Development of the Global Semiconductor Foundry Industry, 2021-2022

Chip Oversupply Concerns Emerge Following Active Capacity Expansion Plans in China

This report provides an overview of the foundry industry in 2021 while examining strategies of major players; looks into factors and incidents impacting the industry such as the decline in demand for consumer electronics products in 2022, the Russia-Ukraine war, and the lockdown in China; identify future trends and prospects of the industry.

The shipment value of the global foundry industry reached US$110.1 billion in 2021, up 26% compared to 2020. The strong demand for semiconductor chips from the third quarter of 2020 led to a chip shortage. This boosted sales of leading foundries that make mainly logic chips in 2021.

Following the insufficient production capacity issue in 2021, wafer foundries around the world have operated at full load or overload while gearing up their capacity expansion plans to tap the increasing market demand. Most of the wafer foundries in 2021 claimed to open new fabs between 2023 and 2024. However, the shortage situation, as far as 2022 is concerned, appears to remain the same, according to the analyst.

Meanwhile, as China aims to achieve the target of domestically manufacturing 70% of its semiconductors under the "Made in China 2025" strategy, foundries in China have been actively expanding their production capacity over the years. Led by SMIC, major foundries in China have all set to increase their production capacity by more than 20% by the end of 2023 compared to the end of 2021. Although the increase in production capacity may help address strong domestic demand in China, it may also turn into an oversupply crisis in the semiconductor industry after 2023.

Following a downward revision in shipment value, global semiconductor shipment value is estimated to reach approximately US$600 billion in 2022 and witness single-digit year-on-year growth. Meanwhile, the analyst predicts that the shipment value of the Taiwanese semiconductor industry will maintain over NT$4 trillion (US$135.1 billion; US$1 = NT$29.6) and enjoy an approximately 15% year-on-year growth, higher than the global average. Established in 1987, the analyst is a division of III (Institute for Information Industry), a major government think tank, and one of the leading IT research institutes in Taiwan.