The semiconductor industry has always been at the heart of technological innovation. From smartphones and electric vehicles to artificial intelligence and cloud computing, chips power almost everything around us. But the way these chips are made has changed dramatically over the years. Today, two major models dominate the industry—fabless and foundry.
1. Fabless semiconductor companies accounted for approximately 35% of the total semiconductor market in 2023
The fabless business model has grown significantly over the past few decades. Instead of building their own manufacturing plants (fabs), these companies focus purely on chip design, outsourcing production to foundries. This strategy allows them to save billions of dollars while remaining agile and innovative.
However, while 35% of the market is controlled by fabless companies, they rely heavily on foundries, especially Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Foundry, which dominate the industry.
Actionable Takeaway:
If you’re an investor or entrepreneur looking to enter the semiconductor space, fabless is a cost-effective and scalable model. However, securing reliable foundry partners is crucial to avoid supply chain disruptions.
2. Foundries like TSMC, Samsung, and GlobalFoundries control about 65% of semiconductor production
Foundries are responsible for manufacturing most of the world’s chips. Unlike fabless firms, they invest billions in factories, process development, and wafer fabrication. The top three foundries—TSMC, Samsung, and GlobalFoundries—control the majority of chip production, giving them enormous leverage over supply chains.
Actionable Takeaway:
For any company relying on semiconductor manufacturing, diversifying production sources is key to reducing risks associated with supply chain disruptions. Foundry capacity is often limited, and access to leading-edge nodes is fiercely competitive.
3. TSMC alone produces over 55% of the world’s semiconductor chips for fabless companies
TSMC has become the backbone of the semiconductor industry. The company’s dominance is largely due to its advanced process technology and ability to mass-produce chips at lower costs than competitors. Almost every major fabless company—Apple, AMD, NVIDIA, and Qualcomm—relies on TSMC to manufacture their products.
However, this dependence creates vulnerabilities. If geopolitical tensions or natural disasters disrupt TSMC’s operations, the entire semiconductor supply chain could be at risk.
Actionable Takeaway:
For companies, it is critical to establish backup manufacturing agreements with multiple foundries to mitigate risks. Governments are also pushing for more domestic semiconductor production to reduce reliance on Taiwan.
4. The global fabless semiconductor market grew by 13.5% CAGR over the last five years
The rise of artificial intelligence, 5G, and autonomous vehicles has fueled strong growth in fabless semiconductors. Unlike traditional integrated device manufacturers (IDMs) that both design and manufacture chips, fabless firms can move faster and focus purely on innovation.
This 13.5% annual growth rate highlights the increasing importance of design-focused companies in the chip industry. As more industries become tech-driven, demand for specialized chips will only increase.
Actionable Takeaway:
If you’re a startup or business in the semiconductor space, focusing on innovation in design rather than manufacturing can be a highly profitable strategy. AI, IoT, and specialized processors present massive opportunities.
5. Pure-play foundry revenue grew by 8.2% CAGR between 2018 and 2023
While fabless companies are thriving, foundries are also experiencing strong growth. The demand for high-performance, power-efficient chips is driving investments in foundry services. As more companies move away from in-house chip manufacturing, foundries are benefiting from higher production volumes and premium pricing on advanced nodes.
Actionable Takeaway:
Foundries are expected to continue growing, especially as industries like AI, automotive, and telecommunications drive higher chip demand. Investing in foundries or forming strategic partnerships with them can be highly beneficial.
6. Fabless companies spend an average of 18-22% of revenue on R&D
One of the biggest strengths of fabless companies is their focus on research and development (R&D). Since they don’t have to worry about factory operations, they can invest more in cutting-edge designs and new technologies.
This high R&D spend allows fabless firms to stay ahead of competitors and push performance and efficiency limits.
Actionable Takeaway:
If you’re running a semiconductor startup, prioritizing R&D is essential. Success in the chip industry is driven by innovation, not just cost savings. Partnering with universities and government-backed R&D programs can also provide an edge.
7. Foundries like TSMC and Samsung collectively invested over $150 billion in CapEx in 2022 alone
Building semiconductor fabs is one of the most expensive ventures in the world. A single state-of-the-art foundry can cost upwards of $20 billion. Leading foundries are continuously pouring billions into expansion and process node advancements (e.g., 3nm, 2nm, etc.).
Actionable Takeaway:
This massive investment means foundries will remain the gatekeepers of semiconductor production. Any fabless company looking to succeed must secure long-term manufacturing agreements with leading foundries.
8. NVIDIA, Qualcomm, AMD, and Broadcom are among the top four fabless semiconductor companies by revenue
The fabless model has produced some of the biggest names in tech. These companies have revolutionized computing, wireless communications, gaming, and AI.
NVIDIA, for instance, has become a dominant force in AI and high-performance computing, while Qualcomm controls a significant share of the smartphone chip market.
Actionable Takeaway:
For new semiconductor businesses, targeting niche markets like AI, networking, or IoT can be more profitable than competing in the general-purpose processor market. Specialization drives differentiation.
9. TSMC, Samsung Foundry, UMC, and GlobalFoundries dominate the pure-play foundry sector
The foundry industry is heavily concentrated. TSMC leads the pack, followed by Samsung Foundry, which has been making aggressive moves in advanced node manufacturing.
UMC and GlobalFoundries focus more on mature process nodes, serving industries like automotive, industrial, and IoT, where ultra-advanced chips aren’t always necessary.
Actionable Takeaway:
Choosing the right foundry partner depends on your product’s complexity. If you need cutting-edge performance, TSMC and Samsung are the top choices. For cost-effective, mature nodes, UMC or GlobalFoundries may be better options.
10. Chinese foundries like SMIC increased their market share from 4% in 2020 to 6% in 2023
China has been heavily investing in its semiconductor industry to reduce reliance on foreign suppliers. Semiconductor Manufacturing International Corporation (SMIC) is leading this effort, steadily increasing its market share despite facing U.S. sanctions and restrictions on accessing advanced chip-making tools.
China’s government has committed billions to support local chip production, and SMIC has made progress in manufacturing 7nm chips without access to extreme ultraviolet (EUV) lithography. However, catching up to TSMC and Samsung remains a massive challenge.
Actionable Takeaway:
Businesses looking to diversify semiconductor sourcing should keep an eye on China’s emerging foundries. While they are still behind in cutting-edge technology, they may offer cost-effective alternatives for mature process nodes (28nm and above).
11. The pure-play foundry market was valued at over $140 billion in 2023
The semiconductor foundry market is growing rapidly, fueled by rising demand for AI chips, automotive semiconductors, and 5G hardware. More fabless companies are outsourcing manufacturing, making foundries an essential part of the global tech supply chain.
TSMC, Samsung Foundry, and GlobalFoundries continue to dominate, while smaller players like UMC, SMIC, and Tower Semiconductor are carving out niche markets.
Actionable Takeaway:
For investors, foundries represent a stable long-term growth opportunity. The increasing shift toward outsourced chip manufacturing ensures demand for foundry services will remain strong for decades.
12. Fabless semiconductor companies are expected to grow by 10.4% CAGR through 2030
The fabless model has proven to be one of the most resilient and scalable approaches in the semiconductor industry. Unlike traditional IDMs, fabless companies don’t have to worry about maintaining billion-dollar fabs, allowing them to focus entirely on R&D and product innovation.
With demand growing for AI accelerators, custom silicon, and edge computing chips, the fabless model is expected to outpace traditional semiconductor manufacturing in terms of growth.
Actionable Takeaway:
Tech entrepreneurs and investors should consider building or funding fabless semiconductor startups, as this model offers high scalability and lower capital risk compared to running a foundry.
13. Over 80% of 5nm and below chip production comes from Taiwan-based foundries
Advanced semiconductor manufacturing is highly concentrated in Taiwan, with TSMC leading the charge. Taiwan produces most of the world’s leading-edge chips, used in smartphones, AI data centers, and high-performance computing.
This heavy concentration in Taiwan creates significant geopolitical risks. Any disruption—whether from political tensions or natural disasters—could lead to massive supply chain disruptions for the global tech industry.
Actionable Takeaway:
To minimize risk, companies should establish partnerships with multiple foundries in different regions and explore manufacturing options in South Korea, the U.S., and Europe.
14. 80% of the world’s leading fabless semiconductor companies are headquartered in the U.S.
The United States remains the global leader in semiconductor design, with companies like NVIDIA, AMD, Qualcomm, Broadcom, and Apple driving innovation. However, most of these companies rely on Asian foundries for production.
With the U.S. government pushing to bring chip manufacturing back home through initiatives like the CHIPS Act, we could see more domestic semiconductor production in the coming years.
Actionable Takeaway:
If you are looking to invest in or collaborate with top fabless semiconductor firms, the U.S. remains the dominant hub for cutting-edge chip design and innovation.
15. TSMC committed over $40 billion to advanced node (3nm and below) R&D in 2023
TSMC continues to invest heavily in next-generation semiconductor technology. The company is leading the transition to 3nm and 2nm chip production, which will power AI applications, next-gen smartphones, and quantum computing.
This massive investment gives TSMC a significant technological edge over competitors. Samsung is also developing 3nm chips, but its yields and efficiency still lag behind TSMC’s.
Actionable Takeaway:
Companies needing the most advanced chips should prioritize TSMC for production. However, keeping an eye on Samsung Foundry and Intel Foundry Services as alternatives is wise.
16. Fabless companies typically have gross margins of 55-65%, while foundries operate at 40-50% margins
Fabless companies enjoy higher profit margins because they don’t have the massive overhead costs associated with running fabs. Their primary expenses are R&D, chip design, and licensing, rather than billion-dollar manufacturing plants.
Foundries, on the other hand, must constantly invest in new fabrication technology to stay competitive, leading to lower margins despite high revenue.
Actionable Takeaway:
If you’re an investor, fabless semiconductor companies often deliver better profitability and return on investment compared to foundries. However, foundries offer stability and long-term growth potential.
17. AI and high-performance computing chips now account for 25% of fabless semiconductor revenue
The AI boom has reshaped the semiconductor industry. NVIDIA’s dominance in AI GPUs, along with the rise of AI chip startups, has made AI and HPC (high-performance computing) one of the fastest-growing semiconductor markets.
Major cloud providers, including Google, Amazon, and Microsoft, are now designing their own custom AI chips to optimize performance for machine learning and data analytics.
Actionable Takeaway:
If you’re a semiconductor company or startup, AI accelerators and HPC chips are lucrative markets to explore. Developing chips optimized for AI workloads, data centers, and edge AI devices can open up massive revenue opportunities.
18. Over 95% of all semiconductor startups are now fabless
The cost of building a foundry is prohibitively high for most startups, making the fabless model the preferred choice for new semiconductor companies. By focusing purely on chip design, startups can bring innovative solutions to market without massive capital investments.
This trend has led to a surge in specialized chip startups focusing on AI, blockchain, quantum computing, and 6G networking.
Actionable Takeaway:
If you’re launching a semiconductor startup, going fabless is the most cost-effective and scalable approach. Partnering with established foundries like TSMC or GlobalFoundries is crucial for production.
19. Over 65% of the world’s semiconductor foundry capacity is concentrated in Taiwan
Taiwan is the global hub for chip production, but this concentration poses a major geopolitical risk. Any conflict or disruption in Taiwan could cripple global semiconductor supply chains.
To reduce dependence on Taiwan, governments in the U.S., Europe, and India are investing in domestic chip production through subsidies and new manufacturing initiatives.
Actionable Takeaway:
Companies should diversify their supply chains by exploring partnerships with foundries in different regions. Relying on a single country for semiconductor production is increasingly risky.
20. Samsung Foundry holds approximately 16% of the total foundry market, compared to TSMC’s 55%
Samsung Foundry is the second-largest semiconductor foundry after TSMC, but it remains far behind in terms of market share. TSMC has long dominated the cutting-edge node market, while Samsung has struggled with lower yields and efficiency issues at advanced process nodes like 3nm and below.
Despite this, Samsung is aggressively investing in foundry expansion, including building new fabs in the U.S. and South Korea to attract more customers. The company is also targeting AI chip manufacturing and high-performance computing (HPC), sectors where TSMC currently has an edge.
Actionable Takeaway:
For businesses, TSMC remains the best choice for leading-edge chips, but Samsung Foundry is an emerging alternative that could become more competitive in the next five years. Keeping an eye on Samsung’s progress, especially in 3nm GAA (Gate-All-Around) technology, is important.
21. The US government pledged $52 billion to revitalize domestic chip manufacturing
The CHIPS and Science Act, signed in 2022, is the U.S. government’s largest effort to revive domestic semiconductor manufacturing. The goal is to reduce dependence on Taiwan and China by offering subsidies and incentives to chipmakers building fabs in the U.S.
Companies like Intel, TSMC, and Samsung have already committed to building new fabs in Arizona, Texas, and Ohio. However, constructing and ramping up production at these fabs will take years.
Actionable Takeaway:
If you’re in the semiconductor supply chain, now is the time to explore opportunities in U.S.-based chip manufacturing. Government support will fuel new investments, creating demand for suppliers, engineers, and technology partners.
22. The EU’s share of global semiconductor manufacturing is below 10% but aims to reach 20% by 2030
Europe has fallen behind in semiconductor manufacturing, with most production concentrated in Asia and the U.S.. However, with the EU Chips Act, Europe aims to double its share of global semiconductor production by investing in domestic fabs, R&D, and supply chain infrastructure.
Intel and STMicroelectronics have announced major fab expansion plans in Germany and France, signaling Europe’s ambition to become a key player in semiconductor self-sufficiency.
Actionable Takeaway:
Companies involved in semiconductor manufacturing, equipment, and materials should look for new business opportunities in Europe, as government funding will accelerate industry growth.
23. Global semiconductor fabs are expected to receive over $500 billion in investments by 2030
The semiconductor industry is experiencing an unprecedented investment boom, with governments and private companies pouring money into new fabs and R&D.
Much of this investment is driven by:
- AI chip demand
- 5G expansion
- Autonomous vehicle technology
- Quantum computing
TSMC, Samsung, Intel, and SMIC have announced massive capital expenditures to build next-generation fabs.
Actionable Takeaway:
Businesses in the semiconductor equipment and materials sector should prepare for strong demand as new fabs require specialized machinery, chemicals, and wafers to operate.
24. Automotive chip demand is driving 15% YoY growth in both fabless and foundry sectors
The automotive industry is now one of the biggest consumers of chips, thanks to the rise of electric vehicles (EVs), self-driving cars, and advanced driver-assistance systems (ADAS).
Companies like Tesla, Nvidia, and Qualcomm are pushing automotive-grade semiconductor technology, increasing demand for power-efficient chips and AI processors.
Actionable Takeaway:
Semiconductor companies should prioritize the automotive sector, which is one of the fastest-growing markets for chips. Investing in automotive chip R&D and supply chain partnerships will be critical.
25. 50% of leading semiconductor companies are transitioning to chiplet-based architectures
Chiplet technology is becoming a game-changer in semiconductor design. Instead of manufacturing a single monolithic chip, companies are using smaller chiplets combined into a single package to improve performance and reduce costs.
AMD, Intel, and Apple are leading this trend, especially in high-performance computing and AI applications.
Actionable Takeaway:
Fabless companies should explore chiplet-based designs to boost efficiency, reduce manufacturing costs, and improve performance scalability.
26. Over 70% of fabless semiconductor companies have 5G-enabled products in their portfolios
The global rollout of 5G networks has driven massive demand for specialized 5G chips. Fabless companies like Qualcomm, MediaTek, and Broadcom have built custom 5G modems, RF chips, and baseband processors to power next-generation smartphones, IoT devices, and infrastructure.
Actionable Takeaway:
If you’re in the semiconductor space, 5G technology remains a profitable sector. Investing in wireless communication chips will ensure long-term demand as global 5G adoption expands.
27. Intel aims to capture 10% of the foundry market by 2030 with Intel Foundry Services (IFS)
Intel, traditionally an integrated device manufacturer (IDM), is now pivoting towards the foundry business to compete with TSMC and Samsung. Intel Foundry Services (IFS) aims to manufacture chips for third-party companies, with plans to produce custom AI, HPC, and enterprise chips.
While Intel is behind in advanced process nodes, its push into foundry services could reshape the competitive landscape.
Actionable Takeaway:
Fabless companies should monitor Intel’s foundry expansion as an alternative to TSMC and Samsung, especially for domestic U.S.-based chip production.
28. Total semiconductor industry revenue exceeded $600 billion in 2023
The semiconductor industry is a $600 billion global market, with projections to surpass $1 trillion by 2030. The biggest growth drivers include:
- AI and machine learning
- 5G and wireless communications
- Automotive electronics
- IoT and edge computing
Actionable Takeaway:
The semiconductor industry is one of the strongest investment sectors. Companies involved in chip design, manufacturing, and equipment will continue to see significant long-term growth.
29. A leading-edge 3nm fab costs $15-$20 billion to build and takes 3-5 years to become operational
Building a modern semiconductor foundry is one of the most expensive and time-consuming engineering projects in the world. The cost of cutting-edge fabs is rising due to increasing complexity, material shortages, and geopolitical challenges.
TSMC, Intel, and Samsung are investing billions into new fabs, but construction delays and high costs remain major hurdles.
Actionable Takeaway:
Semiconductor companies must plan for long-term production capacity and form partnerships with foundries early to avoid manufacturing bottlenecks.
30. Over 80% of advanced chips are produced in Asia, leading to global supply chain vulnerabilities
Asia dominates high-tech chip manufacturing, but this concentration has created global supply chain risks. Natural disasters, geopolitical tensions, and export restrictions can disrupt semiconductor production at any time.
The U.S. and Europe are actively investing in domestic fabs, but shifting chip production away from Asia will take years.
Actionable Takeaway:
Businesses relying on advanced semiconductors should diversify sourcing strategies and explore alternative manufacturing regions to reduce supply chain risks.
wrapping it up
The semiconductor industry is at a pivotal moment. The competition between fabless companies and foundries is intensifying, with each playing a crucial role in shaping the future of chip manufacturing.
While fabless firms like NVIDIA, AMD, and Qualcomm focus on innovation and design, foundries like TSMC, Samsung, and Intel Foundry Services are racing to expand their manufacturing capacity and technological capabilities.
