According to SEMI data, rising chip demand continues to drive sustained growth in global semiconductor foundry capacity. Capacity is projected to increase from 31.5 million wafers per month in 2024 to 33.7 million wafers per month in 2025 (calculated in 8-inch wafer equivalents), with growth rates of 6% and 7% respectively for 2024 and 2025. The current rise of AI industry has generated demand for high-end consumer electronics and computing power. The foundry industry, driven by AI and automotive electronics demand, is expected to maintain growth momentum in advanced processes and specialty processes over the coming years. Beneficiary targets include: SMIC (688981.SH, 00981), Huahong Company (688347.SH), and Xinlian Integration (688469.SH).

**What is Semiconductor Foundry?**

Semiconductor foundry refers to companies that specialize in semiconductor wafer manufacturing and production, accepting manufacturing contracts from other integrated circuit (IC) design companies without engaging in design themselves. Foundry services represent a crucial segment within the semiconductor industry. The foundry industry's upstream includes semiconductor materials, equipment, and related design service suppliers; the midstream encompasses foundry processing services; and the downstream includes wafer packaging and testing, as well as end applications in consumer electronics, semiconductors, photovoltaic cells, and industrial electronics.

Wafer manufacturing processes can be broadly categorized into advanced logic processes and specialty processes. By process node, they are divided into advanced processes and mature processes, with 14nm and below considered advanced processes, and 28nm and above as mature processes. As process nodes advance, required equipment investment increases substantially. Specialty processes (typically 40nm and above) require equipment investment of $2-3 billion per 50,000 wafer capacity, while advanced processes (28nm and below) require at least $4 billion in investment.

**Advantages and Challenges of Foundry Services**

Currently, foundry services demonstrate clear advantages including obvious localization trends and sustained market demand growth. However, foundry services face challenges including: geopolitical instability, significant first-mover advantages of leading players, dependence on key materials, and yield issues.

**Industry Market Status**

Based on semiconductor sales and the Philadelphia Semiconductor Index, the industry appears to be in an upward cycle. According to SEMI data, rising chip demand continues to drive sustained growth in global semiconductor foundry capacity. Capacity is projected to increase from 31.5 million wafers per month in 2024 to 33.7 million wafers per month in 2025 (calculated in 8-inch wafer equivalents), with growth rates of 6% and 7% respectively.

Global semiconductor sales are expected to grow at a 9% compound annual growth rate (CAGR) between 2025 and 2030, with total sales exceeding $1 trillion by 2030. The global foundry industry exhibits a "one leader, multiple strong players" competitive landscape. TSMC, as the industry leader, holds approximately 60% market share, ranking first. From a geographical distribution perspective, by 2027, mainland China will dominate mature processes, while Taiwan will maintain its leading position in advanced processes.

**Major Mainland Chinese Companies**

Currently, domestic companies including SMIC, Changchuan Semiconductor, Nexchip, and Xinlian Integration participate in the market. SMIC is one of the world's leading integrated circuit foundry companies and the leader in mainland China's integrated circuit manufacturing industry. Huahong Semiconductor is a globally leading specialty process foundry company and the industry's most comprehensive specialty process platform foundry enterprise. Nexchip's foundry products are widely applied in LCD panels, mobile phones, and consumer electronics. In 2022, Nexchip achieved the world's number one market share in LCD panel driver chip foundry services. Xinlian Integration focuses on four technology platforms: power devices, MEMS, BCD, and MCU, with AI becoming a new growth area.

**Technology Development Trends in Foundry Services**

Using TSMC as an example, global capacity continues to expand with market share concentrating among leading companies. 3/2nm processes dominate the high-end market, advanced processes are accelerating, and competition in mature processes remains intense. Packaging and process technologies are developing synergistically, with 2nm processes adopting GAAFET architecture. With AI development, HPC demand continues to expand, driving increasing demand for foundry services.

**Risk Factors**

Downstream demand slowdown, technology introduction falling short of expectations, customer onboarding falling short of expectations, and geopolitical risks.