utilization rate

Utilization rate is the **percentage of installed fab capacity actually being used** for production. It directly impacts profitability because semiconductor fabs have massive fixed costs that must be absorbed regardless of output. **Formula** Utilization Rate = (Actual Wafer Starts / Installed Capacity) × 100% **Typical Utilization Levels** • **> 90%**: Running hot. Maximum profitability. Risk of not meeting customer demand spikes • **80-90%**: Healthy. Good profitability with some buffer for demand changes • **70-80%**: Below optimal. Margins under pressure as fixed costs spread over fewer wafers • **< 70%**: Concerning. May be operating at or below breakeven depending on cost structure **Why Utilization Matters So Much** A modern 300mm fab has **$3-5 billion in annual fixed costs** (depreciation, facility, base staffing) regardless of how many wafers are processed. At 95% utilization, these costs are divided by ~95% of maximum wafer output. At 70% utilization, the same costs are spread over only 70% of output—**cost per wafer increases by ~35%** while revenue drops proportionally. **What Drives Utilization** **Demand**: Customer orders ultimately determine how many wafers to start. **Product transitions**: Gaps between old product ramp-down and new product ramp-up reduce utilization. **Semiconductor cycle**: During downturns, demand falls and utilization drops. **Qualification wafers**: New process qualifications consume capacity with non-revenue wafers. **Foundry vs. IDM** **Foundries** (TSMC) maintain high utilization by serving many customers—if one customer's demand drops, others fill the gap. **IDMs** (Intel, Samsung) are tied to their own product demand, making utilization more volatile.