Introduction
The global foundry industry has shown impressive resilience in Q2 2024, with a notable revenue surge that signals a significant rebound from prior downturns. According to Counterpoint Research’s Foundry Quarterly Tracker, the industry’s revenue surged by approximately 9% quarter-over-quarter (QoQ) and a striking 23% year-over-year (YoY).
This rebound reflects the sector’s capacity to recover, driven largely by strong demand for AI-related technologies, despite an uneven recovery across different semiconductor segments.
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Key Takeaways
- AI Demand Fuels Growth: The primary driver of the foundry industry’s revenue increase is the surging demand for AI semiconductors, including advanced packaging technologies like CoWoS (Chip-on-Wafer-on-Substrate).
- Uneven Market Recovery: While AI-related sectors are booming, traditional semiconductor segments, such as automotive and industrial applications, are recovering more slowly.
- Chinese Foundries Lead: Chinese foundries, including SMIC and HuaHong, have rebounded faster than their global counterparts due to earlier inventory corrections and increased demand from local customers.
- TSMC’s Strategic Expansion: TSMC continues to lead with robust growth, driven by AI demand and strategic capacity expansions. The company plans to double its CoWoS capacity by 2025.
- UMC and GlobalFoundries’ Steady Progress: Both UMC and GlobalFoundries report solid performance, with UMC benefiting from specialized technologies and GlobalFoundries seeing steady growth in its automotive sector.
AI Demand Fuels Revenue Growth
The primary catalyst behind the foundry industry’s impressive revenue growth in Q2 2024 has been the sustained and robust demand for artificial intelligence (AI) semiconductors.
AI technologies, which are crucial for a range of applications from machine learning to advanced data analytics, have driven significant investment and demand for high-performance chips.
A key technology in this domain is Chip-on-Wafer-on-Substrate (CoWoS) packaging, which is essential for integrating high-density, high-bandwidth AI accelerators.
The supply of CoWoS remains constrained due to the high demand, leading to anticipated capacity expansions, especially focusing on CoWoS-L, which is expected to support future growth.
This tight supply underscores the critical role AI plays in driving the foundry industry’s performance.
Uneven Recovery Across Semiconductor Segments
While the AI semiconductor segment has experienced strong growth, the recovery in other areas of the semiconductor industry has been less uniform.
Traditional semiconductor sectors, including those serving automotive and industrial applications, have seen a slower recovery.
This uneven performance is reflected in the anticipated weaker peak season for smartphones in Q3 2024 and delays in the recovery of automotive and industrial semiconductor demand.
This disparity highlights a significant shift in the semiconductor market dynamics.
While AI continues to thrive, other segments face ongoing challenges, including slower growth and delayed recovery, impacting overall market performance.
Chinese Foundries Outpace Global Peers
Chinese foundries have emerged as leaders in the current recovery phase, surpassing their global counterparts in terms of performance.
Semiconductor Manufacturing International Corporation (SMIC) and HuaHong Semiconductor, two of China’s prominent foundries, have demonstrated a quicker rebound.
Both companies have achieved utilization rates above 80%, reflecting their successful navigation through the market downturn.
This accelerated recovery is largely due to Chinese fabless customers, who entered the inventory correction phase earlier than their global peers.
As a result, Chinese foundries have benefitted from increased demand and faster inventory replenishment, positioning them ahead of their international counterparts in the current market cycle.
TSMC’s Strategic Growth and Long-Term Prospects
Taiwan Semiconductor Manufacturing Company (TSMC) continues to solidify its position as a global leader in the foundry industry.
In Q2 2024, TSMC reported a revenue beat, primarily driven by sustained demand for AI accelerators. The company has revised its annual revenue guidance to mid-20% growth, up from the previously forecasted low-to-mid 20%.
Looking ahead, TSMC plans to double its CoWoS capacity by 2025 to accommodate the growing demand for AI semiconductors.
The company also anticipates that the demand-supply balance for AI accelerators will remain tight through late 2025 or early 2026.
This expectation is likely to lead to wafer price hikes for advanced nodes, including 3nm and 5/4nm, in 2025.
Such price adjustments will reinforce TSMC’s technology leadership and support its long-term profitability and industry growth.
Samsung Foundry’s Continued Momentum
Samsung Foundry, holding the second-largest market share in the global foundry sector, also demonstrated strong performance in Q2 2024.
The company’s sequential revenue growth was driven by inventory pre-builds and restocking efforts for smartphones.
With a 13% market share, Samsung remains focused on expanding its customer base, particularly in the mobile and AI/high-performance computing (HPC) segments.
Samsung’s strategic emphasis on advanced nodes for mobile and AI applications is expected to bolster its long-term growth prospects.
The company is optimistic about its annual revenue growth, projecting it to outpace the industry average, reflecting its robust market position and strategic focus.
SMIC and HuaHong’s Robust Performance
SMIC reported strong quarterly results in Q2 2024 and provided an optimistic outlook for Q3 2024.
This positive performance is attributed to the recovery in demand within China, particularly for CMOS image sensors (CIS), power management integrated circuits (PMIC), Internet of Things (IoT) devices, touch and display driver integration (TDDI), and LCD driver ICs (LDDIC).
SMIC’s 12-inch wafer demand is improving, and average selling prices (ASP) are expected to rise as inventory restocking continues among Chinese fabless customers.
HuaHong Semiconductor also reported strong results, reflecting the broader recovery trend within the Chinese semiconductor market.
The company’s performance underscores the accelerated rebound seen in Chinese foundries compared to their global peers.
UMC’s Strategic Focus on Specialized Technologies
United Microelectronics Corporation (UMC) exceeded expectations with its Q2 2024 results, thanks to a favorable margin profile supported by disciplined pricing strategies and advantageous foreign exchange rates.
UMC’s focus on specialized technologies such as 22nm high-voltage (HV) and 55nm RF silicon-on-insulator (SOI)/BCD is paying off.
By reducing its exposure to commoditized areas like LCD driver ICs (LDDIC) and NOR flash, UMC is positioning itself for stable pricing and long-term growth, despite a slower overall recovery in the logic semiconductor sector.
GlobalFoundries’ Steady Progress
GlobalFoundries (GF) reported solid results in Q2 2024, driven by new design wins and a sequential growth in its automotive business.
The company is also observing normalizing inventories in the smartphone market and stabilizing demand in the communication and IoT markets.
GlobalFoundries’ guidance suggests a mild recovery in its overall business, reflecting trends seen in other non-Chinese mature node foundries such as UMC.
TSMC Acquires Innolux’s Tainan Plant for $530.6 Million to Boost CoWoS Capacity by 2025 – techovedas
Conclusion: Resilience Amidst Uneven Recovery
The global foundry industry performance in Q2 2024 highlights its resilience, driven by robust AI demand and strategic adjustments by major players.
While the sector shows strong growth in AI applications, the uneven recovery across other semiconductor segments underscores the challenges that remain.
Adam Chang, an analyst at Counterpoint Research, commented, “In Q2 2024, the global foundry industry demonstrated resilience, with most of the growth primarily driven by robust AI demand and smartphone inventory restocking.
The recovery across the semiconductor industry is progressing unevenly, with leading-edge applications such as AI semiconductors experiencing strong growth, while traditional semiconductors recover more slowly.
Chinese foundries are rebounding faster due to earlier inventory corrections and increased restocking by local fabless customers. In contrast, non-Chinese foundries are experiencing a more gradual recovery.”
As the industry moves forward, the ability to adapt to shifting demand dynamics and manage recovery challenges will be crucial in sustaining growth and navigating the evolving semiconductor landscape.
