PSMC's Strategic Pivot: Suspending SOI Sensor Orders

2026-02-03

On the afternoon of January 29, 2026, Taiwan-based CMOS image sensor design house SOI (Silicon Optronics, Inc.) held a material information press conference, announcing that it had received formal notification from its primary foundry partner Powerchip Semiconductor Manufacturing Corporation (PSMC): starting from the second quarter of 2026, PSMC will cease accepting wafer foundry orders for some of SOI's major products. This decision marks PSMC's official launch of major capacity restructuring following the sale of its Tongluo fab to Micron, and signals that the global foundry industry's resource reallocation under the AI wave has entered a substantive phase.

In its announcement, SOI disclosed that PSMC is one of its most important wafer suppliers, accounting for as much as 58% of total wafer procurement value in the most recent fiscal year. This order suspension involves some major products and is expected to cause a certain degree of impact on the company's capacity planning and shipment schedules.

Micron Acquisition Triggers Strategic Transformation

The catalyst for PSMC's capacity adjustment was the exclusive letter of intent signed with Micron on January 17, 2026, valued at $1.8 billion. Under the agreement, Micron will acquire PSMC's P5 wafer fab located in Tongluo Township, Miaoli County (including land, buildings, and 300,000 square feet of cleanroom space, excluding production equipment), with the transaction expected to close in the second quarter of 2026.

More critically, the two parties have established a long-term DRAM advanced packaging foundry partnership. Micron will reserve PSMC's capacity for HBM back-end advanced packaging and assist PSMC in refining niche DRAM process technology at its Hsinchu P3 fab. This means PSMC will transform from a general-purpose foundry into a key link in the AI memory supply chain.

PSMC Chairman Frank Huang explicitly stated: "In the future, PSMC will target the AI supply chain, reorganizing production resources from its original three 12-inch and two 8-inch wafer fabs, focusing on high value-added products required for AI applications such as 3D AI DRAM, WoW (Wafer on Wafer), silicon interposers, IPD (Integrated Passive Devices), PMIC (Power Management ICs), and power components (GaN/MOSFET), while gradually reducing non-AI related business."

PSMC has chosen to tilt its limited capacity toward high-margin, high-growth memory and power management products, while SOI's main business of CMOS image sensors (CIS), due to relatively lower margins and non-core AI applications, has become the target of optimization and adjustment.

SOI Activates Comprehensive Response Mechanism

Facing the sudden change in supply chain structure, SOI has fully activated cross-departmental contingency procedures. SOI Division Director Jian Hongheng pointed out that response measures include: closely negotiating with existing and potential foundry partners for alternative capacity; accelerating process transfer and re-qualification of existing products; and simultaneously reviewing and adjusting medium to long-term technology development roadmaps.

SOI emphasized that currently secured supply capacity can still support current operational needs, and the company has confidence in achieving its 2026 sales targets. Going forward, SOI will maintain transparent communication with customers, with ensuring product quality, delivery stability, and customer rights as the highest principles.

Industry Capacity Crowding-Out Effect Intensifies

The PSMC order suspension incident is not an isolated case, but rather a microcosm of the AI-driven capacity crowding-out effect. According to TrendForce research, TSMC and Samsung have already initiated 8-inch wafer production cuts in 2025, with global 8-inch foundry capacity expected to contract by 2.4% in 2026. Meanwhile, AI servers and edge AI applications continue to drive growing demand for AI power chips, with global 8-inch average capacity utilization expected to rise to 85%-90% in 2026, significantly better than the 75%-80% in 2025.

Against this backdrop, non-AI related, low-margin mature process products are facing increasingly severe capacity squeeze. PSMC's transformation reflects the survival logic of second-tier foundries under the dual drivers of the memory supercycle and AI computing demand: either embrace the AI supply chain or face marginalization risk.

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