Silicon wafers are definitely the best kind of wafers for us tech enthusiasts, but as we all know, required financial resources for the development and production of these is among the most intensive in development costs and R&D. It's not just about the cost of employing enough (and crucially, good enough) engineers that can employ the right tools and knowledge to design the processing miracles that are etched onto wafers; there's also the cost of good, old production as well. Extreme Ultraviolet Lithography Systems that are used for the production of silicon wafers are about the size of a city bus, and typically cost more than 100 million euros ($115.3 million) each. ASML, a Dutch company that specializes in this kind of equipment, announced this year it was expecting to see a 25% revenue growth for 2017. Increased demand for these systems - and added cost of development of ever increasingly small and complex etchings in wafers - means this sector is seeing strong growth. But where there is strong growth, there is usually high demand, and high demand means higher strain on supply, which may sometimes not be able to keep up with the market's needs.

This is seemingly the case for wafer pricing; as demand for wafer production has been increasing, so to are prices. Faced with increased demand, companies are usually faced with a tough question to answer in regards to the correct course of action. Usually, it goes like this: higher demand at the same supply level means higher pricing. However, if supply isn't enough to satisfy demand, manufacturers are losing out on potential increased sales. This leads most companies to increase supply relative to demand, but always with lower projected output than demand requires, so they can bask in both increased ASP (Average Sale Price) and higher number of sales. This has been the case with DRAM memory production for some time now: and is happening with 300 mm silicon wafers as well.South Korean SK Siltron and Japanese SUMCO, both wafer manufacturing companies, are reporting expected 300 mm wafer pricing to shoot up by 20% YoY - with a corresponding increase in overall revenue for both companies. SUMCO, for one, are adjusting pricing of their silicon wafers to correspond to demand (read, higher ASP), this is done through long-term supply and demand contracts with major semiconductor manufacturers on yearly, semi-annually, and quarterly prices. An interesting side-note here for economies of scale and pre-set pricing, with companies that take more portions of the available supply achieving better pricing than smaller companies (it's a winner's market, after all.) These facts have led SUMCO to expect its best performance of the last 10 years (since the global financial crisis of 2008).

"We are also planning to increase price of silicon wafer by 20% in 2018." said CEO Hashimoto Mayuki of SUMCO. "Price of silicon wafer will continue to rise in 2019." Still according to the CEO, global demand for 300 mm silicon wafers for semiconductor production is currently 5.6 million units per month - SUMCO is estimating the global demand in 2020 to reach 6.6 million units per month. SUMCO, on its part, is planning to increase monthly output of 300 mm silicon wafers by 110,000 units in 2019. German company Siltronic is also planning to increase its monthly output, though by a slightly lesser 70,000 units.While it may seem that these price increases are limited to a few companies, remember that the silicon market isn't different from most others: it's akin to a system, where the actions of one player affect all others. It's mostly a causal relationship, and trends are followed closely by all players. You can rest assured in that most other silicon wafer manufacturers will be following suit with lukewarm increases to production output based on expected demand. They certainly wouldn't want to drown out their own value and ASP with inordinate amounts of supply to the market: like the DRAM market, this will be a slow squeeze, but a squeeze, nonetheless.