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Wafer foundry market teeters on edge of growth

Posted: 10 Oct 2014 ?? ?Print Version ?Bookmark and Share

Keywords:wafer foundry? TSMC? pure-play?

The wafer foundry market showed a see-sawing growth rate, fluctuating between a high of 39.4 per cent in 2010 and a low of 6.8 per cent in 2013, according to China Market Research Reports. Expected to continue over the next two yearsstanding at 15.6 per cent in 2014 and falling back to 6 per cent a year afterthe market will suffer a slowed development due mainly to the differentiation in wafer foundry industry.

The report categorises foundries in terms of product types and nature of vendors. The product type category is further segmented into logic IC and general foundries. Logic IC foundries comprise high-shipment ICs including CPU, GPU, FPGA and base band processors. These products require continuous improvement of manufacturing process and reduction of the line width in order to improve performance and power-efficiency, as well as trim down costs. Foundries of this type cater to a large market, resulting in either huge profits or losses.

As such, only the top player in the logic IC foundry industry can make profit, which has been the case with TSMC. The Taiwan-based company has maintained its lead, with a market share that is never below 50 per cent, since its establishment in 1987. This is in contrast with companies under the general foundry segment. They serve a small market where products are sold at low costs, and enjoy stable sales volume, often with huge returns.

Looking at the nature of the vendors category, the foundry businesses can be divided into two segments, namely, IDMs offering their excess capacity to third parties and pure-play (or dedicated) foundries. Major IDM players include Silicon Valley giants Samsung, Intel and IBM. These vendors have long product lines, which make it possible to cause competition with their customers. In reality, they are not involved in foundry businesses and could only engage in such when they have excess capacity.

Money and technology do not always help do well in wafer foundry industry in general, as evidenced by IBM. Recently, stories circulated about GlobalFoundries rejecting IBM's proposal to sell its East Fishkill and Burlington fabs for $2 billion, saying the price was too high. EE Times' Rick Merritt said that this made sense in the light of GlobalFoundries laser-like focus on getting to 14nm and beat TSMC to it (see GlobalFoundries, IBM pursue separate interests). Except TSMC, most foundries have more or less bought IBM's technology, especially Samsung, STMicroelectronics, and Global Foundries.

Over the years, 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 businessApple. Unfortunately, the order of Apple's main products A8 was gained by TSMC in 2014, leading to the first loss of Samsung System LSI Division.

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