The global foundry market is experiencing a period of contrasting fortunes, with Chinese foundries witnessing a resurgence in capacity utilisation while Taiwanese counterparts grapple with weak demand for mature processes, according to TrendForce.
Chinese foundries, bolstered by policies promoting domestic chip production and a rebound in consumer spending, have seen a rapid recovery in capacity utilisation. Some processes are already operating at full capacity, potentially leading to price increases for certain in-demand chips. This marks a departure from previous strategies that prioritised volume over price. “Price increases in Chinese foundries this time targets processes such as CIS that are relatively tight in capacity and currently priced below the market average,” TrendForce reports. “This adjustment aims to alleviate profit pressure rather than indicating a full recovery in demand.”
Taiwanese foundries, meanwhile, are experiencing a mixed bag. While TSMC is operating at full capacity for its advanced nodes due to robust demand from AI applications and high-performance computing, overall demand for mature processes remains sluggish. Most Taiwanese foundries are operating at 70-80% capacity, signalling an absence of significant shortages. Despite this, TSMC is poised to raise prices for its advanced processes, citing cost pressures from overseas expansion and escalating electricity prices.
The first quarter of 2024 saw a 4.3% quarter-on-quarter decline in revenue for the top 10 global foundries, as reported by TrendForce. The traditional off-season for consumer electronics, coupled with economic uncertainties and geopolitical tensions, dampened demand across various sectors. However, AI servers emerged as a bright spot, providing crucial support for the supply chain. SMIC, capitalising on the trend towards localised production and a surge in demand for peripheral ICs, overtook GlobalFoundries and UMC to secure the third spot in market share.
Looking ahead, the foundry market is expected to see a modest single-digit growth in the second quarter of 2024. Urgent orders related to China’s mid-year shopping festival, the upcoming stocking period for new smartphones, and sustained demand for AI-related hardware are expected to drive this growth. However, the slow recovery in mature nodes due to broader economic risks and fierce price competition may temper overall gains.
The influx of new capacity expected in 2025, including TSMC JASM, PSMC P5, and SMIC’s new plants, could further intensify competition and influence future pricing negotiations. This, combined with ongoing concerns over global inflation and uneven recovery in end-demand, suggests that the foundry market will remain a dynamic and unpredictable landscape in the coming years.
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