The wafer foundry market experienced a wavy development, jumping by 39.4 percent in 2010 following a 7.9 percent decline in 2009. And the growth rate first shrank to 8.7 percent in 2011, then expanded to 21.7 percent in 2012, and fell back to 6.8 percent in 2013. It is projected that the growth rate will stand at 15.6 percent in 2014 and 6.0 percent in 2015. The fluctuation in the wafer foundry market will begin to present an increasingly small growth rate, which is mainly because of the differentiation in wafer foundry industry.
Released this month, the Global and China Wafer Foundry Industry Report, 2013-2014 provides data and information on: Overview of Global Semiconductor Industry, Downstream Market of Wafer Foundry Industry, Wafer Foundry Industry, Semiconductor Industry in China as well as 13 Key Wafer Foundry Vendors.
According to the nature of the vendors, the foundry businesses can be divided into two segments, namely, IDMs offering their excess capacity to third parties and pure-play (or dedicated) foundries, with the former including Samsung, Intel, and IBM. Global Foundries can be barely included in IDMs, for it originated from AMD. These vendors have long product lines, which makes it possible to cause competition with their customers. And IDMs, in reality, are not involved in foundry businesses and could conduct foundry business only when they have excess capacity. These IDMs will not become the first choice of the customers unless special reasons.
Money and technology do not always help do well in wafer foundry industry, which has been best illustrated by IBM. Recently, IBM was willing to pay USD1 billion for the sale of its wafer foundry business to GlobalFoundries. And GlobalFoundries suggested that the payment was very small and should be expanded to USD2 billion due to the fact that the business, which generates revenue of less than USD500 million annually, caused IBM to suffer approximately USD1.5 billion loss a year. Except TSMC, most foundries have more or less bought IBM’s technology, especially Samsung, STMicroelectronics, and GlobalFoundries, which are all technologically brought up by IBM.
Over the years, the four giants-Samsung, STMicroelectronics, Global Foundries, and IBM have formed an alliance in a vain attempt to compete against TSMC. Instead, TSMC has grown stronger and stronger. After years of efforts, Samsung has won a client in wafer foundry business-Apple. Unfortunately, the order of Apple’s main products A8 was gained by TSMC in 2014, thus leading to the first loss of Samsung System LSI Division over the years.
Although Samsung’s 14nm technology seems to take the lead, this is not approved by Apple. This is mainly because the four companies-Samsung, STMicroelectronics, GlobalFoundries, and IBM all developed from IDM. And Samsung has a long product line and therefore could compete with any electronic company in the world. Previously, Apple did not choose TSMC because the company suffered capacity constraints, and as TSMC’s capacity was expanded and met Apple’s requirements, Apple lost no time in making a shift from Samsung to TSMC.
Unlike IDMs such as Samsung, TSMC is pure-play foundry and will not compete with clients, which makes it easier for the company to get orders. And Samsung, STMicroelectronics, GlobalFoundries, IBM and Intel are the second choices for the clients.
The investment of Chinese enterprises in the field of semiconductors is totally dependent on the government, resulting in a lower efficiency. In 2010, Shanghai Huali Microelectronics Corporation was established with an investment of RMB14.5 billion. Although it had been into operation for 3 years, the company’s revenue was less than RMB1.2 billion in 2013. SMIC’s major clients include Spreadtrum, RDA, Hisilicon, GalaxyCore Inc., Rockchip, Allwinner Technology, GigaDevice, HED, Fudan Microelectronics, TMC, and DMT. The last few enterprises, which are mainly relied on the government orders, are the major design houses of chips for a variety of smart cards, including social security cards, ID cards, SIM cards, Union Pay cards. Therefore, 40 percent of SMIC’s revenue came from the low-end 0.15/0.18μm technology while TSMC’s revenue from lower than 65 nm technology accounted for 71 percent of the total.
According to the report, the specifically Foundry has a small market size and stable sales volume, but with low costs and high returns. In contrast, Logic IC Foundry has a large market size, but with a considerable fluctuation. Most important, only the leading player in the Logic IC Foundry industry can make profit, otherwise it is easy to make a loss. Take TSMC for example, which has taken the lead in the global market since its establishment in 1987, with its market share never less than 50%. Besides, TSMC is also the wafer foundry vendor that earns the highest profit around the globe, with the gross margin never lower than 40 percent even close to 50 percent in 2014 (exceeding Apple and Qualcomm). The No.2, No.3 and No. 4 players have ever suffered losses for many years, with SMIC, for example, making profit only in 2010 during the 12 years from 2000 to 2011. And the third player, Global Foundries, has suffered losses for years, with the revenue in 2013 showing a slight growth but the operating loss expanding from AED2.217 billion to AED3.217 billion.
Foundry vendors / companies mentioned in Global and China Wafer Foundry Industry Report, 2013-2014 include TSMC, UMC, SMIC, VIS, POWERCHIP, HHGRACE, DONGBU HITEK, TOWER, X-FAB, ASMC, SAMSUNG, MAGNACHIP and GLOBALFOUNDRIES.