Semiconductor foundry industry: negotiating troubled waters

The semiconductor foundry industry faces a complex landscape of make-or-buy decisions and international dependencies, announces Yole Group in its new technology & market analysis, Overview of the Semiconductor Foundry Industry 2024.

IDM s produce semiconductors both locally and abroad, while fabless companies rely heavily on overseas foundries. This reliance is especially significant in the US and Europe, where excess demand requires substantial overseas capacity, predominantly provided by Asian countries.

Pierre Cambou, Principal Analyst, Global Semiconductors, Yole Group, said: “Critical suppliers, including Taiwan, South Korea, Japan, Singapore, and Malaysia, collectively shape the global supply chain. The intricate, interdependent nature of this supply chain has proven vulnerable to disruptions, leading to significant efforts from governments and corporations worldwide to mitigate these risks and enhance resilience.”

The semiconductor industry has been grappling with substantial challenges since the US initiated a trade war in 2019, further exacerbated by potential conflicts between China and Taiwan. This geopolitical tension, compounded by the recent pandemic, has driven an accelerated substitution program by Chinese companies and prompted sustained global efforts to secure supply chains. 

Government subsidies and initiatives such as the various “Chip Acts” are critical responses to these disruptions, aiming to enhance domestic production capabilities and reduce dependency on foreign suppliers. The industry must navigate these geopolitical complexities while simultaneously addressing the increasing carbon footprint of the ICT sector, which relies heavily on semiconductor technology.

Technological advancements and market shifts are driving strong growth in the semiconductor industry, with an anticipated CAGR23-29 of 6.4%. This growth is fueled by rising demand from the server, automotive, and industrial sectors. Leading companies like TSMC, Samsung, and Intel are focusing on advanced node manufacturing, investing heavily in next-generation processes like 2nm, and future technologies such as 18Å and 14Å.

Pierre Cambou added: “Open-foundry model is gaining momentum, and is expected to capture 69% of the market by 2029. However, the challenge of reducing physical feature sizes requires ongoing innovation and strategic investments. High costs associated with advanced nodes are driving the adoption of new techniques, such as high NA EUV.”

Alongside these efforts, the industry must continue to navigate these geopolitical and technological complexities while addressing the growing carbon footprint of the ICT sector, which is ultimately powered by semiconductor technology.