Recently, TrendForce released a report showing that the global semiconductor foundry industry's value reached $27.28 billion in the third quarter, with a quarterly increase of 11.8%. This marks the ninth consecutive quarter of record highs for the foundry industry. Driven by robust demand for products such as laptops, networking communications, automobiles, and the Internet of Things, as well as strong inventory build-up by end-users, the industry is generally optimistic about the foundry market in 2022. It is expected that next year's foundry output value will reach $117.69 billion, with an annual increase of 13.3%, continuing to set new highs.
Market Size Growth May Exceed Expectations
It has been reported that United Microelectronics Corporation (UMC), the world's third-largest semiconductor foundry, will launch a new round of price increases. If confirmed, this will be UMC's third price hike within the year. The price increase will mainly target the top three American customers, which account for more than 30% of UMC's revenue, with an increase of about 8% to 12%, effective from January 1, 2022. UMC's current major American customers include AMD, Qualcomm, Texas Instruments, and Nvidia, and the company also holds orders from major European manufacturers such as Infineon and STMicroelectronics. Given the high revenue contribution of these customers and the significant price increase, this move is expected to boost UMC's profitability. In fact, it's not just UMC; there are rumors that TSMC will also raise its foundry prices again in December.
In the past year, the development of industries such as 5G, AI, autonomous driving, and consumer electronics has significantly boosted the growth of the semiconductor market, keeping foundry capacity in short supply. This has provided a basis for foundry companies to raise prices. In this context, the industry is generally optimistic about the development of the foundry industry.
TrendForce's report shows that the third-quarter foundry output value reached $27.28 billion, with a quarterly increase of 11.8%, marking nine consecutive quarters of historical highs. Among them, TSMC, driven by Apple's release of the new iPhone, achieved third-quarter revenue of $14.88 billion, maintaining its position as the global leader. Samsung, in second place, also achieved a 11% sequential growth, with third-quarter revenue of $4.81 billion. SMIC benefited from stable demand for products such as PMIC, Wi-Fi, MCU, and RF, with third-quarter revenue of $1.42 billion, ranking fifth.
The market outlook for the foundry industry next year is also favorable. Goldman Sachs upgraded its estimate for the foundry companies' price increases in the first quarter of next year, from an original estimate of within 5% to a new range of 5% to 10%, meaning the increase could be double the initial expectations. TrendForce expects next year's foundry output value to reach $117.69 billion, with an annual increase of 13.3%. "The price increase of foundries reflects the trend of the strong getting stronger, and it is also a manifestation of enhanced competitiveness," said semiconductor expert Mo Dake.
Foundry Capacity Will Remain Tight
The price increases reflect the market's supply and demand situation, and the industry expects that foundry capacity will remain tight next year, especially in the first half of the year when the market conditions are clearer.
TSMC President CC Wei said at the company's third-quarter earnings call that he maintains the view that foundry capacity will remain tight through 2022. Speaking of market supply and demand, Wei mentioned the continued short-term imbalance in the supply chain due to the COVID-19 pandemic, expecting the trend of higher inventory levels to persist for some time. Whether this short-term imbalance continues or not, TSMC's technology leadership is expected to meet the strong demand for advanced and special process technologies.
Li Pei, Chairman of Powerchip, also said that despite a slowdown in demand for consumer electronics, the chip demand for automotive electronics, 5G, and other networking communication applications still exceeds supply, and he is optimistic about the overall foundry market outlook for 2022. "The demand for display driver ICs is slowing down, but many other ICs are still in short supply. The shortage of automotive chips and high-end networking chips like 5G will continue into next year," Li said.
TrendForce's report indicates that after two years of chip shortages, the additional capacity announced by major foundries will come online in 2022, with the new capacity focused on the 40nm and 28nm processes, which is expected to slightly ease the current tight chip supply. However, since the additional capacity will contribute to output in the second half of 2022, which coincides with the traditional peak season, and supply chains are actively building up inventory for year-end holidays, the easing of capacity may not be