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Top 10 Foundry Revenues Expected to Increase by 18% YoY in 4Q20



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Semiconductor foundry offerings are thriving due to unprecedented demand for semiconductors and processors in recent quarters. Analysts from TrendForce believe that in Q1 2021 foundries will increase their revenue by 20% year-over-year as their capacities are fully loaded.

As demand for chips is expected to continue to outpace constrained supply for several quarters, market observers predict that manufacturers will be busy for a long time, in addition to taking a long time to catch up. This is good news for fab revenue and may encourage other manufacturers to broaden their wafer foundry offerings. However, the warnings about fab equipment are coming into play - full capacity means that equipment is now wearing out faster, which increases the risk of disruptions when equipment supply is short.

Foundries Overwhelmed by Demand

According to TrendForce, the top 10 foundries are expected to see a 20% year-over-year increase in total revenue in the first quarter of 2021. These companies are either operating at full or nearly full manufacturing capacity, and the typical lead time for ordering a batch of hardware is now reported to be over 14 weeks (3.5 months). This is longer than even the lead time for advanced nodes. Some market observers believe that demand for semiconductors currently exceeds supply by as much as 30 percent, and that it will take more than a year for foundries and distribution channels to meet that demand.

"We believe that semiconductors are shipping 10% to 30% below current demand levels, and that it will take at least 3-4 quarters for supply to catch up with demand, and then another 1-2 quarters to replenish customer/distribution channel inventories to normal levels," said Harlan Sur, an analyst at JPMorgan Chase, in a note to clients, according to MarketWatch." .

Currently, all foundries benefit from overwhelming demand that comes from virtually every segment of the market. toc ounter this, when manufacturing facilities are running at full capacity, these companies have an incentive to devote less time to control and maintenance, which can sometimes lead to breakdowns or even accidents that cause further supply disruptions. As high demand continues, attention will be focused on the companies supplying the machines, both for manufacturing and metering.

TSMC (56%), Samsung (18%) and UMC (7%) / GF (7%) Are Leading the Pack

According to TrendForce estimates, TSMC, Samsung, and UMC will continue to lead the foundry market in the first quarter of 2021 and will make significant sales gains due to increased orders. Meanwhile, smaller players like Vanguard International Semiconductor (VIS) and Hua Hong are expected to see greater gains due to high demand for the products they produce.

Revenue Ranking of the Global Top 10 Foundries, 1Q21

Out of the top 10 companies, Trendforce now has the top 5 with revenues over $1b per quarter, and the top 9 at over $1b per year.

TSMC

As the world's largest pure-play foundry, controlling half of the foundry market by revenue, TSMC arguably has the most advanced manufacturing processes and packaging technology products. TSMC is well positioned to take advantage of this. The company produces 5nm and 7nm chips for tech giants like Apple, Qualcomm, Nvidia and AMD, all of which are overwhelmed with orders, so it's no surprise that the company's revenue is expected to grow 25% year-over-year in the first quarter of 2021. Despite losing Huawei as a major customer in the past year - there are still plenty of customers in reserve, ready to take over those extra wafers.

Considering the ongoing 5G, AI and HPC megatrends, and TSMC's huge capacity in leading-edge, mainstream and mature nodes, it's safe to say that the company's sales will continue to rise in the coming years. TSMC is also investing heavily in its packaging technology, and as several of its customers have pointed out, they are actually seeing a shortage in packaging rather than production.

Notably, TSMC (and Samsung) are the two companies on this list that have ordered the most next-generation EUVL machines from ASML for leading-edge process node development, and ASML's latest report notes that the company has more than 40 back orders worldwide and expects to produce more than 35 machines by 2021.

Samsung Foundry

Analysts say the Samsung foundry, which serves many of its siblings in the Samsung chaebol, can also offer leading 5nm and 7nm nodes that smaller rivals can't, so increased demand for electronics will drive its revenue up at least 11% this quarter.

Samsung foundries lag behind TSMC in terms of capacity and adoption of leading-edge processes. At the same time, the company is gradually scaling up and the number of competitors able to offer both advanced and mature technologies is decreasing, so its position will remain strong.

GlobalFoundries

As the world's fourth largest foundry, GlobalFoundries is seeing high capacity utilization and expects first quarter sales to rise 8 percent year-over-year. TrendForce attributes its continued success to orders from the automotive industry as well as the U.S. Department of Defense.

GF is actually the one with the smallest year-over-year growth improvement compared to other foundries, and the company is looking to offload some of its more minor operations, such as Fab 10 in Fishkill, which has been sold to ON Semiconductor for $430 million.

The most recent news is that GlobalFoundies' Fab 8 in Malta, New York, has officially received DoD ITAR certification for its 45nm process.

UMC and SMIC (China)

After refocusing its R&D efforts on specialty process technologies a few years ago, UMC no longer competes directly with TSMC and Samsung foundries in the high-end market. Yet the company makes a large number of display driver ICs (DDICs), PMICs, RF front ends, IoT products and automotive chips. The company enjoys a strong order book and is on track to achieve 14% year-over-year revenue growth in the first quarter of 2021 as demand for automotive hardware, PCs, consumer electronics and smartphones is on the rise.

SMIC, a leading China-focused company, is developing leading-edge process node technologies with the support of the Chinese government, enabling China to reduce its dependence on external semiconductor operations. SMIC was recently listed by the U.S. Department of Commerce as an entity facing significant problems serving its advanced tools and possibly even halting the development of sub-10nm technology. Although an EUVL machine was reportedly ordered from ASML, the addition to the entity list means that the machine was never shipped, putting any post-10nm production in jeopardy.

Nevertheless, the vast majority of SMIC's revenue comes from mature nodes, and the company has a large production capacity. Its sales are expected to grow 17 percent year-over-year, according to TrendForce.

Others

The remaining five foundries in the top 10 (Towejazz, PSMC, VIS, Hua Hong, and DB HiTek) manufacture specialized chips as well as BCD, CIS, DDICs, IGBTs, PMICs, NOR, and other devices that are in high demand these days from various industries. To that end, sales of these products grow along with demand for electronics in general, so these companies are set to post a 4% ~ 42% year-over-year revenue growth this quarter, TrendForce believes.

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