Foundries see wafer, chip demand on rise

Foundries that make chips and wafers are seeing strong demand from their clients, leading to a 14% jump in projected revenue for the third quarter.

As clients begin to stock up on chip and wafer inventories, analysts at TrendForce urged foundries to “keep a close eye” on whether these clients will be able to use up their inventories.  “Only by paying close attention to industry dynamics can companies deliver appropriate strategies in a timely manner in the foundry market,” TrendForce said in a statement.

The wafer and chip demand is coming partly from semiconductor companies like Qualcomm that sell chips into 5G infrastructure growth.  Meanwhile, auto chip demand is down on reports of 30%-plus declines in auto sales due to COVID-19.

The top 10 foundries in 2019 saw revenues of $65.1 billion.

PSMC is expected to see 26% year-over-year revenue growth in 3Q, the highest among the top 10 foundries.   Meanwhile, TSMC is expected to see 21% revenue growth for the quarter while UMC will see a 23% increase, according to analysts at TrendForce.

At TSMC, there is continued strong demand for 5G infrastructure buildout as well as CPU and GPUS demand for high-performance computing and work-from-home demands, TrendForce said.

TSMC, based in Taiwan, is by far the largest of the top contract foundries that manufacture chips and wafers based on design specification from many downstream chip clients such as Apple.  TSMC accounts for half of all foundry revenues annually for the top 10 contenders and saw revenues topping $30 billion for the past three years, according to Statista and others.

Samsung and GlobalFoundries are second and third, respectively, behind TSMC in revenue share. TSMC's revenues were $34.6 billion in 2019, while Samsung's were $12.2 billion and GlobalFoundries' reached $5.7 billion.

TSMC expects to have revenue from its 5nm chip process included in its 3Q tally, making up 16% of its 3Q revenue. Over the entire year, 5nm will make up 8% of TSMC’s total revenue.

PSMC, based in South Korea, is expanding its foundry business with increased demand for DDI, TDDI, CIS, PMIC and power discretes, including MOSFETs and IGBTs.  TrendForce expects the company to raise manufacturing capacity and the price for its foundry services.

United Microelectronics Corp (UMC) based in Taiwan, is projected to reach a 23% revenue increase partly because of an increase in prices on some foundry services.  The company’s 8-inch wafer capacity is expected to remain in short supply until 2021 because of increased demand for large-sized panel DDI and power management integrated circuits. 

VIS, based in Taiwan, will see 21% revenue growth in 3Q, TrendForce projected,  with the acquisition of a Singapore fab.

Legacy chips in the 14nm and 28nm size make up more than 90% of SMIC’s revenues.  But SMIC, based in China, will see a 16% increase in revenue in 3Q, partly because revenues a year ago were low.  After Sept. 15, many chip shipments to Huawei will expire due to U.S. trade , which could affect its 14nm orders.

 Samsung’s foundry business, also based in South Korea, is expected to reach only a 4% increase in 3Q revenues, partly due to the decline sales of S20 series smartphones that use its in-house Exynos processors. 

GlobalFoundries, based in Santa Clara, California, is expected to see a 3% decline, partly with a decline in the demand for automotive chips.

DB HiTek is expected to see 2% revenue growth, while Hua Hong is expected to see a 1% decline in revenues with a lowering in prices because of sub-par performance for entry-level and mid-range smartphone chips.

The strong revenue growth forecast by TrendForce for foundries in the 3Q comes as semiconductor sales saw double digit growth globally for six weeks after July 1.  But that semiconductor growth did not follow the normal cycle, leading VLSI analyst Dan Hutcheson to not that there are indications of a possible decline in the fourth quarter of 2020.

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