Contract chip manufacturers Top 10 Contract Manufacturers: SMIC Surges as GlobalFoundries Declines

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When it comes to contract manufacturing in chip production, two names dominate the conversation: TSMC and Samsung. Together, these giants control over 70 percent of the market. However, their dominance is being challenged. Chinese manufacturer SMIC has not only surpassed UMC but also overtaken GlobalFoundries. According to Q1 2024 data analyzed by the market research firm TrendForce, SMIC is quickly climbing the ranks in the industry.

Which globally active chip contract manufacturers are soaring, and which stars seem to be dimming? This is the recurring question that analysts at TrendForce, a leading market research institute, explore by examining the reported sales figures of the top ten contract manufacturers in the chip segment.

The figures for the first quarter of 2024 reveal expected trends, showing a typical off-season in the consumer segment. This pattern is well-established, as most electronics sales peak in late autumn due to events like Black Friday and the Christmas season, particularly in Western markets.

In the first quarter of 2024, chip orders from customers primarily focused on replenishing inventories, leading to minimal movement in the market. Projections for automotive and industrial equipment applications were frequently revised due to geopolitical developments and rising economic risks. The sole bright spot in the supply chain was Artificial Intelligence. The intensifying competition among companies ensures sustained high demand for AI hardware. Overall, analysts at TrendForce observed that the market exhibited weak dynamics.

These factors led to total revenue of the top 10 contract manufacturers of 29.2 billion US dollars, which represents a decrease of 4.3 percent compared to the previous quarter. However, there was a change in the ranking of the top 5 contract manufacturers.

Switch on ranks 3 to 5

The first place belongs, unsurprisingly, to the largest among the contract manufacturers, namely Taiwan Semiconductor Manufacturing Company (TSMC). Although TSMC made slightly less revenue in Q1 2024 compared to Q4 2023, its market share increased to a solid 61.7 percent (from 61.2 percent). Also firmly in the saddle is second place among manufacturers, namely Samsung. However, in comparison to TSMC, Samsung lost 0.3 percent of shares in the quarter-on-quarter comparison and thus fell from 11.3 to 11.0 percent.

It is believed that TSMC could benefit more from Apple's stockpiling strategy in Q2 than Samsung. Overall, the data suggests that Samsung's customers may have been overstocking in Q1, which would then result in a decrease in demand in Q2.

In the year-on-year comparison for the previous quarter (QoQ), there has been a change in third place, as GlobalFoundries (previously in 3rd place) was pushed not just to 4th, but all the way to 5th position by Chinese manufacturer SMIC. UMC remains in 4th place. The figures are as follows:

Top 5 Global Foundries in Q1 2024

• TSMC holds the first place with 61.7 percent market share.

• Samsung is in second place with 11.0 percent market share.

• SMIC is in third place with 5.7 percent market share.

• UMC is in fourth place with a 5.7 percent market share (but slightly less revenue).

• GlobalFoundries is in fifth place with a 5.1 percent market share.

After that, the HuaHong Group, Tower, PSMC, Nexchip and VIS line up, whose combined market share is 6.3 percent. According to TrendForce analysts, these Tier-2 foundries struggled with slow revival, fierce price competition and pronounced operational differences.

The QoQ growth of 4.3 percent of Huawei contract manufacturer SMIC is primarily attributed to the trend towards domestic IC production and the demand for peripheral ICs for OLED-DDI and CIS for new Chinese smartphones. Especially since a noticeable increase is expected for the second quarter, as the 618 shopping festival, comparable to Black Friday in the West, took place in China around June 18, 2024. Traditionally, many electronic goods are purchased for 618; in the past, the operators of the JD platform, who are also the inventors of this festival, reported that tech companies like Apple and Xiaomi turnover hundreds of millions of Yuan in the first few minutes. After Singles Day in November, 618 is the largest shopping event in the People's Republic - and a huge economic engine.

On the other hand, GlobalFoundries recorded a 16 percent decrease in wafer shipments in the first quarter of 2024 compared to the previous quarter; adjustments in orders for the automotive sector, industrial equipment, and traditional data centers, as well as the off-season for orders for the smartphone supply chain, contributed to this.