Semiconductor Manufacturing: Foundry

After entering 2019, the semiconductor industry failed to maintain its high growth last year. In the first quarter, the global wafer foundry sales revenue declined by 16% compared with the same period in 2018, and the world's top seven companies all experienced negative growth.

Top 7 are facing YoY decline on sales revenue in 2019 Q1

Compared with the rest five companies in the world's top ten, TSMC, Samsung, Gexin, UMC and SMIC have already overcome more advanced technology nodes and are the main force in the 28nm-7nm advanced process of wafers.

The advanced process is more oriented to the precision and high-tech industries such as smart phones and smart driving. At present, the development and demand of 5G mobile phones and smart driving have not yet reached expectations, and the gloom of Sino-US trade wars has gradually intensified, directly leading a weak performance of advanced processes wafer market. In such an environment, TSMC, Samsung, Gexin, UMC and SMIC all ended the first quarter of 2019 with a big drop.

As for the following 5 enterprises, TowelJazz, Powerchip, VIS, Huahong and DB HiTek, whose production was limited by technology, mainly produce wafer of 28nm-180nm processes. The downstream products of these wafers are relatively stable in application and the market volatility is small. Therefore, the enterprises ranked lower in the top ten (except for Lijing, which was affected by past investment failures) did not fall in the first quarter as the whole semiconductor industry went through a downturn.

Although the semiconductor environment in the second quarter recovered slightly, it still fell by 8% year-on-year, and many companies still failed to get rid of negative growth. After being overtaken by TowerJazz in the first quarter, Powerchip was still in a big drop in the second quarter and surpassed by VIS and Huahong. If Powerchip can't reverse the downturn caused by corporate decision-making mistakes, it is likely to fall out of the top ten in the next quarter.

Powerchip still trapped in huge decrease in 2019 Q2

Since the second transfer of the semiconductor industry, TSMC has occupied half of the wafer foundry industry for many years. Even in the first quarter of 2019, the market experienced a negative growth, and the market share was still as high as 48.1%. After the industry recovered slightly in the second quarter, TSMC’s market share increased to 49.2%.

TSMC dominated nearly half of the market in both Q1 and Q2

TSMC is in steady development

TSMC has been in the semiconductor foundry industry for a long time, and it has already formed a reputation in the industry. Even when the entire industry declines, TSMC can obtain orders by the technology beyond other similar companies, and the strong downstream customers wined by long-term cooperation are the performance guarantee of TSMC.

But now, semiconductor industry is already in the third industrial transfer, and TSMC also needs to reconsider its position. Previously, TSMC consolidated its position in the industry by taking the lead in mass production of 7nm process wafers. According to the plan, TSMC will next work on 6nm and 5nm process wafers. In addition, the 3nm process is also under planning. In the first quarter earnings meeting, TSMC pointed out that 3nm technology has entered the stage of full development. It can be seen that technological innovation will become the focus of TSMC in the third industrial transfer.

In the first half of 2019, Huahong increased the most among the top ten, with an increase of 4.7% in the first quarter and a flat in the second quarter. Huahong has two wafer foundries, one is Huahong Hongli and the other is Shanghai Huali Microelectronics. Huahong Hongli mainly produces 8-inch wafers, while Shanghai Huali mainly manufactures 12-inch wafers.

Since 2012, Huahong has maintained a steady growth. Although it is behind the leading enterprises in advanced processes, Huahong has matured its technology in the production of special wafers, and the market is very broad. Moreover, Huahong’s development relies on mainland IC design and related enterprise, and gains a lot of opportunities through the cooperation with local enterprises.

Huahong grows year after year

At the time of semiconductor industry’s transformation, the design companies in mainland China have developed rapidly, and the local foundry has also achieved excellent development opportunities. Huahong is expected to continue to grow and gain greater market share in the international foundry market.