World Advanced: Price Hike in 2027 Inevitable, Will Not Be Lower Than This Year

World (5347-TW) held its earnings call today (4th), where Chairman Fang Lue stated that demand for AI and power management will extend from this year through 2027. With supply failing to meet demand, and equipment, material, and labor costs continuing to rise, a price adjustment in 2027 for wafer foundry services is 'inevitable.' The company is currently in active discussions with customers, and the expected price increase will not be lower than in 2026.

Fang emphasized that AI demand has shifted from a short-term economic theme to a structural growth trend, with a clear and irreversible direction. The company has long invested in the power management field, and these strategic initiatives are now gradually yielding results. AI is expected to remain the primary growth driver for the global semiconductor industry in 2027.

Fang noted that the growth rate of AI demand far exceeds the pace at which industry players are adding new capacity. Supply-demand imbalance will be particularly evident in 2027, and World Advanced itself is currently in a state where demand exceeds production capacity.

To support customer growth demands in 2026 and 2027, World Advanced continues to make significant capital expenditures. It is constructing a 12-inch wafer fab in Singapore and is one of the few foundry operators still actively investing in 8-inch capacity.

However, as Taiwan's semiconductor industry faces intensifying talent competition and rising equipment, material, and operational costs, World Advanced is experiencing increased operational pressure. To maintain long-term competitiveness and meet customer needs, these rising costs must be reflected in pricing.

Fang emphasized that the company is already actively discussing 2027 price adjustments with customers, negotiating based on actual cost increases, new capacity investments, and long-term customer demand. Given current costs and facility setup expenses, the price adjustment in 2027 is expected to be no lower than in 2026.

Regarding capital expenditures, World Advanced estimates its 2026 capex at NT$60–70 billion, similar to 2025 levels. Approximately 85% will be allocated to the construction of the Singapore VSMC 12-inch wafer fab, with the remaining 15% used for routine maintenance, capacity optimization, and equipment expenses at 8-inch facilities.

The company indicated that 2025 and 2026 are the peak years for capital spending on the Singapore 12-inch fab, with overall capex expected to decline in 2027. Detailed budgets will be announced at future earnings calls.

World Advanced’s Singapore 12-inch wafer fab produced its first wafers in early June 2026. From the launch of the pilot program in late August 2024, it took about 22 months to complete sample production, with initial yield performance being exceptionally high. The overall production system and equipment setup are progressing faster than expected, and mass production is scheduled to begin in Q1 2027 as planned. Subsequent technology nodes and interposer-related processes will also be introduced on schedule.

Given the strong yield, equipment configuration, and production readiness, World Advanced expects the ramp-up speed of the 12-inch fab’s capacity to accelerate. The timelines for reaching break-even and full production may be earlier than originally planned, and the facility is expected to make a significant positive contribution to the company’s revenue and profitability in 2027.

Regarding depreciation, as equipment for the 12-inch fab is gradually installed and mass production begins, World Advanced expects depreciation expenses to increase quarter by quarter in 2027, with annual depreciation growing significantly compared to 2026.

The planned capacity for the first phase of the Singapore 12-inch fab has already been fully sold out. The company will focus in the short term on ramping up phase one capacity. For phase two expansion, the company has begun preliminary evaluations and customer discussions, but no concrete investment plan has been formed at this stage.