Wafer fab, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) alone in America

Introduction: In 2024, the competition in the wafer foundry market is becoming increasingly fierce. The global wafer foundry industry's revenue has exceeded $131.7 billion, and TSMC remains the dominant player in the global wafer foundry market. Meanwhile, mainland wafer fabs are rapidly gaining market share through technological advancement and price advantages, challenging the global market. According to Visual Capitalist's statistics, in 2024, the total revenue of the global wafer foundry industry reached $131.7 billion, with TSMC alone holding 62% market share. Together with other Taiwanese companies like UMC, VIS, and PSMC, Taiwan's overall market share surpasses 70%, maintaining its core position in the global semiconductor manufacturing industry. Following closely is South Korea, with Samsung's market share declining from 16% in 2019 to 10% in 2024, indicating the challenges Samsung faces in the foundry field. The US companies GlobalFoundries and Intel Foundry Services (IFS) together hold 6% market share. Israel's Tower Semiconductor holds 1%. It's worth noting that in 2024, mainland wafer fabs continued to grow in market share, with Semiconductor Manufacturing International Corporation holding 5%, Hua Hong holding 2%, Nexchip Semiconductor Corporation holding 1%, totaling 8% market share, with strong growth momentum. TSMC leads the way, while Intel and Samsung struggle As the three major players in advanced process technology, TSMC, Intel, and Samsung, TSMC stands out, showing growth in all financial indicators. In 2024, TSMC continued to outperform the wafer foundry industry, with an annual revenue growth of 30% in USD, reaching $90 billion, and a growth of 33.9% in New Taiwan dollars, reaching NT$2.89 trillion. Gross margin increased by 1.7 percentage points to 56.1%. Although some growth was affected by the dilution effect of the 3nm technology and rising electricity costs, overall capacity utilization has improved. In terms of platform revenue contribution, in 2024, TSMC's revenue from high-performance computing platforms grew by 58% year-on-year. Revenue from smartphones, IoT, automobiles, and digital consumer electronics grew by 23%, 2%, 4%, and 2% respectively. Overall, high-performance computing accounted for 51% of TSMC's 2024 revenue, smartphones 35%, IoT 6%, and automobiles 5%. The strong growth in demand for AI accelerators in 2024 has become an important driver of TSMC's revenue. TSMC expects AI accelerators (including AI GPUs, AI ASICs, and HBM controllers for data center AI training and inference) to account for nearly 10% of its total revenue in 2024, with revenue doubling. It is expected that the revenue of AI accelerators will double again in 2025, achieving a close to 40% compound annual growth rate over the next five years. Samsung's foundry business revenue in 2024 was 29.2 trillion KRW (approximately $202 billion), a 6% year-on-year decrease. In the second half of 2024, despite increasing production of its Gate-All-Around (GAA) 3nm second-generation process, unstable yields failed to attract customers. Intel's IFS revenue is steadily growing, with the full-year revenue of Intel's Foundry division reaching $17.5 billion in 2024, a 7% year-on-year decrease. Last year, Intel signed a multi-year agreement worth billions of dollars with Amazon to manufacture AI data center chips for its AWS, marking a significant breakthrough for Intel in the foundry field. However, Intel's foundry business still faces severe challenges. Due to Intel's large-scale capacity expansion in recent years, including building new plants and acquiring advanced equipment, this has led to huge investments and operating costs, resulting in a massive loss of $13.4 billion in 2024. Despite the tremendous pressure and challenges facing the foundry business, Intel has stated that it will not give up on the wafer foundry business. Intel's interim CEO and CFO Dave Zinsner said that building a competitive wafer foundry business remains a long-term goal for Intel, with plans to achieve breakeven for the wafer foundry business by 2027. This year, the overall investment in new plants and equipment is estimated to be around $20 billion, lower than the previous estimate of up to $23 billion. Overall, the strong growth in the entire wafer foundry market comes from supply chain stocking for smartphones and PCs and continued strong demand for AI server chips. Some of the growth is attributed to the significant contribution of high-priced 3nm technology, which has greatly benefited TSMC, whose 3nm yield has stabilized. Looking at the revenue distribution among TSMC's various process nodes, the 3nm process, which has only been in production for a few years, contributed 18% of TSMC's wafer revenue in 2024, while 5nm accounted for 34% and 7nm for 17%. Advanced technologies (including 3nm and above) accounted for 69% of total revenue, an increase from 58% in 2023. However, Samsung, which has been competing closely with TSMC, has not benefited. The Exynos 2500 chip produced using the GAA 3nm process has poor yield, raising doubts as to whether it will be featured in next year's Galaxy S25. Additionally, the delay in Samsung's 2nm process adds further uncertainty to its foundry roadmap. There are calls from the industry for Samsung to divest its foundry business. Samsung Securities advocates for a strategic shift, suggesting further expansion into the US and potentially spinning off its foundry division for a listing in the US. In fact, the call for Samsung to divest its foundry business was influenced by Intel's decision. In October 2022, Intel announced an internal foundry operating model that took effect in the first quarter of 2024, separating its Intel Product businesses (CCG, DCAI, and NEX) from its Intel Foundry business (including foundry technology development and manufacturing).A contract manufacturing relationship was established with the supply chain and previous IFS contract manufacturing services. Later, in order to promote Intel's internal contract manufacturing operations, Intel announced its intention to establish the Intel contract manufacturing business as an independent subsidiary in the third quarter of 2024.2nm, critically important It can be seen that TSMC's current position is due to its leading edge in advanced technology. The battle to mass produce 2nm in 2025 is about to begin. TSMC is actively mass producing 2nm and A16 technology, with these new technology nodes leading the industry in meeting the demand for energy-efficient computing. Almost all innovators are partnering with TSMC. TSMC expects capital expenditures in 2025 to further increase compared to 2024, with a capital budget between $38 billion and $42 billion, compared to $29.8 billion last year. Of these expenditures, approximately 70% will be used for advanced process technology, 10% to 20% for special process technology, and the remaining 10% to 20% will be invested in advanced packaging and testing, mask manufacturing, and other areas. TSMC expects that driven by smartphones and high-performance computing applications, the number of new silicon shipments in the first two years of 2nm technology will surpass that of 3nm and 5nm in the first two years. 2nm will provide complete node performance and power advantages, increasing speed by 10% to 15% at the same power, or reducing power consumption by 30% at the same speed (company correction after the conference call). Compared to 3nm, chip density will increase by over 15%. 2nm is expected to begin mass production in the second half of 2025, with a production curve similar to 3nm. TSMC has also introduced an extended product based on 2nm technology called 2nm P, which further enhances performance and power advantages. 2nm P is expected to begin mass production in the second half of 2026, primarily supporting smartphones and high-performance computing applications. In addition, TSMC has introduced the A16, featuring the Super Power Rail (SPR), as a standalone product. TSMC's SPR is an innovative, top-of-the-line backside power delivery solution, the industry's first to adopt a new backside metal scheme that preserves gate density and device width flexibility, maximizing product efficiency. Compared to 2nm P, A16 further increases speed by 8% to 10% at the same power, or increases power by 15% to 20% at the same speed, with an additional increase in chip density of 7% to 10%. A16 is best suited for specific high-performance computing products with complex signal paths and dense power delivery networks. Mass production is planned for the second half of 2026. Furthermore, TSMC's global expansion of wafer fabs is progressing in an orderly manner. TSMC's first fab in Arizona, USA started mass production in the fourth quarter of 2024 using 4nm process technology, with yields comparable to those of Taiwan's domestic fabs. The plans for the second and third fabs are also progressing steadily, with more advanced technologies such as 3nm, 2nm, and A16 being introduced according to customer demand. In Kumamoto, Japan, TSMC's first special process technology fab started production at the end of 2024 with very good yields, and plans for the second special process fab will start in 2025. Additionally, progress is smooth on the construction of a special process technology fab in Dresden, Germany, focusing on automotive and industrial applications. In 2025, TSMC expects semiconductor inventory levels off wafer fabs to return to healthier levels by the end of 2024. It is expected to be another strong growth year for TSMC in 2025, with full-year revenue forecasted to grow close to 20% in US dollars. Samsung's task is more challenging, as it needs to significantly improve the yield of the 3nm process while breaking through to 2nm. According to Samsung's public disclosures, 2nm design kits have been delivered, with mass production expected to start in the second half of 2025, targeting AI chip orders from major customers like NVIDIA and Google. To share R&D costs and reduce capital pressure, Samsung has proposed a "joint investment plan" to share advanced process R&D costs with customers. Samsung is currently undergoing a major reshuffle of its board of directors, appointing 1/3 (3 out of 9 members) semiconductor experts to the board as part of its efforts to regain competitiveness. Intel's IFS is advancing its latest Intel 18A manufacturing process. Intel has defined 18A as a game-changing process, with advanced technologies such as RibbonFET transistors and PowerVia technology to improve efficiency and performance. Intel 18A entered mass production in December last year and will ramp up production in the second half of this year, along with the launch of Panther Lake. Fab 52 in Arizona is currently installing process tools to support the capacity expansion of Intel 18A this year. In terms of capital expenditures, Intel has also made some reductions. Total capital investment in 2025 is expected to be around $20 billion, at the lower end of their previous guidance of $20 billion to $23 billion. Net capital expenditures in 2025 are expected to be $8 billion to $11 billion, with about half offset by expected government incentives and tax credits, and the other half contributed by partners. Intel received funding from the US CHIPS for America Act last year, providing up to $7.86 billion in direct funding to Intel. Intel received $1.1 billion in funding in the fourth quarter of 2024 and another $1.1 billion in January 2025. Dave Zinsner stated at the Q4 earnings call, "I remain very optimistic about Intel's foundry opportunity. The widespread growth of artificial intelligence is driving an accelerated and unprecedented demand for silicon, and the industry's need for more choices and overall manufacturing capabilities remains unmet. TSMC is a valuable supplier for Intel products and an important partner for IMS, setting very high standards for becoming a world-class foundry. However, the entire market needs multiple participants, and with our execution, Intel foundry will play a very important role globally, especially in the United States, where we continue to invest in leading research and manufacturing capabilities." Mainland wafer fabs, rising rapidly In recent years, mainland wafer fabs have been aggressively catching up, with Semiconductor Manufacturing International Corporation continuously focusing on technology nodes of 14nm and below.Progress, Huawei has made significant progress in the fields of power management IC and power semiconductors, while Nexchip Semiconductor Corporation has been advancing continuously in the fields of DDIC and CIS. The market share of the three companies continues to grow.In 2024, Semiconductor Manufacturing International Corporation had sales revenue of 8.03 billion US dollars, a year-on-year increase of 27%, reaching a historical high. The gross profit margin was 18.0%, a decrease of 1.3 percentage points year-on-year due to increased depreciation, among other reasons. In 2024, the company's capital expenditure was 7.33 billion US dollars, with an end-of-year equivalent production capacity of 948,000 8-inch standard logic wafers, total shipments exceeding 8 million wafers, and an average annual production capacity utilization rate of 85.6%. Hua Hong Semiconductor's full-year revenue in 2024 was 2.004 billion US dollars, a decrease of 12.3% from the previous year, mainly due to a decrease in average selling prices partially offset by an increase in the number of wafers shipped; the gross profit margin was 10.2%, a decrease of 11.1 percentage points year-on-year, primarily due to a decrease in average selling prices and increased depreciation costs. On February 20, Hua Hong's total market value had exceeded one hundred billion yuan. It should be noted that Hua Hong's annual average production capacity utilization rate is close to 100%, which is among the best in all foundries. Last year, Hua Hong's performance in image sensors, power management, and other platforms was good, but the demand for mid-to-high-end power devices still needs improvement. Hua Hong has three 8-inch wafer fabs in Shanghai Jin Qiao and Zhang Jiang, and last year, the second 12-inch production line in Wuxi was successfully completed and put into operation, marking a new milestone in the company's strategic development. Nexchip Semiconductor Corporation is a dark horse in the foundry field. In May 2023, Nexchip Semiconductor Corporation was officially listed on the Science and Technology Innovation Board of the Shanghai Stock Exchange, becoming the first pure wafer foundry enterprise in Anhui Province to successfully enter the capital market. Nexchip Semiconductor Corporation is expected to achieve annual revenue of 9.02 billion to 9.47 billion yuan in 2024, an increase of 24.52% to 30.74% year-on-year. Net profit is expected to be 4.55 billion to 5.9 billion yuan, an increase of 115.00% to 178.79% year-on-year. Nexchip Semiconductor Corporation is able to achieve such high revenue mainly due to its differentiated product foundry field. Nexchip Semiconductor Corporation is a leader in DDIC foundry, with the highest market share in the country. In 2024, the main products of the company, DDIC, CIS, PMIC, and MCU, accounted for approximately 67.53%, 17.22%, 8.80%, and 2.47% of the main business income, respectively. DDIC continues to consolidate its advantages, CIS has become the company's second-largest main product, and the competitiveness of other products continues to steadily increase. Although mainland wafer fabs focus on mature processes and rarely directly benefit from AI chip foundry, in other AI-related areas, as demand grows, mainland wafer fabs can indeed indirectly benefit from it. Pressure on mature process foundries As mainland wafer fabs gradually rise, with more capacity released from mainland 12-inch wafer fabs, the competition pressure on mature process foundries is increasing. TrendForce analysis indicates that the estimated capacity of the top ten mature process wafer foundries globally will increase by 6% in 2025. At the same time, a price war is also underway in the wafer foundry field. Recently, the price of 12-inch wafers from mainland foundries has been reduced by 40% compared to Taiwanese companies, and additional discounts of 20% to 30% have been offered for 8-inch wafers. The largest price reduction is said to be at the 40/45nm node, and the previously strong 12-inch wafer prices have seen the most significant decline. The mainland foundries are targeting orders for driver ICs, power management ICs, and MCUs, and offering different discounts based on node or product type. According to Economic Daily, these actions have triggered a wave of Taiwanese IC design customers transferring orders to mainland China, impacting Taiwanese wafer foundries such as UMC, TSMC affiliates, and World Advanced. The capacity utilization rate of Taiwanese foundries in Q4 2024 was generally around 70%. UMC expects the capacity utilization rate in Q1 2025 to still be around 70%, indicating weak market demand. Analysts cited by Economic Daily indicate that the market is unlikely to recover until the second half of 2025 due to significant price reductions by Chinese competitors to secure orders. Taiwanese foundries are facing significant pressure in 2025. For foundries like GlobalFoundries focusing on mature processes, the challenges are significant as well. GlobalFoundries' revenue for 2024 is expected to be 6.75 billion US dollars, a decrease of 9% year-on-year; the gross margin is 24.5%, with a net loss of 262 million US dollars, far below the net income of 1.018 billion US dollars in 2023. Looking ahead to the first quarter of 2025, GlobalFoundries expects revenue to be between 1.55 billion and 1.6 billion US dollars, with a gross margin of 22.1%. Facing fierce competition from Chinese mainland manufacturers, mature process foundries such as UMC, World Advanced, Powerchip, and GlobalFoundries are relying on technological upgrades and product differentiation strategies to maintain their competitiveness. Powerchip's Chairman, Huang Chongren, pointed out that in the face of structural changes in the industry environment, companies must consider new strategies and explore new development paths. On February 5th, GlobalFoundries announced changes in its leadership. Dr. Thomas Caulfield was appointed as Executive Chairman, Tim Breen was appointed as CEO, and Niels Anderskouv was appointed as President and Chief Operating Officer, which will enable GF to accelerate its growth in the next phase. In addition, GlobalFoundries is establishing an advanced packaging and photonics center in New York, with a total expected investment of 575 million US dollars in the coming decade.$1.86 billion, advance layout of optical chips, further enhance its competitiveness in the high-end market.United Microelectronics Corporation (UMC) and Intel are collaborating on a 12-nanometer FinFET process platform to seize the special process market, with development expected to be completed in 2026 and mass production in 2027. UMC is actively transitioning to 3D technology, utilizing the newly opened 12-inch copper wafer fab to develop 3D AI outsourcing platforms for intermediate layers and wafer stacking processes. To mitigate geopolitical risks, many Taiwanese foundries are expanding overseas to maintain competitiveness. For example, UMC will establish a new factory (Fab12i P3) in the Singapore Fab 12i area in 2023, focusing on 22/28-nanometer processes with a planned monthly capacity of 30,000 wafers, with mass production expected in early 2026. UMC is pushing forward with FAB IP and 3D AI outsourcing, assisting India in building a factory through a technology licensing model to earn technology transfer benefits. GlobalFoundries and NXP have jointly built the first 12-inch fab, with mass production scheduled to start in 2027 with an expected monthly capacity of 55,000 wafers. Additionally, more than half of the long-term customers have already reserved production capacity, demonstrating significant benefits for their mid- to long-term operations. In conclusion, the future landscape remains uncertain. In 2024, the wafer foundry industry is experiencing a profound transformation. TSMC and other Taiwanese manufacturers continue to consolidate their leadership positions in the global market, while the rise of mainland Chinese wafer fabs has had a significant impact on the traditional market landscape. Companies like Samsung in Korea and Intel in the United States face the dual pressures of declining market share and technological catch-up in their foundry services. In the face of increasingly fierce competition, how major wafer foundries can establish a firm foothold in this ever-changing competitive environment will determine their development fate in the coming years. This article was reprinted from the Semiconductor Industry Watch and edited by GMTEight: Chen Wenfang.