Fabs find their places via M&As as market improves

Global pure-play foundry revenue is set to rise to Rs.105,007.56 crore ($21.6 billion) in 2010, up an impressive 21 per cent from Rs.86,534.01 crore ($17.8 billion) in 2009. This follows a disastrous 10.9 per cent plunge in 2009. The foundry market in 2010 will outperform the overall semiconductor industry, which will expand by 13.8 per cent.

"The year 2009 is likely to be one that pure-play foundries would love to forget and will make them long for 2010," said Len Jelinek, director and chief analyst for semiconductor manufacturing at iSuppli. "However, next year is likely to bring a new set of challenges, as the rising cost of competition winnows down the number of players in the market.

The expense of developing and implementing next-generation processes for a variety of technologies is rising rapidly. The only way to be a leader and outperform the market is to stay at the cutting edge of semiconductor process development. Only companies with sufficient size can support these costs."

In the past, some foundries have found success by focusing on low-cost manufacturing, trailing behind the process migrations of the most advanced players, Jelinek noted. However, this so-called "fast-follower" strategy no longer is a route to success amid slowing market success. In fact, the fast-follower strategy now serves only as a route to the fringes of the semiconductor manufacturing business.

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