• The global foundry industry’s revenue increased by 27% YoY and 11% QoQ in Q3 2024, driven by strong AI demand and faster recovery in China.

• Leading-edge nodes, including TSMC’s N5 and N3, were key growth drivers for the foundry industry, fueled by strong demand from AI and smartphone semiconductors.

• Non-AI semiconductor demand remained sluggish, with the mature 12-inch demand recovering better than the 8-inch demand.

• Chinese foundry players, including SMIC and HuaHong, outperformed their mature-node global peers, with overall utilization rates rebounding to over 90%, driven by China demand recovery and localization.

• Competition in the mature-node foundry segment is set to intensify as more additional capacity comes online heading into 2025.

Seoul, Beijing, Buenos Aires, Fort Collins, Hong Kong, London, New Delhi, Taipei, Tokyo – Nov 28, 2024

The global foundry industry’s revenue grew 27% YoY and 11% QoQ in Q3 2024, according to Counterpoint Research’s Foundry Quarterly Tracker. The growth was primarily driven by strong AI demand and a faster-than-expected recovery in China. Demand for leading-edge nodes, including TSMC’s N3 and N5 processes, continued to propel industry growth, supported by smartphone and robust AI semiconductor demand. Conversely, the recovery of non-AI semiconductors remained sluggish. The utilization rate (UTR) for global mature-node foundries, excluding those in China, stayed weak at the 65%–70% level. Within the mature-node segment, demand for mature 12-inch nodes has shown better recovery compared to 8-inch nodes.

Notably, the recovery trajectory of China’s foundry and semiconductor market outpaced the global market. Chinese foundry players, such as SMIC and HuaHong, continued to demonstrate strong overall UTR recovery, rising to over 90% in Q3 compared to over 80% in the previous quarter. This performance was bolstered by the earlier-than-expected recovery of demand from China's fabless customers and semiconductor localization initiatives. However, since China’s foundry players have been aggressive in capacity expansion in mature nodes in the past several years, competition in mature-node foundries is set to intensify as more capacity comes online heading into 2025.

TSMC delivered a strong Q3 2024 performance, exceeding expectations with robust gross margins. This success was primarily driven by high utilization rates at its leading-edge nodes, including N5 and N3, due to demand for AI accelerators and seasonal strength in smartphones. The company expanded its industry revenue share to 64% in Q3, up from 62% in the previous quarter. TSMC expects a significant rise in AI-related demand in the years ahead, with AI servers already making up the mid-teens of its 2024 revenue. The company expects this AI revenue share to grow further moving forward, driven by increasing adoption from cloud service providers and the emergence of practical AI applications. Despite the company already announcing to at least double its CoWoS capacity again in 2025, it is still not sufficient to meet strong AI demand from customers. In the non-AI semiconductor market, despite ongoing softness in demand, TSMC is forecasting a steady recovery beginning in 2025, alleviating concerns about a potential peak in the semiconductor cycle.

Samsung Foundry’s revenue slightly increased sequentially primarily due to weaker-than-expected seasonal demand for Android smartphones. However, it managed to maintain its second position in Q3 2024 with a 12% market share. Samsung Foundry is advancing its 2nm GAA process, targeting mass production by 2025 with a focus on optimizing performance, power and area (PPA) for mobile, HPC, AI and automotive applications. The company is also collaborating with customers on advanced 2.5D and 3D packaging solutions, ensuring the competitiveness of its 2nm platform through ongoing innovations.

SMIC's Q3 2024 results were robust, with the company reporting strong revenue growth driven by a recovery in demand across consumer electronics, smartphones, and IoT applications. The company’s 12-inch wafer shipments saw a significant increase, supported by improved product mix and higher ASPs. SMIC’s overall utilization rate rose to 90.4%, reflecting the ongoing strength in demand, particularly in the 28nm, 40nm and 65nm nodes. While the Q4 guidance remains conservative due to expected seasonal weakness, the company remains optimistic about its annual growth outlook, driven by a focus on leveraging domestic demand and localization efforts.

UMC reported steady revenue growth in Q3 2024, driven by strong demand for its 22/28nm nodes. While non-AI semiconductor demand remained sluggish in sectors like automotive and industrial, its utilization rate improved, surpassing the previous guidance. Despite increased competition from China in mature nodes, UMC's focus on specialized high-voltage technologies and power-efficient applications is expected to help maintain its competitiveness and pricing stability. However, the company expects a one-time wafer price adjustment in early 2025 to address market oversupply, which could place additional pressure on margins in the near term.

GlobalFoundries delivered solid results in Q3 2024, benefiting from strong wafer shipments and sustained pricing power. During the quarter, the company saw a sequential boost in its smartphone segment due to customer inventory normalization, while automotive demand remained stable despite a challenging market. Demand in the communications infrastructure and IoT sectors showed signs of stabilization, with continued inventory adjustments in IoT. Looking ahead to Q4, GlobalFoundries' guidance points to strong sequential growth in its non-smartphone segments, though its smartphone business is expected to experience a larger-than-seasonal decline.

Research Analyst at Counterpoint Adam Chang said, “Strong demand for AI semiconductors is driving a robust growth in TSMC's leading-edge N5 nodes, which are crucial for powering next-generation AI accelerators and data centers. This surge in demand for advanced nodes is a key factor propelling the overall foundry industry’s growth, as AI applications continue to be a major catalyst for innovation. However, the oversupply in mature nodes, compounded by increased capacity at both Chinese and global mature node foundries, is creating challenges in that segment. While AI is propelling the semiconductor and foundry industry forward, players in the mature-node space will need to navigate these pressures to maintain profitability.”

Background

Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.