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According to the latest ‘Foundry Quarterly Tracker’ report released by Counterpoint Research, the global foundry industry showed strong growth momentum in the second quarter of 2024, with quarterly revenues increasing by about 9% sequentially, and achieving a remarkable growth of 23% over the same period last year. This impressive performance is mainly attributed to the continued explosion of demand in the field of artificial intelligence (AI).

The report highlighted the surge in AI demand as a key factor driving the YoY growth in foundry revenue. Notably, although the supply of CoWoS (an advanced packaging technology) remains tight, the market has high expectations for the expansion of CoWoS-L production capacity, signalling huge future growth potential in this area.

However, the pace of demand recovery in the non-AI segment appears slower. The smartphone market, in particular, is expected to perform less well than expected in the third quarter of 2024, the traditional peak season. Meanwhile, demand recovery in the automotive and industrial sectors is also expected to be delayed.

In contrast, the pace of recovery in the foundry and semiconductor markets in mainland China is significantly faster than the rest of the world. Major foundries in mainland China, such as SMIC and Hua Hong, not only reported strong quarterly results, but also gave a positive outlook for the future. These vendors bottomed out earlier than other mature node foundries around the world, and overall capacity utilisation has rebounded to over 80%, thanks largely to mainland China's fabless customers entering the inventory adjustment phase earlier.

Driven by strong demand for AI accelerators, TSMC's Q2 2024 revenue slightly exceeded expectations, and as a result, it raised its annual revenue forecast to the mid-20% range. TSMC also forecasts continued tight supply and demand in the AI accelerator market through the end of 2025 or early 2026, and plans to at least double CoWoS capacity in 2025 to meet market demand. In addition, the report also points out that in 2025, including 3nm and 5/4nm, there is the possibility of a significant increase in advanced node foundry prices.

Samsung foundries are also benefiting from the pre-build and replenishment of smartphone inventories, with market share remaining at the next highest position of 13% in the second quarter of 2024. The company is aggressively pursuing more advanced node mobile and AI/HPC customers and expects its annual revenue growth to outperform the industry average.

SMIC provided above expectation guidance for the third quarter on the back of its continued recovery in the Mainland China market. With strong demand for applications such as CIS, PMIC, IoT, TDDI and LDDIC, SMIC's demand for 12-inch wafers continues to improve, and consolidated ASPs are expected to rise accordingly. The company is cautiously optimistic about future annual revenue growth and expects capacity utilisation to continue to rise at a healthy pace.

UMC, on the other hand, achieved strong quarterly growth on the back of favourable exchange rate conditions and strong pricing power. The company expects mid-single digit YoY growth in Q3 2024 and plans to reduce investments in commoditisation by focusing on specialised technology areas such as 22nm HV and 55nm RF SOI/BCD to support stable pricing and long-term growth.

Ge-X also showed solid quarterly results, with its automotive business growing sequentially, driven by new design orders. Ge-soft's overall business is recovering modestly as inventories in the smartphone market return to normal and demand stabilises in the communications and IoT markets, a trend echoed by other non-Chinese established node foundries such as UMC.

Adam Chang, analyst at Counterpoint Research, concluded: ‘The global foundry industry showed strong resilience in Q2 2024, with AI demand and smartphone inventory replenishment as key growth drivers. However, the pace of demand recovery in the semiconductor industry has been uneven, with cutting-edge segments such as AI semiconductors growing rapidly while traditional semiconductors lagged behind. Mainland China foundries achieved a faster recovery due to their unique market environment and customer demand. In contrast, the pace of recovery for non-Mainland China foundries has been slower.’