Top Semiconductor Foundry Companies to Watch in 2023

Recently, TechInsights announced the final ranking of the top 25 semiconductor suppliers in 2023. Although no new suppliers entered the top 25 list, the company rankings changed significantly. Among the top semiconductor suppliers, 11 rose in rank, 11 declined, and 3 companies ranked the same as in 2023. Notably, foundry companies have also been added to the top 25 list, mainly to compare annual sales rather than market share ranking.

Key Takeaways

• TSMC commands a dominant 61% market share, driven by strong demand from AI and smartphone restocking.
• Samsung Foundry is the second-largest player with a 14% market share, benefiting from positive pre-orders for the Samsung S24 series.
• GlobalFoundries and UMC each hold a 6% market share, facing subdued demand and customer inventory adjustments.
• SMIC holds a 5% market share and anticipates increased demand for smartphone-related components in the short term.
• The semiconductor foundry market is crucial for manufacturing chips used in everyday devices like phones, cars, and fridges.

1. TSMC

Founded in 1987, TSMC (Taiwan Semiconductor Manufacturing Company) is a pure-play foundry that has become Taiwan’s largest company. TSMC earned 60% (or nearly $17 billion) of the entire industry’s revenue in Q1 2023, dwarfing every other company by revenue share. TSMC manufactures products for a host of clients including Apple, NVIDIA, and AMD.

Recent Developments

Just last month, TSMC announced the inauguration of its Advanced Backend Fab 6. This significant development marks a milestone in the expansion of TSMC’s 3DFabric™ system integration technology. This new facility is TSMC’s first completely automated advanced packaging and testing fab that allows for integrated front-end to back-end process and testing services.

Market Performance

TSMC was the winner in Q3 2022 by gaining 200-300bps of market share, driven by a significant ramp-up of 4/5nm products including new iPhones AP (A16) and AMD/NVIDIA’s new HPC chips. Samsung’s sales were negatively impacted by the order cuts for Android smartphone SoCs and GPUs. Other foundries, including UMC, GF, and SMIC, were relatively stable on both utilization rate and average.

Business Model

TSMC specializes in fabrication operations rather than the research and design of new and innovative chips, meaning it commands lower margins than some of the flashier semiconductor stocks out there. However, since many leading firms are fundamentally “fabless,” meaning they have no manufacturing capacity of their own, there is built-in business for TSMC every year as it is contracted to turn designs into real hardware.

2. Samsung Foundry

Overview

Samsung Foundry is a key player in the semiconductor industry, offering a wide range of services and technologies. With a strong focus on innovation and quality, Samsung Foundry continues to push the boundaries of semiconductor manufacturing.

Process Technology

Samsung Foundry provides advanced process technologies, including:

• Logic Node
• Specialty Technology
• Process Recommendation

Advanced Package

Samsung Foundry offers advanced packaging solutions such as:

• Advanced Heterogeneous Integration
• Package Turnkey Service

SAFE™

Samsung Foundry’s SAFE™ (Samsung Advanced Foundry Ecosystem) program aims to provide a robust ecosystem for its partners, ensuring seamless integration and collaboration.

Products

Samsung Foundry’s product portfolio includes:

• DRAM
• SSD
• eStorage
• MCP
• Automotive Memory
• Consumer Storage
• Processor
• Image Sensor
• Display IC
• Security Solution
• Power IC
• LED

3. GlobalFoundries

GlobalFoundries, based in the U.S., is a significant player in the semiconductor foundry market. The company was spun out from AMD’s manufacturing arm in 2009 when AMD decided to go fabless. GlobalFoundries specializes in manufacturing semiconductor products for other companies, following designs provided by their customers.

In Q1 2023, GlobalFoundries captured around 6% of the industry’s revenue share. However, the company faced challenges due to subdued demand and customer inventory adjustments, particularly in automotive and industrial applications. This impacted their 2024 guidance.

Despite these challenges, GlobalFoundries aims to be the global leader in feature-rich semiconductor manufacturing, positioning itself as the foundry of choice for the pervasive semiconductor market.

4. UMC

United Microelectronics Corporation (UMC) operates as a semiconductor foundry, providing circuit design, assembly, and testing services for "fabless" design shops that don’t have their own manufacturing capacity. These characteristics make it very similar to the larger Taiwan Semiconductor.

Dividend Yield and Returns

UMC boasts a dividend yield of 6.8%, which is significantly higher than the average. The 1-year return for UMC stands at 9.0%, making it an attractive option for investors.

Market Share and Revenue

GlobalFoundries and UMC both captured a 6% market share. However, subdued demand and customer inventory adjustments, particularly in automotive and industrial applications, impacted the 2024 guidance for both companies.

Future Outlook

UMC is poised for a brighter outlook with an anticipated 16% revenue growth in the next fiscal year. This makes it a semiconductor stock worth considering, particularly for those who are patient and in it for the long haul.

5. SMIC

Overview

SMIC (Semiconductor Manufacturing International Corporation) is one of the leading semiconductor foundries based in China. The company held a 5% share of the global foundry market in Q1 2023. Despite a cautious outlook for the full year, SMIC anticipates increased demand for smartphone-related components in the short term.

Financial Performance

In recent reports, the company’s revenue and gross margin both beat the guidance. This positive financial performance underscores SMIC’s resilience in a competitive market.

Market Position

SMIC is among the top five semiconductor foundries globally, alongside industry giants like TSMC and Samsung Foundry. The company continues to focus on expanding its market share and enhancing its technological capabilities.

Future Outlook

While there are uncertainties in demand sustainability, SMIC remains optimistic about its growth prospects. The company is committed to advancing its technology and meeting the evolving needs of its customers.

Conclusion

As we navigate through 2023, the semiconductor foundry landscape continues to evolve, driven by shifts in market demand and technological advancements. The rankings of the top semiconductor suppliers have seen significant changes, reflecting the dynamic nature of the industry. Companies like TSMC, Samsung Foundry, GlobalFoundries, UMC, and SMIC remain pivotal players, each adapting to market conditions and customer needs. Despite challenges such as inventory backlogs and fluctuating demand, these foundries are crucial in supporting the global technology ecosystem. As we look ahead, the performance and strategies of these companies will be essential indicators of the industry’s direction and growth.

Frequently Asked Questions

What are semiconductor foundries?

Semiconductor foundries are specialized manufacturing plants where semiconductor devices are fabricated. They produce chips for other companies based on the designs provided by those companies.

Which company holds the largest market share in the semiconductor foundry industry?

Taiwan Semiconductor Manufacturing Co. (TSMC) holds the largest market share in the semiconductor foundry industry, commanding over 50% of the global market.

What is the role of GlobalFoundries in the semiconductor industry?

GlobalFoundries is a pure-play foundry that manufactures semiconductor products for other companies. It was spun out from AMD’s manufacturing arm when the company went fabless in 2009.

Why did demand for wafer processing services decline in 2023?

The demand for wafer processing services declined in 2023 due to slow growth and inventory backlogs in smartphones, PCs, and data centers.

How did SMIC perform in the semiconductor foundry market?

SMIC held a 5% market share in the semiconductor foundry market. They anticipate increased demand for smartphone-related components in the short term but have a cautious outlook for the full year due to uncertainties in demand sustainability.

What are the major products manufactured by TSMC?

TSMC manufactures a wide range of semiconductor products for various clients, including Apple, NVIDIA, and AMD.