CHT Q4 2025: 7% Wafer Shipment Drop Signals Near-Term Inventory Correction Despite AI Tailwinds
CHT’s fourth quarter showed resilient revenue growth but exposed short-term shipment softness as inventory adjustments and seasonal dynamics weighed on wafer output. While AI-related demand and a firm pricing stance support the long-term outlook, management’s cautious tone and capacity recalibration point to a measured near-term trajectory. Investors should watch for execution on 12-inch ramp and evolving customer mix as the industry’s mature node cycle enters a new phase.
Summary
- Inventory Correction Hits Shipments: Wafer output fell as customers adjusted inventories, tempering near-term volume expectations.
- AI and Power IC Demand Offsets Consumer Weakness: Growth in automotive and data center segments is balancing softness in traditional consumer categories.
- Capacity and Product Mix Shifts Shape 2026: Execution on 12-inch expansion and evolving customer mix will be pivotal for CHT’s next growth phase.
Performance Analysis
CHT delivered Q4 revenue of NT$125.94 billion, up 2% sequentially and 9% year-over-year, reflecting both product mix improvements and a firmer average selling price (ASP), which rose 5% quarter-over-quarter. However, wafer shipments declined 7% sequentially as customers pulled back on orders to manage inventory and respond to seasonal demand changes. Despite this volume headwind, gross margin improved to 27.5%, aided by a favorable product mix and ongoing pricing discipline, though higher production costs and a December earthquake partially offset these gains.
Operating expenses climbed 12% year-over-year, driven by wage inflation and continued investment in new 12-inch fab capacity. Net profit per share reached NT$0.93, up modestly from Q3 but below the prior year’s Q4. For the full year, CHT’s net profit per share grew just 1.4%, highlighting the challenge of balancing growth investments with margin preservation in a maturing foundry cycle. Cash flow from operations moderated as customer receipts slowed, while capex remained elevated in anticipation of future growth initiatives.
- Wafer Shipment Decline: Q4 saw a 7% sequential drop in wafer shipments, highlighting end-market inventory corrections.
- Product Mix and ASP: Blended ASP rose 5% QoQ, offsetting some volume softness and supporting gross margin.
- Operating Cost Pressure: Wage and expansion-driven opex rose 12% YoY, squeezing operating profit despite top-line growth.
While the business demonstrated resilience on pricing and margin, the shipment decline and higher costs signal a more complex operating environment as CHT navigates industry transitions and executes on its expansion roadmap.
Executive Commentary
"Due to the change in customer season needs, and the storage adjustment of supply chain at the end of the year, the world's advanced cash export volume has decreased by about 7%. On the other hand, the average sales unit price of products based on the dollar is increased by 5% compared to the last quarter. The profit margin is increased by 5% and product combination and sale price."
Jiang Weijishi, General Manager
"At present, our Singapore 12-inch project schedule is on track. Or strictly speaking, it is even ahead of our expected schedule. In June and July of 2026, we should be able to deliver our first batch of samples. Before the end of the year, we hope that all the samples will be qualified. Then in Q1 of 2027, we will enter mass production."
Lu Fangyue, Chairman and Strategy Director
Strategic Positioning
1. Mature Node Focus and Customer Diversification
CHT remains anchored in mature process nodes (0.18 micron and above), with 61% of Q4 revenue derived from 0.18 micron, though this mix is shifting as demand for automotive, industrial, and AI-related applications rises. The company is actively diversifying its customer base away from traditional consumer electronics toward growth segments like automotive power management and data center infrastructure, which are less cyclical and offer higher ASPs.
2. 12-Inch Expansion and Capex Discipline
The Singapore VSMC 12-inch fab, expected to sample in mid-2026 and ramp to mass production in Q1 2027, is a key pillar for long-term growth. Management flagged that 85% of 2025–2026 capex is allocated to this project, with the remainder dedicated to 8-inch line upgrades and maintenance. This capital allocation reflects CHT’s intent to secure a larger share of high-value, mature node demand while maintaining cost discipline.
3. Pricing Power and Contract Dynamics
Despite near-term volume softness, CHT is maintaining pricing discipline through close customer collaboration and a focus on value-added supply chain management. However, the expiration of long-term agreements (LTAs) signed in 2021 is expected to create a low single-digit drag on ASPs in 2026, partially offset by richer product mix and new customer wins in AI and automotive verticals.
4. Product Mix Evolution and AI Exposure
Management highlighted rising demand for power management ICs (PMICs) and display driver ICs (DDICs) in automotive and AI data center applications. The company’s BCD (bipolar-CMOS-DMOS) platform, critical for high-current, low-voltage AI workloads, is gaining traction, while traditional consumer categories such as TV and smartphone remain weak. This evolving mix is driving both margin stability and higher capital intensity.
5. Capacity Rationalization and Utilization
CHT is proactively reducing 8-inch output by 4% in 2026 to align with demand, while shifting resources to higher-value lines. Utilization rates, previously as high as 74%, are expected to moderate, but management is confident in filling new capacity as end-market demand stabilizes and AI adoption accelerates.
Key Considerations
CHT’s Q4 results reflect a company navigating the crosscurrents of industry inventory corrections and secular growth in AI and automotive applications. Capital allocation, customer mix, and pricing discipline remain central to the investment thesis.
Key Considerations:
- Inventory Correction Impact: Q4 shipment decline and cautious Q1 outlook underscore ongoing inventory adjustments across key end markets.
- 12-Inch Ramp Execution: Timely and cost-effective ramp of the Singapore 12-inch fab is critical for capturing next-wave growth and margin expansion.
- ASP Headwinds from LTA Expiry: Expiring long-term contracts will create a low single-digit ASP drag in 2026, pressuring revenue growth despite mix improvements.
- Opex and Capex Management: Wage inflation and high investment levels require tight cost control to preserve profitability as industry conditions remain mixed.
- Customer and Product Mix Shifts: Success in automotive and AI power management ICs will be key to offsetting persistent weakness in consumer electronics.
Risks
CHT faces near-term risks from continued inventory corrections, ASP pressure as legacy contracts expire, and rising operating costs tied to expansion. Execution risk around the 12-inch fab ramp and exposure to cyclical end markets, especially consumer electronics, could challenge margin stability. Macroeconomic uncertainty, geopolitical factors, and potential further supply chain shocks add to the risk profile.
Forward Outlook
For Q1 2026, CHT guided to:
- Wafer shipments to rise 1% to 3% quarter-over-quarter
- Blended ASP to decline 3% to 5% QoQ, primarily due to product mix and LTA expiry
- Gross margin expected between 28% and 30%
For full-year 2026, management signaled:
- Low-to-mid single-digit ASP headwind from expiring LTAs
- Continued high capex for 12-inch ramp, with 85% of spend allocated to Singapore fab
Management highlighted stable three-month order visibility, a recovery in panel driver IC demand, and ongoing strength in automotive and AI-related segments as factors supporting the outlook.
- Order book stability at roughly three months
- Panel driver and AI PMIC demand expected to offset consumer softness
Takeaways
CHT’s Q4 results underscore the importance of disciplined capital allocation and strategic customer engagement as the foundry landscape evolves.
- Volume and Mix Divergence: Shipment softness highlights inventory corrections, but richer mix and pricing discipline support margin stability.
- Expansion Execution: Timely 12-inch ramp and mix shift to automotive and AI are essential for sustaining revenue growth and offsetting ASP pressure.
- Investor Watchpoints: Monitor ASP trends, 12-inch fab milestones, and customer mix evolution as leading indicators of margin and growth trajectory.
Conclusion
CHT enters 2026 with a resilient margin profile and a clear roadmap for capacity and mix upgrades, but faces near-term shipment and ASP headwinds from inventory normalization and contract roll-offs. The next phase will test management’s ability to execute on expansion while capturing secular growth in AI and automotive power ICs.
Industry Read-Through
CHT’s results reinforce the industry-wide narrative of near-term inventory correction and cautious customer ordering, even as secular demand for AI and automotive semiconductors accelerates. The persistent margin focus and disciplined capex signal that mature node foundries are prioritizing value over volume. Peers with exposure to automotive, industrial, and AI power management ICs are likely to see similar mix-driven margin resilience, while those reliant on consumer categories may face further shipment and pricing pressure. The pace and success of 12-inch expansions across the sector will be a key determinant of competitive positioning in the next cycle.