Major Chip Foundries Brace for Tough Q1 as Global Semiconductor Industry Slows Down

The semiconductor industry is facing a downturn and it's impacting wafer foundries. According to a recent report by TrendForce, a research and consulting firm, the global top ten wafer foundries experienced a quarterly decline of 4.7% in output value in Q4 of last year, the first decline in 14 quarters. This was due to the traditional off-season and overall market uncertainties, which may result in a larger decline this quarter.

This means that major wafer foundries such as TSMC, Samsung, UMC, GlobalFoundries, and SMIC will face more challenges this quarter, including reduced orders, pricing pressure, and lower utilization rates.

TrendForce noted that end customers started adjusting their inventories in Q2 of 2022, but since wafer foundries are positioned upstream in the semiconductor industry supply chain, some adjustments are harder to make quickly. As a result, the output value of the top ten wafer foundries declined by 4.7% in Q4 of last year, dropping to $33.53 billion.

TSMC remained the market leader with a market share of 58.5% in Q4 of last year, growing against the trend with a quarterly increase of 2.4 percentage points. Samsung and GlobalFoundries also saw their market shares increase by 0.3 and 0.4 percentage points, respectively, to 15.8% and 6.2%, narrowing the gap between GlobalFoundries and UMC to one percentage point. The competition between the three wafer foundries is becoming increasingly fierce.

However, TrendForce warns that the decline in revenue for the top ten wafer foundries may be greater this quarter due to the traditional off-season and overall market uncertainties. Taiwan's major wafer foundries are also conservative about their outlook for this quarter. TSMC estimates that its revenue in USD will be between $16.7 billion and $17.5 billion this quarter, with an average quarterly decline of 14.2%, but still better than last year overall.

UMC said that its visibility for orders is low at present and that this quarter will be full of multiple challenges. It expects product prices to remain stable compared to last quarter, but capacity utilization will drop to nearly 70%, and both gross profit margin and wafer shipments will decline.

GlobalFoundries also faces challenges this quarter, with expectations that its revenue will decline by about 15%. The company hopes to maintain stable revenue in Q2 and anticipates improvements in the second half of the year.