The global foundry industry's revenue declined about 5% sequentially but grew 12% year-on-year in the first quarter of 2024, according to Counterpoint Research.
The sequential decline in the foundry industry revenue in the first quarter of 2024 was not solely attributable to seasonal effects, said the research firm. It was also affected by a delayed recovery in demand for non-AI semiconductors, which are used in various sectors, including automotive, consumer electronics, IoT, and industrial applications.
"This trend resonates with the observations of TSMC's management regarding the sluggish pace of recovery in non-AI demand," Counterpoint said in its findings. "Consequently, TSMC has made downward revisions to the projected growth for the logic semiconductor industry from over 10% to 10% in 2024."
1Q24 performance by company
TSMC's first-quarter results slightly exceeded market expectations. The company has raised its forecast for data center AI revenue, anticipating a more than doubling year-on-year in 2024. In addition, TSMC has extended its guidance for a 50% CAGR in AI revenue through 2028, indicating sustained and robust momentum in AI demand.
Despite expectations for CoWoS capacity to expand more than double year-over-year by the end of 2024, it still falls short of meeting the strong AI demand from customers. Notably, TSMC's 5nm capacity utilization rate has remained strong due to robust demand from AI accelerators.
"We've observed more evidence to support that the AI demand is real, with increasing CAPEX of cloud service providers adopting the AI hardware first and the following would be enterprises," said Counterpoint analyst Adam Chang. "We expected the demand for AI to remain strong in 2024, and probably more upsides in 2025. However, non-AI demand remained sluggish, but we think the inventory set-up is promising after several quarters of de-stocking."
Samsung Foundry's revenue declined mostly due to smartphone seasonality, although it maintained its second-place position with a 13% market share in the first quarter of 2024. The Samsung S24 smartphone remained a bright spot, but demand for its mid-low-end smartphones was relatively weak. The company expects revenue to rebound with double-digit growth as demand improves in the second quarter of 2024.
SMIC's quarterly results exceeded market expectations, propelling the Chinese foundry to third place in foundry revenue market share for the first time in the first quarter of 2024. SMIC anticipates continued growth in the second quarter as inventory restocking broadens, potentially implying mid-teens growth in 2024, compared to the mid-single-digit growth estimated previously.
UMC and GlobalFoundries both agree that consumer and smartphone demand has reached a low point, but they differ on auto demand, with UMC expecting it to stay muted in the near future and GF anticipating sales to increase in the second quarter.
"Exiting Q1 2024, we've started to observe green shoots of demand recovery even if the progress is slow," Counterpoint noted. "The channel inventory becomes normalized and leaner after several quarters of destocking. We continue to believe that strong demand for AI and a mild recovery in end demand will serve as the main growth drivers for the industry in 2024."
