April 11, 2012 — The pure-play semiconductor foundry business will ride the growth of tablets, ultrabooks, and smartphones to $29.6 billion in revenues, according to an IHS iSuppli Semiconductor Manufacturing and Supply Market Tracker report.
This is a 12% increase over $26.5 billion in 2011, about 3x the rate of growth expected for the overall semiconductor industry. From 2010 to 2011, foundries saw only 3% growth, falling off after a 45% increase 2009-2010.
Demand will steadily increase from late in Q1 2012 to a peak in Q3. Unlike the drop-off seen in 2011, this foundry revenue growth will carry through in the years ahead. 2013 can expect 14% revenue growth ($33.6 billion), and 2014 and 2015 will also see solid double-digit growth.
Figure. Worldwide pure-play semiconductor foundry revenue forecast. SOURCE: IHS iSuppli Research, April 2012.
|Billions of US Dollars||$26.5||$29.6||$33.6||$37.5||$42.2|
Consumer electronics require advanced semiconductors with high performance and low power consumption, said Len Jelinek, director and chief analyst of semiconductor manufacturing at IHS. These applications use more semiconductors per product to support these needs. Notable drivers include tablets, smartphones, and ultrabooks.
Increased tablet and smartphone sales will spur revenue expansion for NAND flash memory and logic application-specific integrated circuit (ASIC) semiconductor markets.
The ultrabook will revitalize notebook PCs, in turn growing revenues for microprocessors.
In contrast, DRAM will underperform. A top DRAM player, Elpida Memory Inc., filed for bankruptcy at the beginning of 2012.
The pure-play foundry landscape comprises 4 Tier 1 suppliers, and 16 Tier 2 companies. Rankings: Taiwan Semiconductor Manufacturing Corp. (TSMC) holds the top spot with $14 billion in 2011 revenue. TSMC remains in the unique position of having more capacity than all of its competitors combined, as well as possessing the financial strength to outspend every one of its rivals. TSMC recently beat its Q1 expectations. UMC is a distant #2 with $3.6 billion revenues. GLOBALFOUNDRIES follows with $3.5 billion, and Semiconductor Manufacturing International Corp. (SMIC) made $1.3 billion. SMIC doubled its Q1 guidance this week.
At the top of Tier 2 is TowerJazz Semiconductor, with $613.0 million in 2011 revenues. TowerJazz also enjoys another distinction: The model used by the company to increase capacity, through fab acquisition with a multiyear foundry manufacturing agreement, remains the most viable expansion method for companies looking to grow capacity, IHS asserts. TowerJazz acquires a fab and then builds off of the expertise of an existing manufacturing facility, effectively serving demand when it is aggregated in the semiconductor market, especially as many second-tier foundries in China and Europe are finding it difficult to achieve differentiation.
The global economy could present challenges for foundry profits, IHS believes. Improving conditions in the US and Eurozone countries could stall, with tensions in the Middle East and high energy prices weighing on economic recoveries.
Inventory also remains a key concern throughout the electronics supply chain, with many companies waiting to place orders until the last possible minute. Overall manufacturing capacity remains in excess of demand. How much additional inventory reduction will be necessary remains to be seen: new innovations could fuel semiconductor growth, or a simple adjustment could be made to supply and demand for existing products.
Foundries could become even more cautious on actual capital spending in 2012, and expenditures are already forecast to plunge 19% from 2011.
Foundries also will have to contend with a continuing decline in average selling prices (ASP) in light of increased overall competition.
IHS (NYSE: IHS) provides information, insight and analytics in critical areas that shape today’s business landscape. Internet: www.ihs.com.