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Reality check for pure-play foundry market

Posted: 01 Dec 2009 ?? ?Print Version ?Bookmark and Share

Keywords:pure-play foundry? semiconductor manufacturing? market growth?

Market analyst iSuppli Corp. warns that while the pure-play foundry business is expanding again, growth is coming off of extremely depressed levels, and market conditions are not as rosy as they might seem.

Global pure-play semiconductor revenue is set to amount to $5.6 billion in Q4 09, up an apparently impressive 53.7 percent from the same period in 2008. However, Q4 08 marked the beginning of a sharp downturn in the global pure-play foundry business. Revenue in the Q4 08 amounted only to $3.7 billion, a 32.3 percent and $1.7 billion plunge from $5.4 billion during the previous quarter.

"The strong year-over-year rise in pure-play foundry revenue in the fourth quarter paints a deceptively strong picture of industry growth," said Len Jelinek, director and chief analyst, semiconductor manufacturing, for iSuppli. "The reality is that Q4 09 is bringing only a moderate expansion in revenue compared to the third quarter. Furthermore, foundries are noting a slowing of orders, indicating an underlying uncertainty in the market."

Global semiconductor foundry revenue in Q4 is set to rise by a comparatively mild 6 percent compared to Q3 09.

Global quarterly pure-play foundry revenue

Foundries are reporting weakness in their sales of semiconductors to the communications and computing segments, with the exception of netbook PCs, an area that is seeing some strength. The companies also note healthy orders in the consumer segment. Foundries also are reporting downward pricing pressure at advanced semiconductor manufacturing process nodes, such as 65nm, as more suppliers enter this segment of the market. However, pricing for more mature semiconductor processes, such as 0.18?m, is holding steady.

"In early 2009, when utilization rates were low, foundries were willing to cut prices on mature semiconductor processes to fill their fabs," Jelinek said. "However, with utilization having risen at the end of the year, companies no longer are willing to compromise on pricing for mature technologies."

Global pure-play semiconductor foundry utilization is set to rise to 83 percent in Q4 09, up from 72 percent in the Q1 09.

In one positive indicator for the industry, inventories held by foundries remain in a healthy state of balance. This means that any increase in end demand will result in revenue increases for the foundry industry.





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