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Foundry sales increase amid falling global chip market

Posted: 26 Oct 2015 ?? ?Print Version ?Bookmark and Share

Keywords:TSMC? IC Insights? foundry? GSA? IC market?

According to the latest report from IC Insights, the importance of the wafer foundry business continues to influence the IC industry. The market research firm revealed that roughly 38 per cent of worldwide IC sales to systems manufacturers in 2015 are coming from products fabricated by silicon foundry services compared to 26 per cent in 2010 and about 21 per cent in 2005, based on an analysis by IC Insights in the 2016 edition of The Foundry Almanac, which is a jointly produced annual report with the Global Semiconductor Alliance (GSA).

The report shows total IC foundry sales to fabless semiconductor suppliers, integrated device manufacturers (IDMs), and systems companies reaching a record-high $50.1 billion in 2015, but the revenue growth this year is expected to be about five per cent compared to much stronger increases of 14 per cent in 2013 and 13 per cent in 2014. Many major pure-play foundries have cut their outlooks for growth in 2H15 because of economic uncertainty, delays in wafer purchases, and continued reductions of IC inventories by customers. A surge in the value of the U.S. dollar, especially against the Taiwan dollar, has also played a factor in suppressing global foundry growth, which is measured in U.S. dollars.

Increasing foundry sales offer some relief

While total foundry sales are expected to rise by a modest five per cent this year, IC Insights is forecasting a one per cent decline in the worldwide integrated circuit market in 2015. Foundry demand is forecast to strengthen slightly in 2016 with sales rising seven per cent to set another record-high level of $53.8 billion, according to the five-year outlook in the latest 2016 Foundry Almanac.

With foundry revenues hitting record-high levels, it is important to recognise that foundry-made devices are accounting for even more sales volume in the global IC market. IC Insights believes the 'final' market value of foundry-made ICs sold to electronic systems producers is 2.22x the total IC foundry sales number.

The 2.22x multiplier assumes a 55 per cent gross margin for foundry customers when their ICs are purchased by systems companies for end-use products (computers, cellphones, automobiles, consumer electronics and other equipment). Using the multiplier, the 'final' sales value of foundry-made ICs reaches $111 billion in 2015, or about 38 per cent of the worldwide total amount spent on integrated circuits for electronic systems. In 2019, the 'final' foundry sales value is expected to reach 42 per cent of the total IC market.

To illustrate the increasingly important role that foundries play in the worldwide IC market, IC Insights applied a sales multiplier to revenues generated by Taiwan Semiconductor Manufacturing Co. (TSMC). Since TSMC's sales are more heavily weighted toward leading-edge devices (e.g., application processors for Qualcomm and Apple), it is estimated that gross margins for the foundry's customers average 57 per cent (which equates to a 2.33x multiplier for a 'final' IC market value).

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