Wafer Demand Expected to Jump 43%
By Robert Ristelhueber
San Jose, Calif.--Demand for wafers by fabless semiconductor companies will rise by 43
percent this year, according to a recent survey of 82 fabless firms.
The survey, conducted by the Fabless Semiconductor Association, doesn't measure
potential demand from integrated device manufacturers (IDMs) who may outsource
more of their production. Motorola, for example, has recently signed deals to meet its
goal of transferring half its wafer production to foundries and joint ventures.
A clamoring for wafers is already setting off a scramble at foundry suppliers like Taiwan
Semiconductor Manufacturing Co. (TSMC). “Demand is strong and very broad based,”
said Magnus Ryde, president of TSMC, USA. “We're working very hard to satisfy it.”
The request for 0.35-micron wafers is particularly intense, Ryde noted. While capacity
currently exists to meet the demand, it sometimes requires shifting production around
TSMC's different fabs, a step which in turn forces new qualifications, he said.
His company has been caught off guard by the strength of business. “A few months ago,
we certainly didn't expect to see what's happening today. If demand stays where it is,
we'll manage, but if it continues to accelerate, there's only so much we can do,” Ryde
said. While the communications segment is particularly healthy, there's also underlying
strength in the personal computer sector, he added.
The recovery of various economies is contributing to demand, said Mark Edelstone,
senior semiconductor analyst for Morgan Stanley Dean Witter, San Francisco. “Stronger
worldwide economic growth in 1999 and 2000 should help drive semiconductor growth
as a whole,” he said. Edelstone expects the chip business to grow 15 to 18 percent this
year, and even faster in 2000.
The analyst said the past three years of DRAM revenue decline, which he called
unprecedented, would not continue this year. “We look for a big snapback for DRAMs
in 1999,” Edelstone said, although he said softening of DRAM prices over the past two
months were reason for caution. He also called the Y2K problem a wild card, since it
may cause some OEMs to increase inventory as a precaution.
Sharp cuts in capital spending last year are helping the chip recovery, said Joe Moore,
senior semiconductor analyst with Goldman Sachs, New York. He said he expects
capital spending to decline slightly this year.
Wafer foundries are getting better at managing their profitability, Moore said. “TSMC is
getting high gross margins of 50 percent at 80 to 90 percent utilization levels,” he said.
This will discourage efforts by foundries to fill their factories to the brim, he added.
Moore expects many memory producers to convert their fabs into merchant foundries to
grab a piece of the booming foundry business.
For the first time, the Fabless Semiconductor Association also surveyed test and
assembly needs. Participants forecast their unit packaging needs to increase 138 percent
from 1998 to 2000. There was a growing trend toward thermally enhanced packages
that will grow more than twice the rate of standard power packages by 2000.
Third parties performed 77 percent of respondents' probe services, 95 percent of
assembly services, and 71 percent of test services last year. By 2000, respondents
expect their outsourcing of probe, assembly and test services to increase 87 percent, 98
percent, and 82 percent, respectively. |
