Foundries Post Q3 Profits and Losses
Updated: Intel and Samsung reported losses in the foundry biz, while GlobalFoundries and UMC remained profitable. And SMIC is working on 5nm.
By Mark LaPedus
Several foundry vendors, or companies that provide foundry services, reported mixed results for the third quarter of 2024.
Intel and Samsung reported losses in their respective foundry businesses for the quarter, while GlobalFoundries and UMC remained profitable. SMIC is profitable and is working on a 5nm process. Meanwhile, Hua Hong and Tower recently posted their results.
The foundry industry can be split into two groups: pure-play foundries and IDM (integrated device manufactures) foundries. Pure-play foundries manufacture chips for others. They don’t design or sell their own chip products. TSMC, SMIC, UMC, GlobalFoundries, Tower and others are pure-play foundry vendors.
Intel and Samsung are IDM foundries. Both design and sell their own chips. They also provide foundry services for other companies.
Nonetheless, TSMC, the world’s largest foundry vendor, recently reported its results for the third quarter. GlobalFoundries, Intel, Samsung and UMC recently reported their results (See below). SMIC is expected to post its results later this week.
Samsung
Overall, Korea’s Samsung posted sales of 79.1 trillion won ($57.4 billion) in the third quarter of 2024, up 7% from the previous quarter and up 17% year-over-year. Operating profit was 9.18 trillion won ($6.7 billion) for the quarter, down by 1.3% from the previous quarter but up 6.8% year-over-year.
Samsung posted mixed results in its semiconductor business. The company’s memory business experienced strong demand in the server market. “But mobile demand was relatively soft due to inventory adjustments by some customers, and the supply-demand situation was impacted somewhat by the increasing supply of legacy products in the China market,” according to Samsung.
Samsung, the world’s second largest foundry vendor, continues to struggle here. The company’s foundry business saw its overall earnings decline compared to the previous quarter due to the impact of “one-off” costs.
The company is temporarily shutting down its production lines at its foundry business in an effort to reduce costs, according to a report from The Chosun Daily, a Korean-language newspaper of record in South Korea. Samsung’s foundry business recorded losses amounting to 1 trillion won in the third quarter, according to a report.
In 2022, Samsung began shipping chips based on its latest 3nm process, but it continues to struggle with its yields here. The company’s 3nm process is based on a new transistor technology called gate-all-around (GAA).
Samsung recently released its process design kits (PDKs) for the 2nm node, which is slated for 2025. The 2nm process is also based on GAA technology.
A process is a term used in the semiconductor industry that describes the design rules and recipes used in manufacturing a given chip line. In the semiconductor world, there are different process nodes, and each one is represented by a number and a unit of measurement (i.e. 3nm, 2nm).
SMIC
China’s Semiconductor Manufacturing International Corp. (SMIC), the world’s third largest foundry vendor, reported sales of $2.17 billion in the third quarter of 2024, compared to $1.9 billion in previous quarter and $1.6 billion a year ago.
The company’s revenue in the third quarter increased by 14% sequentially to $2.17 billion, a record high, reaching the milestone of $2 billion in a single quarter for the first time. Sales jumped 34% year-over-year.
Net profit for the quarter reached $148.8 million, down 9.6% from the previous period but up 58.3% from a year ago.
The overall utilization rate increased to 90.4% in the quarter, up from 85.2% in the previous period. In the fourth quarter, the company says revenue is expected to be flat to up 2% sequentially.
For some time, SMIC has been shipping chips based on its internally-developed 7nm foundry process. In the fab, SMIC is manufacturing 7nm chips using less advanced equipment, including traditional 193nm optical lithography and multiple patterning techniques.
It would be easier to manufacture 7nm chips using extreme ultraviolet (EUV) lithography, a next-generation chip-manufacturing technology. But China is blocked from obtaining ASML’s EUV lithography scanners.
Nonetheless, 7nm represents China’s most advanced process. Still, SMIC is roughly two generations behind Taiwan’s TSMC and Korea’s Samsung.
Now, after a series of delays, SMIC is attempting to ramp up its new 5nm process, although it is struggling with its yield issues here. SMIC is also using 193nm lithography and multi-patterning here.
SMIC has installed some 5nm manufacturing capacity within a fab in China, according to industry sources. And for some time, SMIC is trying to manufacture a 5nm system-on-a-chip (SoC) line, which is designed by HiSilicon, a fabless IC design house in China.
HiSilicon’s 5nm SoC is an application processor, which is expected to be incorporated in Huawei's upcoming Mate 70 smartphone line. The Mate 70 is supposed to be released in November of 2024.
“In terms of the upcoming flagship Mate 70 device, market expectations are for it to be based on the latest HiSilicon chip that will be manufactured by SMIC on a process that is similar to "5nm," according to a recent research note from TD Cowen, an investment banking firm. “Huawei is positioning its upcoming Mate 70 flagship to be the key C2H24 product during the iPhone's seasonal peak. While the company has yet to launch the device, our field work suggests it could have adequate production volumes by mid-November to support a launch. The supply chain believes the Mate 70 is limited by low chip yields on SMIC's ‘5nm’ process. Huawei is targeting to build ~17M Mate 70 units during its product cycle.”
Meanwhile, in a blog, Counterpoint Research provided a new analysis of SMIC’s results.
UMC
Taiwan’s United Microelectronics Corp. (UMC), the world’s fourth largest foundry vendor, reported sales of NT$60.49 billion (US$1.9 billion) in the third quarter of 2024, up 6.5% from the previous quarter and up 6% year-over-year.
Net income was NT$14.47 billion (US$457 million) for the quarter, up 4.8% from the previous quarter but down 9.5% year-over-year.
UMC’s 22nm/28nm processes represented 35% of the company’s sales in the quarter, while 40nm technology was 13% of sales. For the third quarter, UMC’s fab capacity utilization rate was 71%.
For the fourth quarter, UMC provided the following guidance:
*Wafer shipments: flat
*ASPs: flat
*Capacity utilization: high-60% range
*2024 capital spending: US$3.0 billion
“In the third quarter, we delivered results that were in line with guidance. In particular, wafer shipments grew more than expected, increasing 7.8% sequentially due to strong demand for 22nm/28nm products,” said Jason Wang, co-president of UMC. “With regards to Q4 outlook, we are seeing demand stabilizing across end markets and a clear downward trend in inventory levels.”
In a blog, Adam Chang, a research analyst at Counterpoint Research, provided some analysis of UMC’s results.
GlobalFoundries
U.S.-based GlobalFoundries (GF), the world’s fifth largest foundry vendor, reported sales of $1.739 billion for the third quarter, up 7% from the previous quarter but down 6% year-over-year.
Net income was $178 million for the quarter, up 15% from the previous quarter but down 29% year-over-year.
From an end market perspective, GF realized sales of $868 million in the smart mobile device segment in the third quarter, up 14% sequentially and up 11% year-over-year. Automotive sales were $256 million during the quarter, down 5% sequentially and down 16% year-over-year.
"In the third quarter, the GF team continued to execute next generation opportunities with our customers, by securing key design wins across our growing portfolio of essential chip technologies,” said Thomas Caulfield, president and chief executive of GF.
For the fourth quarter, GF provided the following outlook:
*Sales: $1.800 billion to $1.850 billion
*Net income: $161 million to $236 million
Meanwhile, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) imposed a civil penalty of $500,000 against GlobalFoundries. The penalty relates to GlobalFoundries’ shipments of semiconductor wafers valued at approximately $17.1 million to China’s SJ Semiconductor (SJS), a company on the BIS Entity List, without the requisite license or other authorization from BIS.
GlobalFoundries voluntarily disclosed the conduct to BIS, cooperated with the investigation by BIS’s Office of Export Enforcement (OEE), and took remedial measures after discovering the conduct at issue, which resulted in a reduction in the penalty.
Intel
In case you missed it, Intel’s third-quarter results were horrific. Last week, U.S.-based Intel reported sales of $13.3 billion, down 6% year-over-year. Citing a slew of charges, the company also posted a loss of $16.6 billion, or minus $3.89 per share, in the quarter, compared to a profit of $300 million, or $0.07 a share, a year ago.
Intel’s foundry business reported sales of $4.4 billion during the quarter. The company’s foundry business lost $5.8 billion during the quarter. Intel has reported several consecutive quarterly losses in the foundry segment.
The vast majority of Intel’s foundry sales are derived from its own chips. On the positive side, Intel’s chip-packaging operation is profitable.
Years ago, Intel was the leader in process technology. Several years ago, though, Intel was late in shipping its 10nm process (now called 7nm), causing it to fall behind TSMC and Samsung in technology.
So recently, Intel has been developing five process nodes in the last four years. Intel’s goal is to play catch-up in terms of process technology against TSMC and Samsung. To date, though, Intel is still behind. To gain parity with TSMC and Samsung, Intel will need to release its upcoming 18A process on time in 2025. Still in R&D, 18A is a next-generation technology based on a new GAA transistor structure and backside power delivery scheme.
In 2025, Intel hopes to ship its first processors based on its 18A process. These processors are codenamed Panther Lake and Clearwater Forest.
There is some uncertainly here amid an ongoing reorganization at Intel. Navid Shahriari, senior vice president and co-general manager of design engineering at Intel, is assuming a new role and leading the company’s technology development efforts in Oregon, according to a recent report from the Oregonian.
He is assuming that role from Ann Kelleher, who is still with Intel, according to the report. On Intel’s website, Kelleher is listed as executive vice president and general manager of Foundry Technology Development at Intel.
Separately, Intel was recently awarded $3 billion in direct funding under the Secure Enclave program to produce leading-edge semiconductors for the U.S. government. Spearheaded by the U.S. government, the Secure Enclave program supports the secure manufacturing of advanced microelectronics for national security purposes.
The $3 billion in direct funding for the Secure Enclave program is new funding. It is different from the CHIPS Act. In March of 2024, the Biden-Harris Administration and Intel reached a separate proposed funding agreement for up to $8.5 billion to support the construction and modernization of semiconductor commercial fabrication facilities. Intel has not received any of that proposed funding yet, but the U.S. government has said that they expect to begin disbursement by the end of the year.
Hua Hong, Tower
China’s Hua Hong Semiconductor, the world’s sixth largest foundry vendor, reported its consolidated results for the quarter ending Sept. 30. Revenue was $526.3 million, 7.4% lower than 3Q 2023 and 10.0% over 2Q 2024. Net profit was US$44.8 million, 222.6% over 3Q 2023 and 571.6% above 2Q 2024.
Isreal’s Tower Semiconductor, the world’s seventh largest foundry vendor, reported its results for the third quarter ended Sept. 30. Revenue for the third quarter of 2024 was $371 million as compared to $351 million for the second quarter of 2024, representing 6% quarter-over-quarter growth. Revenue for the third quarter of 2023 was $358 million.
Net profit for the third quarter of 2024 was $55 million, or $0.49 basic and diluted earnings per share, as compared to net profit of $53 million, or $0.48 basic and diluted earnings per share for the second quarter of 2024, which included $3 million Japan operations restructuring income net impact. Net profit for the third quarter of 2023 was $342 million, or $3.10 basic and $3.07 diluted earnings per share, and included $290 million net from the Intel merger contract termination.
The company is announcing the execution of a $350 million investment plan to expand its silicon photonics and silicon germanium (SiGe) fab capacity. This plan includes the qualification and ramp-up of 200mm capacity, both in San Antonio and Migdal Haemek, and in its 300mm facility in Uozu.
Tower Semiconductor guides revenue for the fourth quarter of 2024 to be $387 million, with an upward or downward range of 5%.