Introduction
In the semiconductor industry’s ever-shifting landscape, major Foundries Report Mixed Q3 results . While GlobalFoundries and United Microelectronics Corporation (UMC) stayed profitable, Intel and Samsung faced significant financial hurdles in their foundry operations. The earnings reports highlight the challenges and shifts within the industry, where companies are navigating demand fluctuations, technology advancements, and geopolitical factors.
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Key Takeaways
- Intel and Samsung reported Q3 losses in their foundry operations.
- GlobalFoundries and UMC stayed profitable, showing resilience amid market fluctuations.
- Stable demand for legacy processes helped UMC and GlobalFoundries achieve strong Q3 earnings.
- Intel’s restructuring and continued losses signal ongoing struggles in its foundry business.
- Samsung’s 3nm yield issues contributed to its disappointing financial performance.
Intel: Struggles Amid Restructuring and Ambitious Roadmap
Intel reported a challenging Q3, with significant losses in its foundry business despite strong efforts to re-establish itself in the semiconductor industry. Sales for the quarter were $13.3 billion, marking a 6% year-over-year decline. Intel posted a massive net loss of $16.6 billion, equivalent to $3.89 per share, in stark contrast to the $300 million profit it achieved during the same period last year.
The company’s foundry segment, despite contributing $4.4 billion in sales, recorded losses of $5.8 billion. Intel’s foundry division has struggled to keep pace with competitors, primarily due to delays in its 10nm process development (now branded as 7nm) and difficulties in hitting yield targets.
To address this, Intel recently accelerated its roadmap, aiming to launch five new process nodes within four years to regain competitive footing against Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung.
For 2025, Intel plans to introduce its advanced 18A process, a cutting-edge node leveraging gate-all-around (GAA) transistor architecture and backside power delivery. The anticipated processors, known by the codenames Panther Lake and Clearwater Forest, are expected to drive Intel’s competitive recovery. However, these ambitions hinge on the success of ongoing restructuring efforts within Intel’s technology division, led by Navid Shahriari, who recently assumed new responsibilities within the company.
In a significant move, Intel was awarded $3 billion under the U.S. Secure Enclave program. This government initiative aims to bolster domestic semiconductor manufacturing capabilities, a priority as global supply chains face increased scrutiny. Additionally, Intel awaits funding from the CHIPS Act, with an anticipated $8.5 billion earmarked for expansion and modernization efforts.
Samsung: Losses Due to High Costs and 3nm Yield Challenges
Samsung, the world’s second-largest foundry by market share, reported mixed Q3 results, with strong revenue but a struggling foundry division. Overall, Samsung recorded sales of 79.1 trillion won ($57.4 billion), marking a 17% year-over-year increase. Operating profits reached 9.18 trillion won ($6.7 billion), up by 6.8% compared to last year. However, Samsung’s foundry segment posted losses attributed to “one-off” costs and persistent yield issues in its 3nm process.
Samsung’s foundry operations suffered a loss of 1 trillion won ($732 million) in the third quarter, influenced by the company’s challenges in ramping up 3nm production.
The 3nm node, featuring Samsung’s proprietary GAA transistor design, faced significant yield issues, impacting profitability. Samsung is also developing its 2nm node, scheduled for release in 2025, as it aims to compete with industry leader TSMC.
In response to the financial strain, Samsung has temporarily halted production lines to reduce costs, according to a report from The Chosun Daily.
This strategic adjustment is expected to improve operational efficiency in the short term, but Samsung’s long-term success hinges on solving its yield challenges in advanced nodes.
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UMC: Stable Growth Driven by Legacy Process Demand
Taiwan-based UMC, the fourth-largest foundry globally, reported stable growth for Q3 2024. The company’s revenue reached NT$60.49 billion ($1.9 billion), showing a 6.5% increase from the previous quarter and a 6% year-over-year improvement. UMC’s net income for the quarter was NT$14.47 billion ($457 million), an increase of 4.8% from Q2, though slightly down year-over-year.
UMC attributes its stable performance to robust demand for its 22nm and 28nm nodes, which accounted for 35% of Q3 revenue. UMC also saw increased utilization of its 40nm technology, reflecting a steady demand for mature process nodes in automotive and industrial applications. Utilization rates in UMC’s fabs were at 71%, demonstrating effective capacity management amid fluctuating global demand.
For Q4, UMC has projected flat wafer shipments and average selling prices, with utilization rates anticipated to stabilize in the high-60% range. The company expects capital expenditures of $3 billion in 2024 as it continues to expand capacity to meet ongoing demand for its mature nodes.
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GlobalFoundries: Growth in Mobile Devices, but Automotive Demand Declines
GlobalFoundries (GF), based in the U.S., reported a positive Q3 results with $1.739 billion in revenue, a 7% sequential increase but down 6% year-over-year. GF’s net income was $178 million, marking a 15% improvement over Q2, though down 29% compared to last year.
The company experienced strong sales in the mobile devices market, driven by high demand for essential chips, with $868 million in Q3 revenue from this segment, up 14% sequentially. However, GF saw a dip in its automotive sales, which totaled $256 million, down 5% quarter-over-quarter. GF’s continued strength in smart mobile devices and expansion into essential technologies have kept it resilient amid economic uncertainties.
Looking ahead, GF anticipates Q4 revenues in the range of $1.8 billion to $1.85 billion and a net income range between $161 million and $236 million. However, the company faces regulatory scrutiny, as the U.S. Bureau of Industry and Security recently imposed a $500,000 civil penalty related to unauthorized shipments to China-based SJ Semiconductor.
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Foundry Industry Outlook and Challenges
The Q3 2024 results underscore the varied challenges and opportunities within the foundry sector. As geopolitical tensions reshape global supply chains, major players like Intel, Samsung, UMC, and GlobalFoundries are focusing on technological innovation and strategic investments to secure their positions in the industry.
While Samsung and Intel face internal challenges tied to advanced node production and restructuring, UMC and GF benefit from stable demand in legacy nodes. As Intel seeks to regain its competitive edge and Samsung addresses its 3nm yield issues, the foundry landscape remains dynamic.
Conclusion: Mixed Signals in a Shifting Landscape
The Q3 2024 results reports reflect a complex semiconductor industry, where profitability depends on strategic focus, efficient production, and adaptation to market demands. GlobalFoundries and UMC continue to leverage stable demand for legacy nodes, while Intel and Samsung focus on innovation to overcome setbacks in their foundry businesses. With geopolitical forces adding new dimensions to business strategies, the foundry industry will likely see more shifts in the coming quarters as companies navigate this challenging environment.
