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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Ramsey Su who wrote (22134)	7/24/1998 1:43:00 PM
From: Katherine Derbyshire	Read Replies (1) \| Respond to of 70976

Sorry for the overuse of shorthand. A silicon foundry is essentially a rent-a-fab. The owner makes chips for fabless design houses like Xilinx, but does not have extensive in-house design expertise or a branded product line. Many of the most recent fabs on Taiwan are foundries. In particular, TSMC and UMC are both foundry companies. So, Taiwan's semiconductor industry is largely driven by demand for this "retail" capacity. Back in 1994-95, the fabless companies were screaming because they couldn't get enough capacity. This drove massive foundry construction, inspired several new companies to get into the business, and inspired a number of the existing DRAM houses to diversify into foundry services. As DRAM prices fell in 1996-present, fab owners have used foundry services to keep the fabs running. All of this happened slightly out of sync with the DRAM crash. As late as 4Q97 and 1Q98, Taiwan was seen as the bright spot, planning to keep on building in order to gain market share. (Sound familiar?) Since these same fabs are now reporting low capacity utilization, it seems like foundries have now been hit with the same problems as the DRAM people. For the industry at large, it's important to realize that the fabless houses (who are now getting fab services cheap because of overcapacity) compete directly with the merchant IC companies (who have relatively fixed costs). This is one reason why the whole industry is seeing a profit margin squeeze. Relevant links: news.semiconductoronline.com news.semiconductoronline.com I don't mean to toot my own horn too loudly by pointing people to Semiconductor Online, by the way. I just don't want to bore anyone (including myself) by writing the same things over and over again. Katherine