Samsung is losing the market for contract chip production while all competitors are growing

The lack of signs of a serious improvement in the macroeconomic situation in the third quarter, according to TrendForce, did not prevent the revenue of the ten largest contract chip manufacturers in the world to show an increase in revenue to a record $34.87 billion at the end of the period. In addition, the degree of utilization of production capacity also increased.

Image Source: Intel

Firstly, as the source explains, this was facilitated by the release of new models of smartphones and laptops in the second half of the year. Secondly, the demand for components for artificial intelligence systems continues to remain high, and the bulk of them are produced by contract companies. Consistently, revenue growth of the ten largest players, who together control 96% of the market, grew by 9.1% to $34.87 billion. High demand for 3-nm products, according to TrendForce representatives, allowed them to update the revenue record set during the pandemic. In the current quarter, the revenue growth rate of the ten largest contract chip manufacturers will slow down, but demand for advanced technological processes will continue to push the revenue of the largest market participants upward.

At least in the PC and smartphone segments, the demand for technological processes from 5nm to 3nm inclusive will be high until the end of this year. In the segment of chip packaging services using the CoWoS method, supply shortages will continue. In the field of mature lithography, demand will be negatively affected by seasonal phenomena and previously formed warehouse stocks of products. This thesis is true for lithographic standards from 28 nm and above, but it will be partially offset by the desire of Chinese smartphone manufacturers to stock up on the necessary components. Accordingly, in the field of mature lithography, the equipment utilization rate in the fourth quarter will either remain at the same level or even increase sequentially.

Image source: TrendForce

Market leader TSMC managed to increase revenue sequentially by 13% to $23.53 billion in the third quarter and strengthen its market position from last year’s 62.3% to 64.9%. Although Samsung retains second place, it faces problems in finding new customers for advanced technological processes, and in the mature lithography segment, revenue is being undermined by Chinese competitors, provoking price competition with them. According to the results of the third quarter, Samsung sequentially reduced revenue by 12.4% to $3.36 billion and reduced its market share to 9.3%.

China’s SMIC ranks a respectable third, but its revenue growth of 14.2% to $2.2 billion in a sequential comparison was not driven by proportional growth in the volume of silicon wafers processed. In any case, SMIC controls 6% of the global market for contract chip manufacturing services. Taiwanese UMC is content with fourth place and 5.2%, but in the third quarter it not only increased its production volumes, but also increased the conveyor utilization rate. This resulted in sequential revenue growth of 6.7% to $1.87 billion.

GlobalFoundries ranks fifth with 4.8% market share, and its revenue increased 6.6% sequentially to $1.74 billion, driven by rising demand for the smartphone and PC components it makes for its customers. By the way, in sixth place is the Chinese HuaHong Group, which controls only 2.2% of the global market, but consistently increased its revenue by 12.8% to $799 million. Israeli Tower Semiconductor, which avoided being taken over by Intel, ranks seventh and 1% of the market , its revenue grew 5.6% sequentially to $371 million.

Taiwanese VIS (Vanguard) is content with the same 1% of the market, while Taiwanese PSMC and Chinese Nexchip close the top ten with market shares of no more than 0.9% each. Thus, there are already three Chinese companies in the top ten largest contract chip manufacturers in the world.