The foundry market landscape is in flux. TSMC dominates with a market share of more than 86 percent, but a decline is expected this year. Bottlenecks in back-end processes have opened gaps for challengers. As cracks emerge in the one-horse race, Samsung Electronics, Intel and SMIC are forming a pursuit front through different routes.

The foundry market is entering a new phase. Counterpoint Research said global foundry market revenue last year rose 16 percent from a year earlier to $320 billion. It attributed the increase to solid demand for AI GPUs and AI ASICs across advanced processes and advanced packaging. Here, "Foundry 2.0" is an expanded concept that goes beyond pure contract manufacturing to include non-memory IDMs, outsourced assembly and test (OSAT) firms and photomask suppliers. It is used to mean that deeper integration across design, manufacturing and packaging is shifting the market's competitive axis itself.

With the competitive arena expanding, TSMC's market share is expected to dip slightly. Samsung Foundry and SMIC are expected to exploit that gap this year. As front-end process scaling nears physical limits, the bottleneck for performance gains is moving to back-end processes such as advanced packaging, reshaping the market structure. With TSMC supply shortages persisting, AI customers are moving to secure additional capacity through long-term contracts with OSAT companies.

At a time when the one-horse race is showing cracks, Samsung Electronics, Intel and SMIC are forming a pursuit front through different routes. Samsung Electronics is seeking a breakthrough with preemptive mass production at 2 nanometres, SMIC with volume-based tactics rooted in domestic demand, and Intel by securing major AI customers. The era of competing on manufacturing capability alone is fading, and an all-out contest spanning processes, packaging and customer wins is taking shape.

In particular, a rare opportunity has opened for Samsung Electronics' foundry business. A first card is mass-producing the 2-nanometre process for the first time in the world through the Exynos 2600 installed in the Galaxy S26. Just as Apple previously led the shift to 3 nanometres, Samsung is now stepping in as an early adopter of 2 nanometres. It is also exploring foundry cooperation with Qualcomm. Counterpoint assessed this as a strategy that could be a win-win for both companies in the smartphone market. Demand for the existing 4-nanometre process also remains relatively solid. Kyeong-su Kang (강경수), a director at Counterpoint Research, analysed that Samsung Electronics is likely to grow in 2026 when considering volume and improvements in average selling prices (ASP).

But the window of opportunity will not stay open for long. The cost structure of 2 nanometres is a variable. Counterpoint estimates that 2-nanometre wafer costs will be about 30 percent higher than 3 nanometres. As it will be difficult for fabless companies such as Qualcomm and MediaTek to absorb all of the higher manufacturing costs, price increases for next-generation flagship application processors (AP) are an inevitable situation.

So, the ability to bear costs before 2 nanometres spreads in earnest will soon determine foundry competitiveness. Shipments of 3-nanometre and 2-nanometre processes are expected to grow 18 percent in 2026 from a year earlier and be installed in about 1 in 3 smartphones overall. That is why this year is a turning point for Samsung Foundry.

◆ As Intel returns alongside China's volume push... pursuit front expands

The competitors pushing up from behind are also not easy opponents. China's SMIC posted 2025 revenue growth of 16 percent from a year earlier, and Nexchip grew 24 percent, continuing a volume push based on domestic demand. SMIC plans to add new capacity of 40,000 wafers a month by the end of this year, on a 12-inch wafer basis. It also increased output by 50,000 wafers a month last year. It is pressing ahead with expansion even while accepting margin pressure.

Zhao Haijun, SMIC's co-CEO, explained on an earnings conference call that high capital spending led to rapid revenue growth but put significant depreciation pressure on gross margin. But China accounted for 87.6 percent of revenue in the fourth quarter, meaning growth momentum is solid on domestic demand alone even under a U.S. sanctions environment.

Intel is also a variable. Since CEO Lip-Bu Tan took over, it has accelerated the rebuilding of its foundry business. It joined the $25 billion "Terafab" project led by Elon Musk and moved to secure major customers directly in AI, robotics and space, including SpaceX, Tesla and xAI.

Intel said its ability to carry out the design, manufacturing and packaging of ultra-high-performance chips at scale will accelerate Terafab's goal of achieving annual computing capacity equivalent to 1 terawatt. It posted a large operating loss in its foundry business last year, but it appears to be laying the groundwork for a counterattack by pre-empting large-scale AI demand.

Advanced packaging is also emerging as a new axis of competition. Jake Rhy, a senior analyst at Counterpoint, said the key question about TSMC is no longer wafer production capacity but system-level integration. He analysed that advanced packaging technologies such as CoWoS will be a key variable determining performance in 2026.