Foundry revenue to drop 6.5% vs 28% growth last year: IDC

The global foundry market is expected to experience a 6.5 percent decline in size in 2023 as against 27.9 percent increase in 2022, according to a recent report by IDC.
Semiconductor foundry market share in 2022While the foundry segment will see a slight decrease compared to the overall semiconductor supply chain, the industry as a whole is projected to recover by 2024.

During the first half of 2023, the demand for consumer electronics remained low, leading to no significant increase in market demand. Inventory adjustments for endpoint products will continue into the latter half of the year.

Though there is abundant demand for AI- and high-performance computing (HPC) related wafers, some IC designers’ products will undergo de-stocking in the second half of 2023, followed by inventory replenishment. However, the overall outlook for inventory demand is not optimistic due to the decline in long-term agreements (LTAs) and the diminishing price rise dividend.

In 2022, the foundry market experienced substantial growth, with a size increase of 27.9 percent, reaching a record high. This growth was attributed to long-term agreements with customers, higher foundry prices, process shrinkage, and plant expansions. All of the top 10 vendors reported double-digit revenue growth in 2022. However, due to changes in market conditions, order revisions resulted in a significant drop in the capacity utilization of foundries in the last three quarters.

Galen Zeng, Senior Research Manager at IDC Asia/Pacific’s Semiconductor Research, stated that despite the challenges, there is still demand for semiconductors in the market. It is expected that after more than a year of de-inventory, subsequent order planning will transition from negative to steady and conservative. This, coupled with the AI boom, is anticipated to drive a recovery in capacity utilization by 5-10 percent.

The top 10 semiconductor foundry vendors include TSMC, Samsung Foundry, UMC, GlobalFoundries, SMIC, HHGrace, PSMC, VIS, Tower, and Nexchi. TSMC, the leading vendor, witnessed an increase in market share from 53.1 percent in 2021 to 55.5 percent in 2022, thanks to the continuous evolution of its advanced processes.

TSMC’s market share is expected to further grow in 2023, driven by the gradual increase in orders for 3/4/5nm wafers. Additionally, Chinese foundry vendors made strides in developing mature processes, achieving a total market share of 8.2 percent in 2022, up from 7.4 percent in 2021, along with revenue growth of over 30 percent.

Analysis of capacity utilization reveals that IC designers actively stocked up until the first half of 2022 (1H22), and the signing of long contracts further bolstered foundry prices and pushed capacity utilization to 90-100 percent.

However, starting from the second quarter of 2022 (2Q22), the supply chain operations became increasingly cautious, leading IC designers to reduce orders with foundries, including significant cuts in consumer IC orders and cancellations of LTAs. This resulted in imbalanced operations throughout 2022.