SMIC's 8-Inch Price Hike Falters on Customer Pushback; Chinese Orders Shift to Korean Foundries

Chinese foundry SMIC attempted a 10-15% price hike for its 8-inch BCD process but faced strong resistance from customers.

The actual price increase was reduced to just 2-4% through rebates, indicating a limit to SMIC's pricing power despite tight market conditions.

In response, some Chinese fabless companies have begun diversifying their orders to overseas foundries, particularly benefiting Korean firms like DB HiTek.

A recent attempt by China's top chipmaker, SMIC, to raise prices has revealed interesting dynamics in the semiconductor market.

At its core, this story is about a clash between supply shortages and customer bargaining power. The global market for 8-inch wafers, which are used for many essential chips like power managers, has been very tight. Foundries were running at nearly full capacity, which usually gives them the power to increase prices. Seeing this opportunity, SMIC announced a significant price hike of 10-15% for its BCD process technology in late 2025.

However, the situation was more complex than simple supply and demand. First, China's aggressive push for 'chip localization' created massive domestic demand. Government policies, such as banning foreign AI chips in state-funded projects, forced Chinese companies to look for local suppliers like SMIC, further tightening the domestic supply. This policy tailwind gave SMIC the confidence to raise its prices.

But the price hike backfired. The key reason is that SMIC's move wasn't just about capitalizing on scarcity; it was also driven by internal cost pressures. Rising depreciation from new factories and a mandate to use more domestic (and sometimes less efficient) equipment squeezed its profit margins. Customers sensed that this was partly a cost-pass-through, not just a reflection of market demand. Furthermore, these Chinese fabless companies had a viable alternative: Korean foundries like DB HiTek, which had already proven to be reliable partners.

Faced with strong pushback and the real risk of losing orders, SMIC had to retreat. They offered rebates that brought the net price increase down to a much smaller 2-4%. This has led some Chinese firms to begin diversifying their orders to Korea, creating a positive outlook for companies like DB HiTek. It's a clear signal that even in a seller's market, pricing power has its limits when buyers have credible alternatives.

Fabless: A company that designs microchips but outsources the manufacturing to a specialized manufacturer called a foundry.
Foundry: A semiconductor manufacturing plant that makes chips for other companies.
BCD Process: A semiconductor process technology that integrates three different types of devices (Bipolar, CMOS, and DMOS) onto a single chip, commonly used for power management circuits.

SMIC's 8-Inch Price Hike Falters on Customer Pushback; Chinese Orders Shift to Korean Foundries

Chinese foundry SMIC attempted a 10-15% price hike for its 8-inch BCD process but faced strong resistance from customers.

The actual price increase was reduced to just 2-4% through rebates, indicating a limit to SMIC's pricing power despite tight market conditions.

In response, some Chinese fabless companies have begun diversifying their orders to overseas foundries, particularly benefiting Korean firms like DB HiTek.

A recent attempt by China's top chipmaker, SMIC, to raise prices has revealed interesting dynamics in the semiconductor market.

Fabless: A company that designs microchips but outsources the manufacturing to a specialized manufacturer called a foundry.
Foundry: A semiconductor manufacturing plant that makes chips for other companies.
BCD Process: A semiconductor process technology that integrates three different types of devices (Bipolar, CMOS, and DMOS) onto a single chip, commonly used for power management circuits.