Watch: 12-inch Silicon Wafer Domestic Substitution Enters Volume Expansion Stage: Triple Breakthroughs in Technology, Capacity and Customers; Chipress: Overseas Silicon Wafer Leaders Strategically Contract, Domestic Manufacturers Usher in Historic Opportunities

Source: Sina Finance (Contact us for deletion if any infringement is involved)