While the global semiconductor foundry market is set to grow in 2010, the recent downturn is likely to thin the ranks of the top-tier pure-play suppliers down to just three major players in the future, according to iSuppli Corp.
Global pure-play foundry revenue is set to rise to $21.6 billion in 2010, up 21 percent from $17.8 billion in 2009. This follows a 10.9 percent plunge in 2009. The foundry market in 2010 will outperform the overall semiconductor industry, which will expand by 13.8 percent.
"The year 2009 is likely to be one that pure-play foundries would love to forget and will make them long for 2010," said Len Jelinek, director and chief analyst for semiconductor manufacturing at iSuppli. "However, next year is likely to bring a new set of challenges, as the rising cost of competition winnows down the number of players in the market.
"The expense of developing and implementing next-generation processes for a variety of technologies is rising rapidly. The only way to be a leader and outperform the market is to stay at the cutting edge of semiconductor process development. Only companies with sufficient size can support these costs."
Mergers and acquisitions are contributing to the landscape shift, iSuppli found. The pending merger between Hua Hong NEC and Grace Semiconductor is set to reshape China's foundry industry. Tower Semiconductor purchased Jazz Semiconductor in 2008, and the deals have continued into 2009.
The proposed acquisition of HeJian Technologies by Taiwan’s United Microelectronics (UMC) will further consolidate the Chinese foundry market. Advanced Technology Investment Company (ATIC) bought Chartered Semiconductor last month and folded it into AMD spinoff GlobalFoundries in order to gain its core competencies along with its five 200mm fabs and one 300mm facility.
The research firm said that, looking ahead, Semiconductor Manufacturing International (SMIC) could acquire Cension Semiconductor Manufacturing International and Wuhan Xinxin Semiconductor Manufacturing, two companies it is managing. Small foundries are struggling and have become the subject of speculation regarding a merger with another manufacturer, iSuppli said. When this consolidation process concludes, it’s likely that only three top-tier players will be left.
However, iSuppli said, technology continues to develop and to gain more clients for the pure-play foundry suppliers as Integrated Design Manufacturers (IDMs) expand their proven asset-light programs.
Innovation continues to advance in both end-product design and manufacturing technology. As consumers return to stores, this innovation likely will result in new and different products on the shelves, helping to sustain some semblance of recovery, even if it is delayed into 2010.
