Supply will become constrained as 2015 continues, and prices will rise by the end of the year as a result.

Silicon wafer shipments hit record highs in 2014 making it a banner year for the industry, according to SEMI's recently released report. In 2014, silicon wafer shipments reached a total of 10,098 million square inches (MSI), an 11.4 percent increase year-on-year. Unfortunately for manufacturers of silicon wafers, prices have not held up against the increase in production, and industry revenues dropped by 9 percent in terms of US$ per MSI shipped.

Nevertheless, industry analysts expect silicon wafers to increase in price in 2015 and 2016. According to BNP Paribas analyst Yoshitsugu Yamamoto, wafer prices are expected to rise by 10 percent in 2015, and a further 35 percent in 2016. Much of the reason for projecting a price increase is that wafer inventories remain relatively high at the moment but are rapidly draining. In addition, wafer manufacturers are partly unwilling to add more capacity until prices rise significantly - 30 percent or more.

As a result, even though wafer manufacturers maximized production in 2014, overall inventories dropped. This, in turn, indicates that supply will become constrained as 2015 continues, and prices will rise by the end of the year as a result. As wafer manufacturers are unlikely to increase capacity until after prices rise, a supply constraint could occur by the end of 2015, pushing prices significantly higher. Using Yamamoto's figures, prices for silicon wafers could reach as high as US$1.05 million per MSI, a level not seen since 2011.