Interesting insights.................
__________________________________________________________________________________
Foundry Sales Defy IC Decline
TSMC’s market impact exceeds Intel's
Bill McClean, IC Insights
10/22/2015
The importance of the wafer foundry business continues to grow in the IC industry, according to a new report from one veteran electronics analyst.
Nearly 38% of worldwide integrated circuit sales to systems manufacturers in 2015 are coming from products fabricated by silicon foundry services compared to 26% in 2010 and about 21% in 2005, based on an analysis by IC Insights in the new 2016 edition of
The Foundry Almanac, which is a jointly produced annual report with the Global Semiconductor Alliance (GSA).
The new report shows total IC foundry sales to fabless semiconductor suppliers, integrated device manufacturers (IDMs), and systems companies reaching a record-high $50.1 billion in 2015, but the revenue growth this year is expected to be about 5% compared to much stronger increases of 14% in 2013 and 13% in 2014. Many major pure-play foundries have cut their outlooks for growth in the second half of 2015 because of economic uncertainty, delays in wafer purchases, and continued reductions of IC inventories by customers. A surge in the value of the U.S. dollar, especially against the Taiwan dollar, has also played a factor in suppressing global foundry growth, which is measured in U.S. dollars.
While total foundry sales are expected to rise by a modest 5% this year, IC Insights is forecasting a 1% decline in the worldwide integrated circuit market in 2015. Foundry demand is forecast to strengthen slightly in 2016 with sales rising 7% to set another record-high level of $53.8 billion, according to the five-year outlook in the newly released 2016 Foundry Almanac, which is now available from the GSA.
With foundry revenues hitting record-high levels, it is important to recognize that foundry-made devices are accounting for even more sales volume in the global IC market. IC Insights believes the “final” market value of foundry-made integrated circuits sold to electronic systems producers is 2.22x the total IC foundry sales number.
The 2.22x multiplier assumes a 55% gross margin for foundry customers when their ICs are purchased by systems companies for end-use products (computers, cellphones, automobiles, consumer electronics, and other equipment). Using the multiplier, the “final” sales value of foundry-made ICs reaches $111 billion in 2015, or about 38% of the worldwide total amount spent on integrated circuits for electronic systems. In 2019, the “final” foundry sales value is expected to reach 42% of the total IC market.
To illustrate the increasingly important role that foundries play in the worldwide IC market, IC Insights applied a sales multiplier to revenues generated by Taiwan Semiconductor Manufacturing Co. Since TSMC’s sales are more heavily weighted toward leading-edge devices (e.g., application processors for Qualcomm and Apple), it is estimated that gross margins for the foundry giant’s customers average 57% (which equates to a 2.33x multiplier for a “final” IC market value).
Using this multiplier, IC Insights shows that TSMC’s “final” IC sales value in the market first surpassed Intel’s IC sales in 2Q13 and exceeded Intel’s sales by 29% in 2Q15 (as shown in Figure 1). Thus, in 2015, TSMC essentially has had a greater impact on the total IC market than any other company, including Intel.
[Image: TSMC-vs-Intel.jpg]
The “final” foundry sales figures help to explain why capital expenditures of Intel and TSMC were fairly close in size in 2014 ($10.1 billion for Intel and $9.5 billion for TSMC). TSMC lowered its capex guidance in October, but it is still expected to outspend Intel in 2015 (about $8.0 billion versus $7.3 billion for Intel).
Currently, about 90% of contract wafer-processing revenues are generated by pure-play foundries with the remaining 10% coming from IDMs that fabricate ICs for other companies. Pure-play foundry sales are forecast to strengthen slightly in 2016 and grow 8% to $48.4 billion after increasing 6% in 2015. Meanwhile, foundry sales by IDMs are expected to grow 4% in 2016 to $5.4 billion after rising just 2% in 2015. Only two IDMs (Samsung and Fujitsu) are among the top 10 IC foundry suppliers in 2015 with the rest being pure-play foundries, according to the company ranking in the new
Foundry Almanac.
Looking ahead, IC Insights believes that most IDM foundries will focus on manufacturing limited volumes of specialty IC devices using non-leading-edge technologies. As a result, it is expected that Intel and Samsung will be the only IDM companies seeking high-volume production levels of leading-edge IC foundry business during the next five years.
The growth and concentration of leading-edge IC processes at the largest pure-play foundries (such as TSMC, GlobalFoundries, and United Microelectronics Corp.) will further reduce the IDM share of wafer foundry sales to about 9% in 2019 versus 10% in 2015 and about 14% in 2009, based on IC Insights’ projections in the new
Foundry Almanac report.
--Bill McClean is president of IC Insights, a market research form headquartered in Scottsdale, Arizona.
http://www.eetimes.com/author.asp?sectio...id=1328090
_____________________________________________________________________________________________________________________________________________________________________________________________