On July 31, 2026, the global semiconductor market is staging a rare "two extremes" drama. According to the latest report from market research firm TrendForce, the global wafer foundry industry delivered impressive overall performance in the second quarter, but beneath the impressive numbers, an undercurrent is stirring—the alarm of mature-process capacity oversupply has been sounded, and the 8-inch wafer foundry segment is the first to show signs of a price war, casting uncertainty over the semiconductor outlook for the second half of the year.
Severe divergence between advanced and mature processes
Data show that the global wafer foundry output value grew about 12% year-on-year in Q2 2026, mainly driven by explosive growth in AI chip demand. Leading players such as TSMC ran their advanced-process capacity at full capacity, with revenue beating expectations. However, excluding a few advanced-process makers, the industry's overall growth momentum was actually quite limited. In mature processes of 28nm and above, capacity utilization generally failed to reach full load. The situation is most severe at 8-inch fabs, where average utilization has fallen below 80%.
It is understood that due to persistently weak consumer electronics end demand and automotive chip orders not recovering as strongly as expected, several foundries focused on mature processes began cutting prices from the end of Q2, with cuts of about 10% to 15%. Some second-tier players even offered "buy five, get one free" deals, sending a distinct whiff of gunpowder through the market.
Two major drivers of supply-demand imbalance
The softening of mature-process prices is no accident; it is the inevitable result of supply-demand structural imbalance. On the supply side, the global semiconductor industry has seen a wave of capacity expansion over the past three years. In particular, mainland China's wafer foundries have aggressively expanded mature-process capacity under policy subsidies, with new supply concentrated in 2025–2026. According to SEMI, among new wafer capacity added globally in 2026, more than 60% is concentrated at 28nm and more mature nodes, worsening an already sluggish market.
On the demand side, although automotive electronics, IoT, and other applications are still growing, the growth rate is far slower than the increase in supply. Take automotive chips as an example: the chip shortage over the past two years prompted automakers to build substantial inventories, and inventory levels remain relatively high, naturally reducing their ordering willingness for mature-process chips. In addition, consumer electronics such as smartphones and PCs have entered a replacement cycle, with shipments unlikely to return to pre-pandemic peaks, further suppressing mature-process demand.
The knock-on effects of the price war
Once a price war breaks out, it is undoubtedly a major test of profitability for manufacturers that rely on mature processes for most of their revenue. For example, Taiwan's second-tier foundries such as UMC and Vanguard International Semiconductor derive more than 70% of their revenue from 8-inch and 12-inch mature processes. If ASP (average selling price) declines 10%, the impact on gross margin could be as high as 5 to 8 percentage points. More worrying, some manufacturers feel forced to follow price cuts in order to maintain capacity utilization, creating a vicious cycle.
However, every coin has two sides. For downstream IC design companies, mature-process price cuts are a great opportunity to reduce costs. Companies such as MediaTek and Realtek have recently indicated at earnings calls that they are actively negotiating prices with foundries and expect their gross margins to benefit in the second half. In addition, lower prices can help stimulate demand; for example, projects such as smart meters and industrial controls that were postponed due to high costs could be restarted.
A new normal for the industry cycle?
Looking back at the history of the semiconductor industry, each cycle has had different drivers and adjustment paths. Since the industry emerged from recession in the second half of 2024, AI chips have played the role of "superhero", pushing advanced-process performance to record highs. But the recovery of mature processes has clearly lagged, creating a rare "K-shaped divergence" in nearly 20 years. Analysts point out that this reflects the industry's shift from a synchronized cyclical model to a combination of technology-driven structural growth and traditional cycles.
Looking to the second half, TrendForce forecasts that mature-process prices will fall another 5% quarter-on-quarter in Q3, and the decline may extend into 2027. The pace of inventory digestion is a key indicator to watch. If end demand recovers during the year-end shopping season, inventory levels may decrease faster; otherwise, the 8-inch wafer foundry segment may face a prolonged period of "rest and recuperation".
Investment implications: pick leaders, avoid the mature-process trap
For investors, the current semiconductor market no longer suits "everyone gets a share" investing. It is advisable to focus on long-term growth themes such as advanced processes and the AI chip supply chain, including leading companies with technological moats like TSMC and Intel (as a leading-edge process transformer). At the same time, investors can pay attention to IC design firms that benefit from price cuts, or niche players that have successfully transformed their 8-inch fabs. In contrast, pure-play mature-process foundries are unlikely to see a real stock price recovery until capacity utilization returns above 90%.
The pendulum of the semiconductor cycle is still swinging, but in this cycle, the positions of different nodes vary greatly. Accurately identifying who is "losing" and who is "gaining" in the supply chain is the key to capturing investment returns in the second half.
