Total Revenue of Top 10 Foundries Expected to Increase by 18% YoY in 4Q20 While UMC Overtakes GlobalFoundries for Third Place, Says TrendForce

December 7, 2020 -- Demand in the foundry market has remained strong in 4Q20, as production capacities across the industry remain fully loaded, with the tight supply of wafer capacities leading to a price hike in foundry services and subsequently driving up total quarterly industry revenue, according to TrendForce’s latest investigations. The top 10 foundries’ revenues for 4Q20 are expected to exceed US$21.7 billion, an 18% increase YoY, with TSMC, Samsung, and UMC respectively taking the top three largest market shares.

Thanks to high demand for 5G smartphone processors and HPC chips, TSMC has been seeing continued revenue growth from the 7nm process technology. The company has also been including earnings from the 5nm process in its total revenue calculations since 3Q20, while the upward momentum is persisting throughout 4Q20. Finally, recovering demand for the 16-45nm process technologies, along with the abovementioned factors, is expected to help TSMC set a record high in quarterly revenue in 4Q20 with a 21% increase YoY. Samsung will increase its 5nm production in order to meet the growing demand for smartphone SoCs and HPC chips, in addition to accelerating its EUV deployment. Moreover, the development of smartphone SoCs manufactured with the 4nm process and the increase in 2.5D advanced packaging capacities will both propel Samsung’s earnings performance further, driving its revenue up by about 25% YoY in 4Q20.

A steady stream of client orders for driver IC, PMIC, RF front-end, and IoT components resulted in maximum capacity utilization rates for UMC’s 8-inch fabs; UMC therefore raised the quotes for its 8-inch wafer starts. In addition, UMC is continuing to finalize designs for client products to be subsequently manufactured using the 28nm process technology. UMC’s revenue from 28nm and below processes is expected to reach a 60% increase YoY in 4Q20, while its total foundry revenue for 4Q20 is projected to increase by 13% YoY. On the other hand, GlobalFoundries previously divested some of its facilities without increasing its existing production capacities, as part of its effort to downsize. Although GlobalFoundries’ revenue for 4Q20 decreased by 4% YoY as a result, it is still expected to maintain a certain level of wafer capacity due to the massive RF chip demand brought about by the global 5G infrastructure build-out and due to increased client interest in biomedical sensor chips, which are manufactured with mature/special process technologies.

SMIC has stopped all shipment to Huawei subsidiary HiSilicon since September 14. As the company’s other clients undertake trial production with the 14nm process, SMIC will be left with about two to three quarters of low 14nm capacity utilization. Furthermore, after the U.S. Department of Commerce placed SMIC on the Entity List, not only has the company been facing restrictions with equipment procurement, but its non-Chinese clients may also withdraw wafer orders. Owing to the aforementioned factors, SMIC’s 4Q20 revenue is expected to reach an 11% decrease QoQ, but a 15% increase YoY, since the company’s quarterly revenue in 4Q19 represented a relatively low base period in comparison. TowerJazz’s revenue for 4Q20 is likely to reach an 11% increase YoY thanks to stable market demand for RFICs and power ICs. Having traditionally placed heavy emphasis on foundry development, PSMC’s production capacities have remained fully loaded, while a constant influx of client orders generates upward momentum for PSMC’s foundry business. Its revenue for 4Q20 is expected to increase by 28% YoY.

VIS’ 8-inch capacities have been in significant shortage. The company’s 4Q20 revenue is expected to increase by 24% YoY on the backs of increased PMIC and LDDI wafer inputs as well as the price hikes for VIS’ foundry services. Hua Hong’s 8-inch capacities are likewise fully loaded due to strong demand for MCU and power discretes, such as MOSFET and IGBT. Hua Hong’s manufacturing operations for CIS and power discretes are expected to continue driving up its 12-inch capacity utilization rate, in turn generating an 11% increase YoY in its revenue for 4Q20. Finally, most of DB HiTek’s current business includes wafer starts for industry 4.0 chips, such as AI, IoT, and robotics chips. DB HiTek’s capacity utilization rate has remained at max levels for 16 consecutive months, and the company’s revenue for 4Q20 is expected to increase by 16% YoY.

TrendForce indicates that foundry revenue will undergo a steady uptick in 4Q20, since the explosive demand for certain products has led foundry clients to raise inventory levels by moving ahead their component procurement, leading to a shortage in foundries’ wafer capacities. However, companies still need to pay close attention to U.S.-China relations going forward as well as whether the pandemic’s global resurgence will negatively impact purchasing demand for end devices.