A structural reversal is unfolding in the wafer market: once-maligned 8‑inch production lines have moved from overcapacity to scarcity as leading foundries shift investment to 12‑inch fabs and AI-related demand for power and analog chips surges. Industry consultancies report accelerating capacity withdrawals by TSMC and Samsung alongside rising orders for power management and driver ICs, prompting a wave of price increases across the 8‑inch supply chain.
TrendForce’s January report flags the supply shock: global 8‑inch capacity is set to contract by roughly 2.4% in 2026 as TSMC and Samsung reduce output, while utilization has climbed back toward 90% as demand recovers. The re‑tightening is most visible in segments that still rely on mature nodes — power ICs, PMICs, MCUs and discrete devices such as IGBTs and MOSFETs — where foundries are already enacting price adjustments in the mid‑single digits up to about 20% for some orders.
The economics behind the shift are straightforward. 8‑inch lines have long produced cash‑generative mature chips with depreciated equipment, but the march to 3nm, 2nm and more advanced nodes has redirected capital to 12‑inch facilities that deliver higher wafer output per run and support advanced packaging. With TSMC signaling phased 8‑inch exits by 2027 and Samsung aggressively shrinking its 8‑inch footprint, the industry has reached a turning point where supply contraction meets reinvigorated demand.
AI compute is a proximate cause. Growth in servers, edge devices and electrified vehicles is increasing demand for power management and analog chips that are predominantly made on 8‑inch lines. That demand, combined with precautionary stockpiling by some customers, has driven utilization rates and given foundries pricing power. Smaller fabless companies that do not have long‑term supply agreements risk capacity shortfalls or being forced to pay significant premiums.
China’s mainland foundries are the primary beneficiaries of this short‑term squeeze. SMIC, Hua Hong and other domestic fabs have expanded or reallocated capacity to pick up orders leaving Taiwan and South Korea. SMIC reported a historically high equivalent logic capacity and utilization rates near 96% in mid‑2025, and in late December 2025 it notified customers of roughly a 10% price rise for BCD (Bipolar‑CMOS‑DMOS) 8‑inch processes. Hua Hong’s 8‑inch lines are reportedly running at near‑full capacity following rerouted orders from international power‑semiconductor firms.
Market research firms expect the price momentum to persist into 2026, with a broad 5–20% increase forecast across various 8‑inch process offerings. For buyers — from module assemblers to automakers — this will raise input costs for power and analog components and could compress margins or pass through into higher consumer prices. For foundries, the tighter market restores profitability to legacy lines and buys time to plan for longer‑term investments.
Longer term, however, the underlying trend remains migration to 12‑inch wafers and more advanced nodes. SEMI projects 12‑inch wafer capacity will reach new highs in 2026, driven by sustained demand for advanced logic, memory and specialty processes. That means the current 8‑inch rally is likely a window rather than a permanent reversal: mainland fabs must accelerate 12‑inch and specialty process investments if they intend to convert short‑term gains into durable competitiveness.
The development has broader strategic implications. China’s ability to absorb displaced 8‑inch demand enhances domestic supply resilience and creates economic upside for local suppliers, but it also heightens the global stakes in semiconductor capacity distribution. Western customers and allies will watch closely whether the mainland’s move up the value chain narrows the technological gap or simply fills an interim capacity void. The items to watch next are price trajectories, announced capacity expansions (especially 12‑inch projects and advanced packaging), and whether lead times and quality metrics for rerouted orders remain acceptable to global customers.