What is a semiconductor foundry?

How the foundry model works

Advanced chips are made in factories called fabs. Many chip companies do not own one. They design the chips and hire a foundry to make them. Nvidia's annual report calls this a fabless strategy. Its suppliers handle wafer fabrication, assembly, testing and packaging. Nvidia says the approach lets it avoid many of the costs and risks of running factories. It names TSMC and Samsung among the foundries that produce its wafers.

TSMC was founded by Morris Chang in 1987. The company says it pioneered the pure-play foundry model, which focuses only on making customers' products. In 2025 it made 12,682 different products for 534 customers, it says.

Companies that both design and make chips

Some chipmakers sell their own products and also work as foundries. Nvidia's filing lists Samsung both as a foundry and as a memory supplier. Intel launched Intel Foundry in February 2024 to make chips for outside customers. It said it aimed to be the No. 2 foundry by 2030. At the launch, Microsoft said it planned to produce a chip design on Intel's 18A process.

Why foundries matter for AI

Production of the most advanced chips is concentrated. TSMC makes more than 90% of the world's most cutting-edge chips, the Associated Press reported in October 2026. Its customers include Nvidia and Apple.

Capacity at those plants can limit chip supply. Nvidia's filing warns that it may not meet demand if its foundry partners cannot increase production. On October 15, 2026, TSMC chief executive C.C. Wei said demand was still far above what TSMC could supply, AP reported. The same day, TSMC said its 2026 capital budget was unchanged at US$60 billion to US$64 billion, Focus Taiwan reported.