Prices of silicon wafers set to soar -

An unwillingness to invest in fab expansion is set to prompt prices of silicon wafers to rise during the third quarter of this year.

According to Digitimes, quoting industry sources, foundries and DRAM manufacturers are running at full capacity. Conservatism in the teeth of the economic recession is largely to blame for the foul up.

And it's not as if the industry itself is unaware of the mess it's got itself in.

Earlier this month, the CEO of market research firm Future Horizon, hit out at manufacturers for having their head in the sand because they took a short term view.

He said that in 2009 a number of fabs were shut down, leading to very tight capacity. He said that if companies have no capacity and no wafers. Without sales, companies have no business. "We don't often go undercapacity but when we do it's a killer," he said then.

Digitimes claims that TSMC, UMC, Vanguard and other companies are showing tight capacities, and that prices of wafers rose by five percent in the first quarter of this year and between 10 to 20 percent in the second quarter of 2010.

* Meanwhile TSMC has announced that it plans to set up a VC fund in mainland China, aimed not at funding fab production but encouraging fresh semiconductor designs.