The wafer foundry market is projected to experience significant recovery by 2025, driven by multiple key factors and strategic responses from major vendors, according to TrendForce.
The wafer foundry market is expected to grow by 20 percent annually, up from 16 percent in 2024, as demand recovers in specific sectors and advanced technologies continue to push innovation.
Growth Drivers in the Wafer Foundry Market
Advanced Processes (3nm, 5/4nm Nodes): High-performance computing (HPC) products, flagship smartphones, and AI chips that rely on advanced manufacturing nodes (3nm, 5nm, and 4nm) are maintaining strong demand. The utilization rates for these advanced nodes remain high, offsetting weak consumer demand. This trend is expected to continue into 2025 as 3nm processes become mainstream for high-end PCs, mobile processors, and AI applications.
Automotive and Industrial Recovery: After facing inventory corrections throughout 2024, the automotive and industrial control sectors are expected to return to normal restocking levels by 2025. This sector, along with increased wafer consumption per unit in edge AI and industrial automation, is projected to significantly boost demand.
AI and Cloud Infrastructure: Growth in cloud AI infrastructure and the increasing need for AI chips, especially for applications like edge computing, are additional drivers. AI-related demand will also spur further investment in advanced packaging technologies like 2.5D, which is expected to grow by 120 percent in 2025.
Restocking and Supply Chain Improvements: As inventories across multiple industries recover to healthier levels, demand for general-purpose servers, automotive components, and industrial products will support growth. Mature processes such as 28nm, 40nm, and 55nm are expected to see a rise in utilization rates, contributing to the overall market expansion.
Vendor Strategies
TSMC (Taiwan Semiconductor Manufacturing Company): TSMC is positioned to outpace the industry growth rate, with a focus on scaling advanced processes and 2.5D packaging. The company is expected to benefit from high utilization rates in its 3nm and 5/4nm nodes, which are essential for AI, HPC, and premium smartphone applications. TSMC’s expansion into advanced packaging solutions is another key driver for revenue growth, as demand for AI chips continues to surge.
Non-TSMC Foundries: While non-TSMC foundries may face challenges due to weaker consumer demand, they are expected to see a revenue growth of around 12 percent in 2025. This improvement will be driven by sectors like automotive, industrial, and AI-related power demand. Their recovery is further supported by healthier inventories among integrated device manufacturers (IDMs) and fabless clients.
Capacity Expansion and Pricing Pressures: Foundries are expected to introduce postponed capacity expansions in 2025, particularly in mature processes like 28nm, 40nm, and 55nm. However, the influx of new capacity coupled with low visibility in end-market demand could lead to price pressures, particularly in mature nodes. This will necessitate careful strategic planning to balance supply and demand dynamics while maintaining profitability.
Challenges Ahead
Despite the promising growth outlook, wafer foundries face several challenges in 2025. These include uncertainties around macroeconomic conditions, the high cost of AI deployment, and the impact of expanding capacities on pricing. Vendors will need to navigate these complexities while capitalizing on the recovery in automotive, industrial, and AI markets.
In summary, the wafer foundry market is poised for a strong rebound in 2025, driven by advancements in semiconductor manufacturing processes, AI demand, and recovery in the automotive sector. Key players like TSMC and other foundries are aligning their strategies to capture growth opportunities, but they will need to stay agile in the face of potential market fluctuations and price pressures.
