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How semiconductor capacity is bought
A practical taxonomy for reservations, firm purchases, prepayments, guarantees, investments, and anchor agreements.
Start with the contract form
Capacity can be secured through reservations, firm inventory purchases, supplier prepayments, facility guarantees, strategic investments, or customer-backed expansion. Each form creates different timing, cancellation, accounting, and residual-value outcomes.
Ask who owns the asset
An anchor customer may de-risk a supplier’s expansion without receiving the factory. A prepayment can improve allocation without becoming PP&E. A long-term agreement can create control without transferring title.
Read the partnership terms
Useful diligence questions include duration, firmness, remedies, matching customer demand, portability, and how partners adapt when regulation or product demand changes.
Use the taxonomy
Label the mechanism before drawing a conclusion. A reservation, firm purchase, prepayment, investment, guarantee, and supplier expansion can all support capacity, but they allocate cash timing, ownership, and downside risk in very different ways.