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China's wafer foundry industry endures hampered growth

Posted: 22 Nov 2006 ?? ?Print Version ?Bookmark and Share

Keywords:TSMC? UMC? SMIC? wafer? semiconductor?

IC design houses in mainland China greatly impede the development of the wafer foundry industry in the region, according to Research and Markets' Global Wafer Foundry Industry Report, 2006. The report also noted that the wafer foundry industry manufacturers can be grouped into three camps based on their production capacity, sales and output, and market strategies.

The report found that whenever the semiconductor industry suffers recession or declining market demand, many large IC design houses tend to order from Taiwan Semiconductor Manufacturing Co. Ltd (TSMC). Hence, TSMC captures more orders than the other wafer foundries. As such, TSMC is part of the 'first camp' of the wafer industry.

Meanwhile, when recession falls, United Microelectronics Co. (UMC), Semiconductor Manufacturing International Corp. (SMIC), Chartered and IBM tend to be burdened by the market first. The four are usually the second choice or alternative for large IC design houses and the first choice for medium IC design houses. So to avoid such impact of recession, the four companies, categorized under the 'second camp' category, each have their own clients. UMC have Media Tek and NOVATEK while SMIC have Infineon and Elpida. Then, Chartered, Infineon, Samsung and IBM built a cross platform wafer foundry ally. IBM, however, also provides CPU foundry services for game machine makers like Microsoft and Sony.

Furthermore, the report cited that some manufacturers rely on the local industry chain and capitalize on their own specialties and regional advantageshence belonging in the 'third camp' of the wafer foundry industry. MagnaChip and Vangurd specialize in LCD driver IC foundry services and also cooperate with the driver IC industry in South Korea and Taiwan. MagnaChip also offers image sensor CMOS foundry like Dongbu Anam, which is also into automobile electronics. Meanwhile, HHNEC delivers Smart card solutions while JAZZ offers RF IC foundry services. X-FAB delivers mixed-signal and MEMS foundry services. Episil manufactures power semiconductor components and Advanced Semiconductor Manufacturing Corp. Ltd is skilled in analog IC foundry.

Industry's plight
Research and Markets found that among 500 IC design houses located in mainland China, only about 50 companies support mass production. Over 90 percent of the IC design houses are 'just conceptual,' relying on loans or external investments.

Of the 50 design houses, more than 90 percent focus on logic ICs over analog. Wafer size and manufacturing techniques determine production cost for logic ICs. At present, 12-inch and 90nm or 65nm wafer is touted as the lowest-cost solution for the segment.

According to the report, wafer foundries in mainland China are all of weak competitiveness in the logic IC field, except for SMIC. Of the 57 wafer fabs in mainland China, 45 are still manufacturing products over 0.5nm. Furthermore, many blindly started wafer production lines focused on foundry services in mainland China. As most of the investment comes from loans, gaining profits is quite hard, the report found.

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