Rising wafer prices lift chip foundry revenues

Intel to slip into top 10 list with Tower takeover

Contract chip manufacturers grew revenue in the fourth quarter of last calendar year largely by raising the prices of wafers in the face of overloaded factories as the semiconductor industry continued its breakneck pace.

That's according to the latest foundry report published Monday by research firm TrendForce, which said the total revenue of the world's top 10 foundries reached a record of nearly $29.6bn in the fourth quarter of 2021. That marks an 8.3 percent increase from the previous quarter.

"When the production capacity is severely undersupplied, foundries are able to choose to manufacture the product at a higher price, so the overall [average selling price] of the company will go up when they produce more expensive wafers," Joanne Chiao, senior analyst at TrendForce, told The Register.

As for whether the increased wafer prices impact the prices of chips, Chiao said that is up to the foundry customers.

While fully loaded factories allowed foundries to raise wafer prices, limited growth in new production capacity was a limiting factor in the fourth quarter. TrendForce said this was happening with old manufacturing processes that produce peripheral components such as Wi-Fi chips, microcontrollers and power management chips.

These components "are still in short supply, precipitating continued fully loaded foundry capacity," according to the firm. Components for TVs and laptops, on the other hand, "have eased."

TSMC, by far the largest foundry based on revenue, grew fourth-quarter sales to nearly $15.8bn. TrendForce said Apple's latest iPhone drove a large spike in orders for the Taiwanese firm's 5nm wafers that contributed to a 5.8 percent increase in revenue from the previous quarter. However, lower sales of smartphones in China caused a drop-off in revenue for TSMC's 7nm and 6nm nodes.

Samsung, the second largest foundry, saw revenue grow much faster in the fourth quarter: 15.3 percent to $5.5bn. The biggest factors driving growth for the South Korean foundry were high demand for 5nm and 4nm nodes and mass production of "new flagship products" for mobile chip designer Qualcomm.

Despite achieving record revenue in the fourth quarter, the slow ramp-up of capacity for its 5nm and 4nm nodes dinged Samsung's overall profits, TrendForce said.

The third largest foundry, UMC, based in Taiwan, suffered from limited growth in production capacity for more mature nodes, according to TrendForce. This caused UMC's fourth-quarter revenue to only grow 5.8 percent from the previous period to $2.1bn.

As for the remaining top seven foundries, things went like this:

  • Malta, NY-based GlobalFoundries grew 8.6 percent sequentially to nearly $1.9bn thanks to new capacity, a better mix of products, and a new long-term pricing agreement that lifted prices.
  • SMIC in China grew 11.6 percent sequentially to nearly $1.6bn thanks to rising average selling prices and demand for things like microcontrollers and specialty memory.
  • HuaHong Group in China grew 8.1 percent to $864m due to newly expanded production capacity, nearly full utilization, and a prioritization of higher-value silicon.
  • PSMC in Taiwan grew the second fastest out of the group, right above Samsung, with a 17.9 percent increase to $619m largely due to the same factors as HuaHong Group.
  • VIS in Singapore experienced similar circumstances, too, allowing revenue to grow 7.4 percent to $458m in revenue.

The ninth biggest foundry is Tower Semiconductor, which Intel plans to acquire for $5.4bn. Israel-based Tower grew fourth-quarter revenue by 6.5 percent to $412m. TrendForce said Intel, through its Intel Foundry Services business, will become a top-10 foundry once the deal closes.

The last foundry on the list, Nexchip in China, was ascendant in the fourth quarter, growing a whopping 44.2 percent to $352m in revenue. TrendForce credited Nexchip for its "diligent production expansion" and said the foundry plans to diversify beyond its single product line and limited customer base with an expansion to more advanced processes like 55nm, 40nm, and 28nm, and new product lines that include microcontrollers, image sensors, and touch and display controllers.

"Since Nexchip is currently ramping-up operations quickly, its growth performance in 2022 should not be underestimated," TrendForce said. ®

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