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Will foundry rebound last?

Posted: 13 Apr 2009 ?? ?Print Version ?Bookmark and Share

Keywords:foundry industry? market rebound? Q2 order?

Amid a major downturn, the silicon foundry market is expected to see a big rally in Q2!and perhaps beyond. But the real question is clear: Will the momentum last?

Right now, major foundry vendors!Chartered Semiconductor, Taiwan Semiconductor Manufacturing Co., Semiconductor Manufacturing International Corp. and United Microelectronics Corp.!are all seeing a rebound after a huge drop in orders. The surge could be a replenishment cycle in the channels!or a real upturn!or a combination or both. More likely, it's somewhere in the middle.

"Recent checks suggest that the average foundry wafer shipment in Q1 was down by nearly 35 percent quarter-over-quarter (verses historical average of down 5 percent), following 32 percent decline in Q4 08 (verses historical average of up 5 percent)," according to a report from FBR.

"Our current assessment for Q2 09 average foundry wafer shipment is to be up by nearly 50 percent quarter-over-quarter (verses historical average of up 10 percent)," according to the report. "By end market, communication and PC-related orders appear to have provided the upside, though it is our view that China (as a geography) has been the biggest source of upside."

Now, for the bad news: "We also believe that ASPs, across all foundries, to have declined by 10 percent in Q1, and down again 10 percent (ish) in Q2," according to the report. "Additionally, even with a strong rebound in foundry wafer shipment, we still do not expect foundry utilization rates to reach the critical 85 percent range (until sometime in CY10) that is needed to trigger sizable capital equipment orders."

Beyond that, the rally could somewhat subside. "What makes us concerned a bit is the sustainability of such improvement if other geographies like the U.S. and Europe do not improve," according to the report. "According to our checks, average foundry wafer shipment in Q2 is currently forecasted to be up 8 percent to 10 percent quarter-over-quarter, which would make the slope (or pace) of the current recovery more muted than 1H09 wafer shipment would indicate."

TSMC, UMC expect surge
Regarding the rally, the vendors are seeing a rebound.

For TSMC, "we expect Q1 wafer shipment to come in at the high end of the already revised expectations, while Q2 wafer shipment is expected to increase by 35 to 40 percent quarter-over-quarter," the report stated.

"We attribute the upside to Q2 wafer shipment expectations to upside in orders from the PC- (particularly graphics) and LCD-related customers. We also believe that the current forecasts are for 3Q wafer shipment to improve by an additional 8 to 10 percent quarter-over-quarter. We expect utilization rates to improve from an average in the low 40 percent range in Q1 to the low 50 percent range in Q2 and up to the high 50 percent range in 2H 09," the report said.

Meanwhile, for UMC, recent checks suggest that Q1 wafer shipment declined by 30-to-35 percent q-on-q, though Q2 wafer shipment is expected to increase by 70 to 75 percent q-on-q (given the historical low shipment in Q1), according to FBR.

"Our field data suggest that the key customers behind upside to Q2 wafer shipment have been from graphics (Nvidia), communication (Broadcom, Mediatek, Texas Instruments, Xilinx), and LCD (Novatek, Realtek, Sunplus). We currently expect Q3 wafer shipment to improve by 8 percent to 10 percent, with utilization improving from the 30 percent range in Q1 to the high 50 percent range in Q2 and up to the 60 to 65 percent range in 2H 09," according to the report.

As for Chartered, recent checks suggest that Q1 wafer shipment declined by 30 percent q-on-q, following a 27 percent decline in Q4 08. We expect wafer shipment to improve by 40 to 45 percent in Q2, while current forecasts indicate a more modest improvement (8 percent-ish) in Q3, the FBR report stated.

"Similar to TSMC and UMC, major customers behind the recovery in wafer shipment in Q2 are from PC and communication end markets. Utilization rates are estimated to be in the high 30 percent range in early Q2," according to the report.

Lastly, FBR said that SMIC wafer shipment declined by nearly 50 percent q-on-q in Q1, following a nearly 30 percent decline in Q4. "We expect wafer shipment to improve by 50 to 55 percent in Q2 and up moderately by 10 percent in 3Q," according to the report.

"We believe the pickup in Q2 wafer shipment was driven, to a large extent, by local (China-based) and fables customers, particularly in the area of wireless communication, DVD, and MP3," the report said.

- Mark LaPedus
EE Times





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