Market Overview: AI Drives Demand, Foundry Capacity Tight
In July 2026, the Asia-Pacific semiconductor foundry market (i.e., wafer foundry) entered a new growth peak. Driven by the global AI chip demand boom, smartphone recovery, and continued automotive electrification, major foundries saw capacity utilization rates generally exceed 90%, with advanced processes even in short supply. According to the latest report from IC Insights, the Asia-Pacific foundry market revenue in Q2 2026 grew 8.2% quarter-over-quarter and 15.3% year-over-year, reaching approximately $35 billion and accounting for 78% of the global foundry market.
TSMC: 3nm Capacity Full, Preparing for 2nm
As the global foundry leader, TSMC continues to lead in advanced process nodes. In its Q2 earnings report released on July 20, the company's 3nm process revenue contributed 25%, with capacity utilization near 100%. TSMC President C.C. Wei stated on the earnings call that driven by strong orders for AI accelerators and high-end smartphone chips, 3nm orders are booked through early 2027. Meanwhile, TSMC's 2nm pilot line at Hsinchu Baoshan has successfully taped out, with mass production expected in 2027 using GAA (Gate-All-Around) architecture.
TSMC recently announced an expansion of investment in Japan. The second Kumamoto fab, a joint venture with Sony and Denso, will begin production in 2027, mainly focusing on 6/7nm processes to meet automotive and industrial chip demand. This move is seen as part of TSMC's strategy to diversify geopolitical risks while solidifying its leadership in the Asia-Pacific foundry market.
Samsung Electronics: Advanced Node Challenges, Actively Seeking Breakthroughs
Samsung Electronics has faced setbacks in catching up on 3nm. According to Korean media reports, the yield of Samsung's self-developed Exynos 2600 processor using 3nm GAE (Gate-All-Around) is below 60%, delaying its planned mass production from end-2026 to 2027. This has directly impacted Samsung's foundry division's external customer acquisition, with its 3nm customers currently limited to partial Qualcomm orders and one AI startup.
To turn the situation around, Samsung Electronics Vice Chairman Lee Jae-yong urgently recalled overseas executives on July 25 for a "Foundry Strategy Symposium." The meeting decided to accelerate 1.4nm process development and plan to introduce backside power delivery (PowerVia) by 2027 to differentiate. Additionally, Samsung announced increased investment in its Taylor fab in the U.S. to build a dedicated 5nm line for American AI chip companies, with production expected by 2028.
Chinese Mainland Foundries: Mature Nodes Rise, Rapid Capacity Expansion
Under equipment export restrictions on advanced processes, Chinese mainland foundries focus on expanding mature nodes (28nm and above). SMIC announced on July 15 that its three 12-inch fabs in Beijing, Shanghai, and Shenzhen have completed expansion, reaching a combined monthly capacity of 350,000 wafers, mainly serving IoT, power management, CIS image sensors, and other demands. Hua Hong Semiconductor also plans to reach 100,000 wafers per month at its Wuxi 12-inch fab by end-2026.
Notably, Chinese mainland foundries have achieved breakthroughs in specialty processes. For example, SMIC's BCD (Bipolar-CMOS-DMOS) process has reached 90nm mass production, attracting automotive battery management chip customers. However, due to Western high-end equipment restrictions, development of advanced nodes still faces bottlenecks, and these foundries are expected to remain focused on 28nm and above nodes for the next two years.
Geopolitical Factors: US Restrictions Escalate, Japan and India Become New Hotspots
U.S. chip export restrictions on China further escalated in 2026. In early July, equipment for processes below 14nm was added to the comprehensive embargo list, and U.S. citizens were restricted from providing technical support to Chinese mainland foundries. This has forced some design companies to accelerate "de-China" foundry transfers, benefiting UMC, GlobalFoundries, as well as emerging foundries in Japan and India.
The Japanese government seized the opportunity to promote its "Semiconductor Revival Plan," announcing on July 20 an additional $20 billion subsidy to Rapidus (Japan's advanced foundry project), targeting 2nm chip mass production by 2027. Meanwhile, the Indian government approved a 28nm wafer fab project in collaboration with Tata Group and Powerchip, with an investment of $11 billion, expected to start production by 2028. These new entrants are reshaping the competitive landscape of the Asia-Pacific foundry market, but in the short term, TSMC's dominance remains unchallenged.
Investment Perspective: Focus on Equipment and Service Chains
For investors, foundry prosperity often transmits upstream along the supply chain. Semiconductor equipment companies in the Asia-Pacific region—such as Tokyo Electron (TEL) in Japan, ASML in the Netherlands (though not Asia-Pacific, deeply involved in regional supply), and NAURA Technology in China—have all seen order growth. Additionally, silicon wafer suppliers Shin-Etsu Chemical and SUMCO, as well as semiconductor material companies for gases and chemicals, benefit from capacity expansion.
OceanRing Asia-Pacific Foundry Market Watch notes that current foundry valuations already reflect some optimistic expectations. Looking ahead, attention should be paid to AI demand sustainability, geopolitical risks, and potential overcapacity. For long-term investors, consider leading companies with advanced process moats, as well as mature node manufacturers benefiting from import substitution.
In summary, the Asia-Pacific foundry market will maintain high prosperity in H2 2026, but competitive divergence will intensify. TSMC continues to lead with technological advantages, Samsung faces catch-up pressure, and Chinese mainland foundries carve out a differentiated development path. Market participants should maintain flexible strategies to capture structural opportunities.
