Pure-play foundries comprise 84% of market, IC Insights says

The "Big 4" foundries - TSMC, UMC, Chartered and SMIC - have dominated the foundry market over the past five years, with Taiwan Semiconductor Manufacturing Co clearly the leading foundry in 2007, with sales of almost $10 billion. TSMC increased its revenue 1% over 2006, and its sales were only 11% less than the combined foundry sales of the other companies listed in the top 14 ranking, IC Insights pointed out.

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 5/9/2008

In its ranking of the top IC foundries for 2007, Scottsdale, Ariz.-based market research company IC Insights Inc reported this week that 11 of the top 14 foundries are based in the Asia-Pacific region, with only one - Europe-headquartered X-Fab, which merged with 1st Silicon in 2006 -- the only non-Asia-Pacific pure-play foundry company in the top 14 group.

The “Big 4” foundries - TSMC, UMC, Chartered and SMIC - have dominated the foundry market over the past five years, with Taiwan Semiconductor Manufacturing Co clearly the leading foundry in 2007, with sales of almost $10 billion. TSMC increased its revenue 1% over 2006, and its sales were only 11% less than the combined foundry sales of the other companies listed in the top 14 ranking, IC Insights pointed out.

Meanwhile, Taiwan-headquartered United Microelectronics Corp (UMC) maintained its second place ranking with sales of $3.8 billion, up 2% over 2006, and China-based Semiconductor Manufacturing International Corp (SMIC) increased its sales 6% and edged slightly ahead of Chartered Semiconductor Manufacturing in 2007 to take over the number three position in the ranking - a position it subsequently lost in Q1.

Together, the big four accounted for 68% of the $24.5 billion foundry market in 2007, the company said, and reminded that TSMC, UMC, SMIC and Chartered are pure-play foundries and do not offer IC products of their own design, but instead produce ICs for other companies. In 2007, pure play foundries accounted for 84% of the total foundry market, IC Insights reported.

Next, in the integrated device manufacturer (IDM) foundry arena, these foundries accounted for 16% of the 2007 foundry market. IDM foundries offer foundry services in addition to their own ICs, and include companies such as IBM, NEC, TI, and Samsung. In 2007, Samsung edged it way into the ranks of IC Insights’ top 10 foundry suppliers following its announcement in 2006 that it was going to place special emphasis on its foundry business. And aided by a technology alliance with IBM and Chartered and with a new, 300-mm wafer fab dedicated exclusively to foundry production, Samsung has quickly emerged as a foundry player, garnering sales of $385 million in 2007, placing it in 10th-place in the top 14 ranking.

Further, IC Insights reminded that IC foundries have two main customers: fabless IC companies such as Qualcomm, Nvidia, and Xilinx, and IDMs such as Freescale, ST, and others. The success of fabless IC companies as well as the movement to more outsourcing by existing IDMs has fueled tremendous growth in IC foundry sales since 1998, the company pointed out.

Finally, large companies and an increasing number of mid-size companies are ditching their fabs in favor of the fabless business model, with companies in this category including LSI and Avago (ex-Agilent), which have all become fabless in the past few years. Considering its Q1 financial results, AMD could be a company that is forced to go fab-lite or possibly completely fabless in the near future, IC Insights concluded.