Top 10 foundries expect revenues to increase 18% YoY in 4Q20

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According to TrendForce, demand in the foundry market has remained strong in the fourth quarter of 2020, as production capacities across the industry remain fully loaded.

The continued tight supply of wafer capacities is expected to lead to a price hike in foundry services and subsequently will drive up total quarterly industry revenue. According to TrendForce, the top 10 foundries’ revenues for 4Q20 are expected to exceed $21.7 billion, up 18% on the same time last year, with TSMC, Samsung, and UMC respectively taking the top three largest market shares.

Due to the 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, with recovering demand for the 16-45nm process technologies TSMC is expected to set a record high in quarterly revenue in 4Q20 with a 21% increase compared to 2019.

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 help to propel Samsung’s earnings performance further, driving its revenue up by about 25%.

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%.

GlobalFoundries, which previously divested some of its facilities without increasing its existing production capacities, as part of its effort to downsize, is expected to see a fall of 4% year-on-year. However,, 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, and as clients undertake trial production with the 14nm process, SMIC will be left with about two to three quarters of low 14nm capacity utilization. Furthermore, now that the US has 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. As a result, SMIC’s revenue for 4Q is expected to be down11% but up 15% on this time last year, since the company’s quarterly revenue in 4Q19 represented a relatively low base period in comparison.

TowerJazz’s revenue for 4Q20 is likely to be up 11% 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%.

According toTrendForce, foundry revenues 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 US-China relations going forward as well as whether the pandemic’s global resurgence will negatively impact purchasing demand for end devices.