According to Counterpoint Research's analysis, the chip foundry industry is expected to grow by 20% in 2025, a slight slowdown from the 22% growth rate in 2024. This growth was largely driven by TSMC and other smaller competitors that have seized the AI wave. The expansion of AI in data centers and edge computing is driving demand for chips for advanced processes, which TSMC has benefited from with its 5/4nm and 3nm chips and advanced packaging technologies.
Growth Trends and Drivers
AI and the rise of data centers
The widespread use of AI in data centers and edge computing is driving the demand for advanced process node chips. Taiwan Semiconductor Manufacturing Company (TSMC) has seized this growth opportunity with its 5/4nm and 3nm chip manufacturing capabilities, combined with proprietary CoWoS advanced packaging technology. TSMC expects sales to grow by up to 26% in 2025, and capacity utilization at its advanced nodes is expected to remain above 90%.
Capacity utilization and market dynamics
It is estimated that the overall foundry capacity utilization rate will be about 80% in 2025, of which the utilization rate of advanced nodes will be higher than that of mature nodes. TSMC will continue to benefit from high-end smartphone demand and AI-related orders from cloud service providers such as Amazon, Microsoft, and Google. However, the recovery at the mature node (28/22nm and beyond) has been relatively slow, due to weak end-market demand such as consumer electronics, networking, automotive, and industrial.
Enterprise Competitive Landscape
TSMC's leadership
TSMC has a market share of more than 60% in the foundry industry, and its leadership in advanced nodes and advanced packaging technologies enables it to continue to lead the industry. In 2025, TSMC's capital expenditures are expected to be between $38 billion and $42 billion, up from about $29.8 billion in 2024. TSMC will continue to invest in R&D to maintain its technological edge in high-performance computing and AI applications.
The rise of Intel
Intel is also gaining growth through its EMIB and Foveros 3D packaging technologies. Foveros 3D stacking is primarily used for Intel's own products, such as Meteor Lake, which features a chiplet architecture. As semiconductor design complexity increases, Intel expects to continue to invest in advanced packaging R&D to support its product roadmap and attract external customers.
Opportunities for other foundries
Foundries with strong silicon-on-insulator (SOI) capabilities, such as GlobalFoundries, Tower, and TSMC, will benefit from the growing silicon photonics market. However, the size of this market is still relatively small compared to the demand for mainstream semiconductors.
Adjustments in the automotive semiconductor market.
Figure: Year-on-year growth of foundries (Source: Counterpoint Research)
Inventory adjustments and demand pressures
Counterpoint expects the inventory adjustment of automotive semiconductors to continue into the first half of 2025, delaying the recovery. High inventory levels at global integrated equipment manufacturers, such as Infineon and NXP, could lead to a reduction in foundry outsourcing at mature nodes, further putting pressure on capacity utilization at mature nodes. Although the semiconductor content per vehicle is increasing, the automotive semiconductor market is currently facing a correction, with the automotive market having been weak for several quarters in a row, with high interest rates further dampening demand.
Long-term outlook
Sustained growth and technological innovation
From 2025 to 2028, the foundry industry is expected to grow at a CAGR of 13-15% from 20% in 2025. Long-term growth will be driven by advancements in advanced process nodes such as 3nm, 2nm and below, as well as the accelerated adoption of advanced packaging technologies such as CoWoS and 3D integration. These innovations will be the industry's primary growth engine over the next 3-5 years, driven by increased demand for high-performance computing and AI applications.
Changes in the chip equipment market
According to SEMI, the foundry industry will continue to lead semiconductor equipment procurement. Capacity in the industrial industry is expected to grow by 10.9% year-over-year in 2025, from 11.3 million wafers per month in 2024 to a record 12.6 million wafers. The memory industry grew by 3.5% in 2024 and is expected to slow to 2.9% in 2025. Strong demand for generative AI is driving significant changes in the memory market, with a surge in demand for high-bandwidth memory (HBM) that is diverging from capacity growth trends in the DRAM and NAND flash segments.
