Recovering foundry business won't get lift from shortages in five years, say analysts
By Mark LaPedus, Semiconductor Business News
Feb 7, 2002 (4:16 PM)
MOUNTAIN VIEW, Calif. -- While the silicon foundry business is expected to grow at a healthy 25% clip per year until the middle of this decade, a massive build-up of fab capacity is expected to upset the delicate supply/demand balance in this segment, said analysts from Semico Research Inc. The events are projected to cause worldwide foundry capacity to exceed overall wafer demand on the average--at least until 2006, according to Semico.
Those projections are not based on a particular process technology, but rather on the overall supply/demand picture for the foundry industry over the next five years, according to Phoenix-based Semico during a meeting in Mountain View this week.
That prognosis should come as a real shock to the chip industry and foundry providers, which previously experienced huge demand for services, that is, until the severe semiconductor downturn in 2001. Last year, the foundry providers hit the wall the hardest in the 2001 semiconductor recession, but those vendors are expecting a rebound in 2002.
However, for the first time ever, the foundry business will experience a prolonged period of excess capacity on average over the next five years, warned analyst Joanne Itow, who tracks the market segment at Semico.
"I wouldn't call it a 'capacity glut,'" explained Itow, "but the supply side is keeping up with demand in the foundry business. I don't see a major shortage of in terms of capacity for awhile," she said during a presentation in Mountain View on Tuesday. In the past, foundry suppliers have counted on shortages to drive up their profits and sales.
Not surprisingly, the supply/demand picture is somewhat different when broken down into the various process technologies, she said. Foundry capacity will remain tight for leading-edge processes over the next several years, but there will be an abundance of older-generation and mature technologies for some time, she added.
The problem facing foundry suppliers is that the definition of what is "older" technology is rapidly shifting as chip makers and fabless semiconductor houses accelerate their designs to 0.18-micron and below feature sizes. It certainly has become a fast-moving target on an accelerated technology curve.
In any case, the entire supply/demand picture in the foundry business has been turned upside down, due in part to a massive build-up of fabs by both the new and established players. Foundry providers are currently building both 200- and 300-mm wafer fabs at an alarming rate, according to analysts.
In the past, the foundry investments followed the traditional topsy-turvy cycles of the worldwide semiconductor business. One of the key indicators in both the foundry and IC industries is the so-called "crossover" point, where the demand curve would hit and pass the supply curve. At this point, a semiconductor upturn is usually well underway.
But now, in a major change in the dynamics for the foundry industry, there does not appear to be a "crossover" point in the offing for this chip sector until at least 2006, according to Semico. The separate supply and demand curves will be running parallel during the next five years, with no crossover point in the making. To make matters worse, the overall foundry supply will exceed demand by a significant margin, based on Semico's plot lines (specific details were not available, but the gap was clear).
There is some good news for the fickle foundry sector, however. The overall silicon foundry market is expected to rebound this year from the 2001 downturn and grow by a healthy 33-to-34% in terms of 8-inch equivalent wafer unit shipments, based on the most recent forecast fromSemico. In 2001, the foundry industry declined by 39% due to the IC industry downturn, according to Semico's estimate (see Jan. 15 story ).
In fact, the foundry business could grow by as much as 35-to-40% in 2002 over 2001, Itow said this week. And, demand for leading-edge foundry capacity is expected to be tight in the second half of this year, especially 0.18- to- 0.13-micron process technologies, she said.
"There's a lot of demand for wafers at 0.18-micron and smaller right now," she said. "The demand has accelerated towards the leading-edge technologies. But we can't see much demand for the older technologies," she added. |
