Fabless firms expect surge, but others are skeptical
By Crista Souza, EBN
Mar 12, 2002 (10:51 AM)
URL: siliconstrategies.com
With little consensus as to how much, if any, market recovery to expect in 2002, fabless semiconductor suppliers are apparently marching to their own beat.
According to results from the Fabless Semiconductor Association's annual Wafer and Packaging Demand Survey, released last week, chip companies think they will need a whopping 78% more silicon wafers this year than in 2001.
Market watchers attributed the sharp demand increase to a large survey population of start-ups that expect to enter volume production this year, as well as companies that may be overestimating their potential share of the total available market.
Wall Street analysts aren't convinced there will be a notable increase in semiconductor demand, beyond inventory replenishment. Eric Ross of Thomas Weisel Partners LLP, New York, projects a 1.6% rise in revenue over 2001. A less-optimistic Dan Niles of Lehman Brothers & Co. in San Francisco believes 2002 revenue will be somewhere between flat and a 5% decrease.
“It's not an inventory problem anymore, it's a demand issue,” Niles said.
Whether the fabless group's forecasted need for 4.5 million CMOS wafers in 2002 proves too optimistic or right on target, there appears to be no urgency to add new capacity. The foundry industry is already in good shape to handle the upside, given that many state-of-the-art factories sat nearly empty last year, while foundries continued to invest in future capacity, said Joanne Itow, foundry analyst at Semico Research Corp., Phoenix.
“TSMC by itself could produce 4.5 million wafers,” Itow said.
More cautious approach
Semico is forecasting a more conservative 16% increase in overall wafer demand, and an approximately 35% rise in demand for foundry wafers, based on its projection of 18% growth in semiconductor unit shipments and revenue in 2002.
Even the FSA is hedging the survey's forecast. Excluding companies that think their wafer needs will double this year, the survey indicated foundry wafer demand in 2002 will increase a mere 16% over 2001, the group said.
A sequential increase of 17% is expected in the first quarter, with demand strengthening toward the end of the year. In the past, the FSA surveys have proven a more accurate measure of short-term wafer needs.
Last year semiconductor companies consumed 2.6 million wafers, about half the estimated need.
“If nothing else, what the 2001 survey showed us was how unprepared fabless companies were for the downturn,” said Jodi Shelton, executive director of the FSA in Dallas.
Nevertheless, there is likely to be capacity pressure --possibly even shortages -- in 0.15- and 0.13-micron geometries, as foundries, eager to bolster profit margins, urge customers to use these higher-priced technologies.
According to the FSA survey, an estimated 30% of foundry wafer demand will be for geometries of less than 0.18-micron, up from an actual 21% in 2001.
“There's a tremendous amount of design activity going on at the very leading edge-at 0.13-micron-in all the main areas: PC, wireless, networking,” said Ed Ross, president of Taiwan Semiconductor Manufacturing Co. North America, San Jose. “It bodes well that there will be new-product releases. How that drives growth for the semiconductor industry I'll leave to [the pundits].”
The FSA, in conjunction with PricewaterhouseCoopers LLP, conducted the survey in January, and responses were supplied by 131 fabless and 14 integrated device manufacturers (IDMs).
Foundries' role
“The question still remains whether [IDMs] are going to be strategic or opportunistic foundry customers,” Shelton said. “But the reality is, you have to invest close to $1 billion a year to have a competitive fab. Very few companies are scheduled to invest $1 billion a year.”
More deals like Advanced Micro Devices Inc.'s 300mm-wafer joint venture with United Microelectronics Corp., and Taiwan Semiconductor Manufacturing Co. Ltd.'s process alignment with Philips Electronics N.V. and STMicroelectronics N.V., will come into play in 2003, as IDMs try to flex their capacity and share technology development costs, Shelton said.
The FSA survey showed that foundry customers will continue to rely on the Big Three [TSMC, UMC, and Chartered Semiconductor Manufacturing Pte. Ltd.] for as much as 78% of their wafer supply, about the same as a year ago.
Analysts believe that having more capacity controlled by fewer suppliers will level out, but not eliminate, the boom-bust cycles.
“It's possible that having a handful of foundries supplying the majority of capacity, concentrating the supply into fewer hands, can help mitigate the swings,” said Grant Johnson, manager of the Market Intelligence Group at Converge Inc., Peabody, Mass.
“But we're still human,” said Lehman's Niles. “You've got to expect we're going to have those mood swings.” |
