The latest financial reports for 4Q23 from six leading global semiconductor foundries signal optimism for the semiconductor industry’s recovery in 2024.

In 2023, the semiconductor sector underwent significant adjustments. As the industry worked towards normalizing its inventory levels amidst ongoing high inflation risks, the short-term market outlook remained unclear. #TrendForce has analyzed the latest financials from these six foundries to provide insights into what 2024 might hold for the industry.

TSMC

TSMC reported a slight YoY revenue decrease of 1.5% to US$19.62 billion in 4Q23, though it saw a 13.6% increase from the previous quarter. With an anticipated CAGR of 15–20%, TSMC’s 2024 capital expenditures are expected to be between $28 billion and $32 billion.

The company forecasts more than 10% growth in the semiconductor market (excluding memory) and around 20% growth in the wafer fabrication sector for 2024.

Samsung Electronics

Samsung Electronics’ 4Q23 consolidated revenue fell 3.81% YoY to ₩67.78 trillion. Its DS division reported revenues of ₩21.69 trillion but faced an operating loss of ₩2.18 trillion.

Despite the challenges, Samsung is focusing on advancing 3nm and 2nm GAA process technologies, expecting a revival in smartphone and PC demand in 2024 to rejuvenate the foundry market to its former prosperity.

Intel

Intel’s 4Q23 earnings saw a 10% revenue increase to $15.406 billion, with its foundry business, Intel Foundry Services, jumping 63% to $291 million in revenue.

Despite seasonal demand slumps in its core PC and server segments, Intel’s AI chips have accumulated $2 billion in orders, with sales forecast to improve in the second half of the year.

Global Foundries

GlobalFoundries reported a 12% revenue drop in 4Q23 to $1.85 billion, with a net income of $356 million. The company anticipates 1Q24 revenues to range between $1.5 billion and $1.54 billion, primarily due to the current industry-wide chip inventory adjustments.

Nevertheless, GlobalFoundries expects its 2023 automotive market revenue to surpass $1 billion, forecasting continued growth into 2024.

UMC

UMC disclosed a 19% YoY decrease in 4Q23 revenues to $1.79 billion. The company cited an extended semiconductor industry inventory adjustment period due to a challenging global economic climate, leading to a slight reduction in wafer shipments and capacity utilization. UMC expects a gradual uptick in wafer demand through 1Q24.

SMIC

SMIC reported a modest increase in 4Q23 revenues to $1.68 billion, with a 0-2% growth projection for 1Q24. Despite last year’s cyclical lows and competitive pressures, SMIC anticipates its 2024 revenue growth will at least match the industry average, with capital expenditures mirroring those of 2023.

TrendForce had earlier forecasted a delayed recovery in the end-market by the fourth quarter of 2023. However, they noted that inventory stocking by Chinese Android firms for the year-end sales rush—particularly for mid-to-low-end 5G and 4G smartphone application processors—alongside the influence of new Apple iPhone releases, might surpass initial expectations.

This indicates that the revenues of the world’s top ten semiconductor foundries are poised for growth, potentially surpassing the growth rates observed in the third quarter.

(Photo credit: Samsung)

Intel announced on the evening of January 25th that it will collaborate with UMC to develop 12-nanometer process platform technology. The production will utilize Intel’s wafer fab capacity in the United States, and both parties will share the cash generated from the collaboration. The production is expected to commence in 2027.

This marks Intel’s first collaboration with a Taiwanese foundry in process development. Intel is actively venturing into the foundry business, and this collaboration with UMC not only marks a new milestone in the Taiwan-US semiconductor foundry industry but also initiates a new competitive relationship in the global foundry industry.

Intel and UMC have not disclosed the expected investment amount for their collaboration. UMC stated that the investment amount cannot be disclosed as the collaborative technology will not enter production until 2027, at which point it will begin contributing to revenue.

Therefore, the investment will be shared by both parties. Regarding whether they will advance towards more advanced processes, UMC stated that they do not respond to distant matters and primarily focus on financial indicators that the company can afford.

Intel noted that the collaboration with UMC to develop the 12-nanometer process platform is primarily aimed at addressing the high growth in markets such as mobile, communication infrastructure, and networking.

This long-term collaboration combines Intel’s large-scale manufacturing capacity in the United States with UMC’s extensive experience in mature processes in foundry, expanding the process portfolio while providing a better regionally diversified and resilient supply chain to assist global customers in making better procurement decisions.

The new process node, according to Intel, will be developed and manufactured in Fabs 12, 22 and 32 at Intel’s Ocotillo Technology Fabrication site in Arizona.

“Taiwan has been a critical part of the Asian and global semiconductor and broader technology ecosystem for decades, and Intel is committed to collaborating with innovative companies in Taiwan, such as UMC, to help better serve global customers,” said Stuart Pann, Intel senior vice president and general manager of Intel Foundry Services (IFS).

He further stated that, “Intel’s strategic collaboration with UMC further demonstrates our commitment to delivering technology and manufacturing innovation across the global semiconductor supply chain and is another important step toward our goal of becoming the world’s second-largest foundry by 2030.”

Jason Wang, UMC co-president, said that UMC’s collaboration with Intel on a U.S.-manufactured 12 nm process with FinFET capabilities in the United States is a crucial aspect of the company’s pursuit of cost-effective capacity expansion and technological node advancement.

UMC anticipates that this collaboration will assist customers in smoothly migrating to this critical node while benefiting from the resilience of the expanded capacity in the North American market.

UMC looks forward to strategic collaboration with Intel, leveraging the complementary advantages of both parties to expand potential markets and significantly accelerate technology development timelines.

TrendForce believes that this partnership, which leverages UMC’s diversifed technological services and Intel’s existing factory facilities for joint operation, not only aids Intel in transitioning from an IDM to a foundry business model, it also allows UMC to agilely leverage FinFET capacity without the pressure of heavy capital investments.

TrendForce forecasts that this collaboration slashes average investment by a staggering 80%, compared to the cost of new equipment. This calculation includes only the expenses related to the relocation of equipment, secondary piping costs for factory services, and other minor associated expenses for ancillary equipment.

However, the journey is not without its challenges. UMC’s 14nm process, in development since 2017, is yet to hit mass production, and its 12nm process is still in the R&D phase, with mass production eyed for late 2026. This collaboration’s mass production timeline is tentatively set for 2027, with the FinFET architecture’s stability under careful watch.

Overall, TrendForce views this alliance as a significant step. UMC brings its plentiful experience in mature processes, while Intel contributes its advanced technological prowess.

This partnership is not just about mutual benefits in the 10nm process level; it’s a watchpoint for potentially deeper and more extensive collaboration in their respective fields of expertise. In the dynamic world of semiconductor manufacturing, this Intel-UMC alliance is a fascinating development to keep an eye on.

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(Photo credit: Intel)

China, Taiwan, and South Korea’s foundry price war continues to heat up. Rumors of price reductions are circulating in the foundry industry, Chinese foundries allegedly lowering their tape out prices, attracting Taiwanese IC design companies to switch their orders.

Companies including Samsung, GlobalFoundries, UMC, and PSMC have reportedly seen customers cancel orders in favor of these Chinese foundries.

According to reports from IJIWEI, China’s SMIC, Huahong Group, and Nexchip began lowering their foundry service prices to Taiwanese IC design companies last year to secure new orders. Many Taiwanese IC design companies have been enticed by these lower prices, prompting them to shift their orders to Chinese foundries. As a result, companies like Samsung, GlobalFoundries, UMC, and PSMC have witnessed customers canceling orders in favor of Chinese manufacturers.

Due to the mature manufacturing processes in China, unaffected by US export restrictions, the lowered wafer fabrication costs have become attractive to Taiwanese IC design companies seeking to enhance their cost competitiveness.

Reports also indicate that this competitive pressure has forced Taiwan’s foundries, UMC and PSMC, to follow suit by reducing their prices. UMC has lowered its 12-inch wafer foundry services by an average of 10-15%, while its 8-inch wafer services have seen an average price reduction of 20%. These price adjustments took effect in the fourth quarter of 2023.

Earlier reports from TechNews had already highlighted that, due to the sluggish semiconductor market conditions in 2023, both China and South Korea aggressively reduced prices to secure orders, with price reductions of up to 20-30% observed in 8-inch and 12-inch mature processes. Taiwanese foundries also made concessions in terms of pricing.

Taiwan’s leading foundry, TSMC, had already initiated pricing concessions in 2023, mainly related to mask costs rather than wafer fabrication. It was reported that these concessions primarily applied to the 7nm process and were dependent on order volumes.

Samsung Foundry, which had previously remained inactive, also adopted a price reduction strategy in the first quarter of this year, offering discounts ranging from 5-15% and indicating a willingness to negotiate.

Looking at the global semiconductor foundry landscape, data released by TrendForce in 2023 showed that Taiwan accounted for approximately 46% of the world’s wafer fabrication capacity, followed by China at 26%, South Korea at 12%, the United States at 6%, and Japan at 2%. However, due to active efforts by China, the United States, and other countries to increase their local capacity shares, by 2027, Taiwan and South Korea’s capacity shares are expected to converge to approximately 41% and 10%, respectively.

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Recent reports have suggested that UMC’s new facility in Singapore is set to be completed by mid-2024, with initial production expected to commence in early 2025.

UMC has announced that, in response to the demand for capacity expansion, the board of directors has approved a capital expenditure execution plan of USD 39.8 million. The first phase of the new facility is planned to have a monthly production capacity of 30,000 wafers, offering 22/28nm processes, with a total investment of USD 5 billion.

Semiconductor Companies Target Singapore

Influenced by complex international situations and other factors, the global semiconductor supply chain is undergoing a shift, with high expectations placed on the Southeast Asian region, particularly Singapore.

In the wafer manufacturing sector, IDM companies like Micron, Infineon, NXP Semiconductors, STMicroelectronics, and others, along with foundry enterprises like GlobalFoundries, UMC, and Vanguard International Semiconductor(VIS) are investing in building facilities in Singapore.

In 2010, GlobalFoundries acquired Singapore’s Chartered Semiconductor Manufacturing Company and took over its fab. In September 2023, GlobalFoundries announced the official launch of its USD 4 billion investment in expanding the manufacturing plant in Singapore, further expanding its global production capacity.

The expanded fab is projected to produce an additional 450,000 300mm wafers annually, raising GlobalFoundries’ total production capacity in Singapore to approximately 1.5 million 300mm wafers per year.

UMC has been operating its 12-inch fab in Singapore for over 20 years. In February 2022, UMC announced that its board of directors approved plans to expand a new advanced fab in the Fab12i campus in Singapore.

At that time, UMC anticipated that the new facility would commence production at the end of 2024. The latest updates indicate that the new facility is expected to begin production in early 2025.

VIS currently operates an 8-inch fab in Singapore. In October 2023, media reports indicated that VIS plans to establish its first 12-inch fab in Singapore. This facility is primarily intended to meet the demand for automotive chips. The investment for this project is estimated to be at least USD 2 billion, and it is anticipated to produce 28nm chips.

Continuous Expansion in Foundry Capacity

Despite the sluggish demand in the consumer electronics market, the pace of expansion for foundries remains unaffected.

Covering 2022 to 2024, the World Fab Forecast report has shown that the global semiconductor industry plans to begin operation of 82 new volume fabs, including 11 projects in 2023 and 42 projects in 2024 spanning wafer sizes ranging from 300mm to 100mm.

Among the newly added capacity, China is expected to experience rapid growth, securing the top position, followed by Taiwan, maintaining the second position. Subsequently, the rankings include South Korea, Japan, the Americas, Europe, and Southeast Asia.

According to TrendForce‘s statistics, the number of foundries in China has reached 44 and is expected to increase by 32 in the future, mainly focusing on mature nodes.

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• [News] UMC, VIS, PSMC Cut Prices for Mature Process Wafers to Boost Production

(Photo credit: UMC)

On January 8th, leading U.S. microcontroller (MCU) and analog IC manufacturer Microchip raised concerns, stating that the revenue for the last quarter would experience a more significant decline than previously estimated, falling short of overall expectations.

The market perceives Microchip’s financial report as an alarm, revealing the continued sluggishness in sectors such as automotive and consumer electronics. These areas heavily rely on mature process production for related products, impacting mature process-focused foundries like UMC (United Microelectronics Corporation) and Vanguard International Semiconductor (VIS).

Industry sources analyze that Microchip’s warning of poor financial results indicates that, amid the unstable overall economic situation, further observation might be necessary for evaluating this year’s semiconductor market conditions.

Microchip is the global leader in the 8-bit microcontroller market, with a wide range of chip applications that virtually span across all industries. Its customer base exceeds 125,000 in industrial, automotive, consumer, defense, communication, and computer markets. Due to its diverse coverage and extensive customer base, Microchip is regarded as a crucial indicator for observing the semiconductor market.

Market expectations were initially optimistic that, after last year’s industry inventory adjustments, the overall semiconductor market conditions would gradually recover this year. Additionally, the anticipation of new trends such as AI smartphones and AI PCs was expected to drive mid-to-long-term demand in the industry.

However, Microchip’s concern seems to introduce more uncertainty into the market. According to Microchip’s latest projections, the revenue for the third quarter of the fiscal year ending in December is expected to decrease by approximately 22%, surpassing the earlier estimated range of 15% to 20% and significantly exceeding Wall Street’s forecast of 17%.

Microchip’s CEO, Ganesh Moorthy, mentioned in a press release: “The weakening economic environment that our customers and distributors faced during the December 2023 quarter resulted in many of them wanting to receive a lower level of shipments as they took actions to further de-risk their inventory positions.”

Moorthy pointed out that many customers, in their ongoing management of operational activities at the end of the last quarter, extended the closure time of facilities.

He stated, ” The impact of these and related factors was that certain backlog that we had planned to ship when we provided our guidance on November 2, 2023 did not ship to customers before the end of the December quarter. ”

Microchip will release its complete financial report for the last quarter on February 1st.

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(Photo credit: Microchip)