Chip contract manufacturers continue to grow, TSMC extends market leadership
While business of some chip manufacturers is declining, nine of the ten largest contract manufacturers are growing, with SMIC showing the strongest growth.
Semiconductor chips on a silicon wafer
(Image: c’t Magazin)
The semiconductor industry is currently characterized by very different trends. While large chip contract manufacturers such as TSMC and SMIC are achieving record sales, other chip companies are seeing their profits fall or even incurring high losses like Intel.
The Taiwanese consulting firm TrendForce reports that nine of the ten largest chip contract manufacturers (foundries) significantly increased their turnover in the third quarter of 2024, namely by 4.9% to 14.2% sequentially. Only the foundry division of Samsung Semiconductor saw its revenue shrink by 12.4%.
Strong growth at TSMC and SMIC
The sales performance of the world's largest chip foundry Taiwan Semiconductor Manufacturing Company (TSMC) and its Chinese competitor Semiconductor Manufacturing International Corporation (SMIC) is particularly impressive. TSMC's turnover grew by 13% to the equivalent of USD 23.5 billion in the third quarter of 2024.
SMIC's turnover (much lower in absolute terms) rose even more strongly, by 14.2 percent. According to TrendForce, the leading company in China did not sell many more wafers than in the previous quarter, but more expensive ones, and was able to improve the capacity utilization of its fabs. Similar factors also boosted the sales of the two other Chinese contract manufacturers Huahong and Nexchip.
According to TrendForce, a federal program for the purchase of energy-efficient household and IT appliances in China also contributed to growth in China. Chinese companies are tending to shift more orders from abroad to China due to stricter US sanctions.
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TSMC increasingly dominant
TSMC's market share, which has already been dominant for years, rose further to 64.9%.
The five largest contract manufacturers in the world generate around 90 percent of all sales in the industry, or 94 percent of the top ten.
TSMC generates most of its turnover with the most modern and expensive manufacturing processes. These in turn consume huge investments in expensive machines such as EUV lithography machines. Only three companies in the world can afford them.
However, the high yields from the finest manufacturing processes make it easier for TSMC to compete with lower prices for mature chip generations (mature nodes).
Demand for the latest processes is continuing to rise, primarily due to AI processors. The capacities of the packaging fabs are still at the limit. However, the prospects for 28 nanometers and even coarser processes are rather weak.
According to TrendForce, Samsung is not receiving enough new orders for its most advanced manufacturing processes. In addition, Samsung is under price pressure for older manufacturing processes, especially from its Chinese competitors.
| Turnover of the world's ten largest chip contract manufacturers in the third quarter of 2024 | |||||
| Company | Country | Revenue Q3/24 |
Growth |
Market share | |
| [Mio. US-$] | vs. Q2/24 | Q3/24 | |||
| 1 | TSMC | Taiwan | 23.527 | 13,0Â % | 64,9Â % |
| 2 | Samsung | Korea | 3.357 | -12,4Â % | 9,3Â % |
| 3 | SMIC | China | 2.171 | 14,2Â % | 6,0Â % |
| 4 | UMC | Taiwan | 1.873 | 6,7Â % | 5,2Â % |
| 5 | Globalfoundries | USA | 1.739 | 6,6Â % | 4,8Â % |
| 6 | Huahong | China | 799 | 12,8Â % | 2,2Â % |
| 7 | Tower Semi | Israel | 371 | 5,6Â % | 1,0Â % |
| 8 | VIS (Vanguard) | Taiwan | 366 | 6,9Â % | 1,0Â % |
| 9 | PSMC (Powerchip) | Taiwan | 336 | 4,9Â % | 0,9Â % |
| 10 | Nexchip | China | 332 | 10,7Â % | 0,9Â % |
| Sum Top Ten: | 34.869 | 9,1Â % | 96,0Â % | ||
| Source: TrendForce. Turnover in the respective national currencies converted into US dollars | |||||
(ciw)
