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Foundry’s 31% Growth in 2021 Outpaced Overall Chip Industry

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The 31% increase in chip foundry revenue to $100.2 billion led growth in the overall semiconductor industry last year, according to market research firm Gartner. The increase in foundry sales was primarily due to an 11.5% rise in average selling prices for silicon wafers and an 18% jump in unit shipments.

The overall semiconductor industry saw revenues increase by 26% to $595 billion in 2021, according to the Gartner report. Foundries, which are mainly based in Taiwan and South Korea, benefitted from strong demand from fabless chip designers such as AMD and MediaTek.

During 2021, the overall foundry utilization rate exceeded 95%, while demand was especially tight for eight–inch wafers made for power management ICs (PMICs), display drivers, and fingerprint sensors, the report said. The shortages of eight–inch wafers are likely to persist “for a long time” because fab expansions are constrained by a lack of production tools for the smaller wafer size, according to Gartner.

Encouraged by the first long–term agreements and prepayments signed with customers in years, leading foundries doubled capital expenditures to record highs in 2021 and years ahead.

Top five semiconductor foundry providers’ revenue in 2021 (Source: Gartner) (Click image to enlarge)

The world’s largest foundry, Taiwan Semiconductor Manufacturing Company (TSMC), saw its 2021 market share slip by about 3 percentage points to 57% because it raised wafer prices at a slower rate than smaller rivals. In the advanced 7–nm and 5–nm nodes where TSMC had more than 90% of the market, the company’s key customers were Apple, AMD, and MediaTek.

In 2021, TSMC made more than a quarter of the world’s logic chips, based on revenue numbers. Key products for the company were application processors, CPUs, GPUs, and FPGAs made for customers such as Apple, AMD, MediaTek, Nvidia, Qualcomm, and Marvell.

In the meantime, Samsung Foundry, Powerchip Semiconductor Manufacturing Corporation, and Shanghai Huahong Grace Semiconductor made market share gains on TSMC with revenues that soared by about 60% in 2021.

Samsung’s key customers Qualcomm, Nvidia, and Tesla counted on the company for production of 8–nm and 14–nm chips. Samsung won new orders from Qualcomm for its Snapdragon 888 line and from Nvidia for its Ampere and GeForce chips. Samsung raised its wafer prices by as much as 20% in late 2021 after TSMC announced smaller price hikes, according to the Gartner report.

Number–three foundry United Microelectronics Corporation (UMC) delivered “optimum performance” on legacy 28–nm and more mature process nodes, according to Gartner. UMC raised its wafer prices by 14% in 2021. The company was the first to develop a 28–nm high–voltage process for AMOLED display drivers, helping to win business from Samsung.

In fourth place, GlobalFoundries specialized in technologies like RF–SOI, SiGe, and FD–SOI as part of a sole source strategy to customers. The company’s 12–inch wafer fabs in Malta and Germany focused on FinFET and FD–SOI, while its older eight–inch fabs in the U.S. and Singapore provided SiGe and BCD technologies. As shortages of chips for carmakers intensified last year, GlobalFoundries formed key partnerships with customers in the automotive business such as Ford, BMW, and Bosch.

Growth of the foundry industry soared during the U.S.–China trade war, which cut off sales of imported chips to Chinese companies such as Huawei. Huawei built up an estimated six months of chip inventories in anticipation of the U.S. ban on chip sales. Another factor was the Covid pandemic, which accelerated the work–from–home trend and investments in data centers by hyperscale companies like Amazon and Google in response to increased online activity.

Top 10 companies’ sales revenue from shipments of foundry wafers to external customers (Source: Gartner) (Click image to enlarge)

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