Advanced packaging and AI chiplet demand fuel Foundry 2.0 growth, pushing TSMC to 35% share as others face headwinds.
As the new wave of semiconductor fabrication around the world unfolds (Foundry 2.0), the global market grew 13% year-on-year (YoY) in Q1 2025 to $72.29 billion, up from $64.25 billion a year earlier, according to Counterpoint Research’s data.
This increase was driven by sustained demand for artificial intelligence (AI) and high-performance computing (HPC) chips, which has accelerated the adoption of advanced process nodes (3nm, 4/5nm) and packaging technologies such as CoWoS.
At the same time, it signals a more profound structural shift in the semiconductor value chain.
Breaking down the latest data, pure foundries expanded their share of Foundry 2.0 revenue from 48% in Q1 2024 to 53% in Q1 2025, representing a 26% increase in revenue.
Simultaneously, outsourced semiconductor assembly and test (OSAT) vendors retained a 13% share but posted a 6.8% revenue gain, benefiting from the rising demand for advanced packaging, especially in AI applications.
Conversely, non-memory integrated device manufacturers (IDMs) saw their share decline from 33% to 28%, with revenues falling 3% YoY. The report attributed this to continued weakness in the automotive and industrial sectors, where recovery remains uneven.
Meanwhile, photomask and related vendors maintained a consistent 6% share, driven by 3.2% growth, which was aided by the increased use of EUV lithography and the complexity of chiplet-based design, as well as growth in the supply chain, as demand for advanced node patterning and chiplet integration rises.
While Foundry 1.0 was manufacturing-led, Foundry 2.0 integrates a broader range of players, pure-play foundries, non-memory IDMs, OSAT vendors, and photomask makers. This evolving model supports the system-level optimisation now required to meet the technical complexity of AI-driven applications.
In terms of company-level performance, Taiwan Semiconductor Manufacturing Company (TSMC) led the market with a 35% share, supported by large-scale AI chip orders and a strong position in advanced nodes.
Among other players, Intel gained modest traction through its 18A and Foveros platforms, while Samsung Foundry struggled with persistent yield issues in its 3nm GAA process.
The OSAT providers ASE, SPIL, and Amkor expanded their capacity to meet packaging overflow from TSMC. However, production constraints and yield issues continue to limit throughput.
Commenting on market dynamics, William Li, Senior Analyst at Counterpoint, said, “AI adoption remains the centrepiece of semiconductor growth. TSMC and packaging players are emerging as key beneficiaries in this transformation.”
As highlighted in the analysis, system-level co-design and chiplet optimisation are expected to define the next phase of competitiveness.
With the Foundry 2.0 model becoming integrated, effective coordination across chip design, manufacturing, and packaging will be essential. Counterpoint highlighted, those who adapt quickly to this shift stand to gain a competitive edge.
