China Foundries Feeling Impact of Global Slowdown
Online staff -- Electronic News, 12/16/2004
In line with a number of successive drops in revenue for Taiwan’s wafer foundries, iSuppli Corp. today said that China’s semiconductor foundry industry is also beginning to feel the impact of the global chip slowdown, despite its rapid expansion this year.
With China’s leading foundries deriving more than 90 percent of their manufacturing orders from overseas customers, as the present slowdown in global demand progresses, capacity utilization rates at the Chinese foundries are set to decline, iSuppli forecasted.
Manufacturing of electronic equipment, which drives semiconductor sales, is expected to experience decelerating growth next year, at 6.2 percent growth in 2005, down from 10.1 percent this year, according to the El Segundo, Calif.-based market research firm.
After peaking at 93 percent in Q2, foundry capacity utilization in China began to decline, falling to 89 percent in Q3 and to an expected 87 percent in Q4. Utilization is expected to continue to decline in Q1 before recovering, in line with seasonal patterns, iSuppli said.
These declines in Chinese foundry utilization rates conform to worldwide trends in the semiconductor manufacturing industry although they are expected to be as severe initially in China as in the rest of the world, the firm said.
Further, Chinese foundries have developed cost-effective trailing-edge production technology, which will award them with preferential run rates particularly as the industry enters a period of excess capacity and companies focus on manufacturing semiconductors in more cost-effective manufacturing locations, iSuppli added.
Regardless of the decline in utilization, China’s foundry industry is growing at a fast rate and has transitioned from a low technology, low-labor-cost captive industry to a globally recognized power in merchant chip manufacturing.
Chinese foundry capacity is predicted to grow by 78.2 percent in 2004, compared to 45.1 percent in 2003 and by the end of 2006, iSuppli concluded ,there would be no less than three 300mm 90nm and below wafer fabrication facilities in mass production in China.
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