In the map of the global semiconductor industry, the foundry industry has always occupied a pivotal position. Recently, the well-known market analyst Counterpoint Research predicted that the growth rate of the chip foundry may reach 20% in 2025, compared with the 22% growth rate in 2024, a slight slowdown. This data not only reveals the current development trend of the foundry industry, but also indicates that the industry is moving towards a new stage of development driven by AI and advanced process technology.
Growth and Market Landscape
In 2024, the foundry industry rebounded strongly from the downturn in 2023, realizing a growth of 22%. In 2025, although the growth rate has declined, but the 20% growth rate still indicates that the industry is in an upward channel. In terms of market landscape, TSMC is undoubtedly the leader in the foundry space, holding more than 60% of the market share. Its advantages in advanced process and advanced packaging technologies make it the first choice of many high-end customers. For example, by combining 5/4-nm and 3-nm chips with advanced packaging technologies such as CoWoS, TSMC has successfully capitalized on AI development, producing chips for AI giants such as NVIDIA, and thus benefiting from strong demand for high-end smartphones.
In addition to TSMC, a number of smaller competitors have also gotten on the AI bandwagon to capture a share of the market. Intel is also making progress in advanced packaging technology, with its emib and foveros 3d packaging technologies used in its own products, such as meteor lake based on chiplet architecture, and is expected to continue to invest in advanced packaging R&D in order to support its own product roadmap and attract external customers. Samsung, as one of the important wafer foundries, is also making continuous efforts in advanced process technology, and TSMC is in fierce competition.
AI and Advanced Processing: The Twin Engines of Growth
- AI-driven chip demand explosion
The rapid expansion of artificial intelligence in data center and edge computing has greatly boosted the demand for advanced chips. Taking NVIDIA as an example, its AI chips are in short supply in the market, and a large number of orders have prompted foundries to continuously expand their production capacity. the extremely high demand for computational power for AI training and inference has made it crucial for advanced process foundry services to be able to provide high-performance chips. These chips are not only used for large-scale AI training in data centers, but are also widely used in edge computing devices, such as smart cameras and smart speakers, to enable local real-time data processing and decision-making.
- Continuous breakthroughs in advanced process technology
Advanced process technology nodes, such as 5/4nm and 3nm, have consistently maintained a high capacity utilization rate of over 90%. This is due to the stable demand in the high-end smartphone chip market. The demand for advanced process chips from smartphone chip design giants such as Apple, Qualcomm, and MediaTek supports the production capacity of these leading-edge nodes. At the same time, with the continuous progress of technology, the process technology below 3nm is also being developed, and these technological breakthroughs will bring more possibilities for future chip performance improvement and cost reduction.
Advanced packaging technology also plays an important role in promoting the development of the industry. TSMC‘s CoWoS technology and Intel’s 3D packaging technology have improved the performance and efficiency of chips by integrating multiple chips or chip modules together, meeting the demand for miniaturized and high-performance chips in areas such as AI and high-performance computing.
Challenges and Concerns
- Difficulties in the mature process market
While the advanced process and AI-related businesses are doing well, the mature process market is facing difficulties. Mature process nodes, defined as 28/22nm and above, are recovering relatively slowly due to weak demand in end markets such as consumer electronics, networking, automotive and industrial. High inventory levels at global integrated device manufacturers (IDMs), such as Infineon and NXP, could lead to a reduction in outsourcing orders to mature process foundries, further depressing mature process capacity utilization. In the automotive semiconductor sector, inventory adjustments are expected to continue until the first half of 2025, which also slows down the recovery of the automotive semiconductor market, which in turn affects the related mature process foundry business.
- Increased industry competition
As more and more companies see the development potential of the foundry industry, the market competition is becoming increasingly fierce. In addition to the traditional competition between foundry operators, some IDM companies are also expanding foundry business, such as Intel, which makes the market competition pattern more complex. At the same time, in order to take advantage of the competition, enterprises need to continuously invest huge sums of money for technology research and development and production capacity expansion, which puts forward extremely high requirements on the financial strength and technological innovation ability of enterprises.
Future Outlook
In the long run, the foundry industry is expected to maintain a CAGR of 13%-15% from 2025-2028. This continued growth will be driven by continued advancements in advanced process technologies, such as breakthroughs in 2nm and below, and accelerated adoption of advanced packaging technologies, including CoWoS and 3D integration. These innovations will continue to be a key growth driver for the industry over the next 3-5 years, meeting the growing demand for high-performance computing and AI applications.
TSMC is expected to continue to lead the industry with its leadership in advanced process and advanced packaging technologies. However, other companies are also striving to catch up, and the competition in the foundry market will be more exciting in the future through technological innovation and market expansion. Meanwhile, with the continuous development of AI technology and the expansion of application scenarios, the demand for foundry will continue to diversify, which will bring more development opportunities and challenges to the industry.
