Top 10 foundries report a 1.1% quarterly decline in 2Q23

These last-minute orders have served as pivotal lifelines, propping up Q2 capacity utilization and revenue for semiconductor foundries. However, the adrenaline rush from these stop-gap orders may be a short-lived phenomenon and is unlikely to be carried over into the third quarter.

On the other hand, demand for staple consumer products like smartphones, PCs, and notebooks remains sluggish, perpetuating a slump in the use of expensive, cutting-edge manufacturing processes. At the same time, traditionally stable sectors – automotive, industrial control, and servers – are undergoing inventory correction. The confluence of these trends has resulted in a sustained contraction for the world’s top ten semiconductor foundries. Their global revenue declined by approximately 1.1% for the quarter, amounting to a staggering USD 26.2 billion.

Additionally, the urgency in the supply chain seems largely fueled by demand for LDDI and TDDI components. This demand surge has catapulted Nexchip – a key player closely aligned with the panel industry’s fortunes – back into the top ten rankings.

Weak demand in advanced processes impacts TSMC’s Q2 revenue

In a season of fluctuating fortunes, TSMC – the titan of chipmaking – posted a Q2 revenue of USD 15.66 billion, managing to limit the quarterly downturn to a modest 6.4%. While the revenue stream from 7/6 nm manufacturing processes flowed freely, the 5/4 nm sectors witnessed a contraction.

However, hope is on the horizon as TSMC looks forward to a likely boost in 3Q23. With the iPhone’s latest production cycle as a strong tailwind, the semiconductor giant anticipates a surge in demand for related components. Plus, the introduction of the costly yet revolutionary 3 nm process is set to make its financial debut, providing a much-needed jolt to offset the stagnation seen in mature processes. As a result, TSMC’s Q3 revenue landscape appears not only poised to stabilize but also primed for a potential rebound.

Samsung’s foundry business hit a high note in Q2 with an impressive revenue of USD 3.23 billion – a robust QoQ leap of 17.3%. However, the third quarter is likely to be affected by a sluggish economy, driving down demand for Android smartphones, PCs, and laptops. As a result, the utilization rate for 8-inch fabs continues to decline. While Samsung hopes for a silver lining courtesy of Apple’s new device inventory buildup, the uplift in revenue growth may be limited.

Meanwhile, GlobalFoundries played it cool in Q2, virtually holding the line with a nominal revenue increase of 0.2% to around USD 1.85 billion. Revenue from sectors like smartphones and automotive showed growth, while the networking sector saw a contraction. However, as Q3 begins taking shape amid economic turbulence, GlobalFoundries possesses the ability to stabilise itself in the form of long-term contracts in specialised niches – from US aerospace and defense to healthcare – as well as long-term agreements (LTAs) for automotive-related orders. These contracts not only solidify GlobalFoundries’ foothold but also effectively underpin its capacity utilization rates. Therefore, the company’s revenue is projected to maintain its equilibrium in the third quarter.

Looking ahead to the third quarter, the seasonal demand for the latter half of the year is projected to be softer than in previous years. Anticipated orders for premium mainstream chips – such as Application Processors (AP) and modems – as well as peripheral ICs are set to bolster the capacity utilisation metrics for partners in Apple’s intricate supply chain. Further turbocharging this landscape is an uptick in orders of high-end HPC AI chips, adding a burst of momentum to high-value manufacturing processes. TrendForce predicts that the revenue of the top ten global semiconductor foundries is likely to rebound from its lowest point in the third quarter, followed by gradual growth thereafter.

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