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Pure-play foundry paints deceptively rosy picture

Posted: 01 Dec 2009     Print Version  Bookmark and Share

Keywords:pure-play foundry  semiconductor manufacturing  market growth 

Market analyst iSuppli Corp. cautions that while the pure-play foundry business is expanding again, growth coming off is of extremely depressed levels, and market conditions are not as bright as they might seem.

Global pure-play semiconductor revenue is set to amount to Rs. 27,336.64 crore ($5.6 billion) in Q4 09, up an apparently impressive 53.7 per cent from the same period in 2008. However, Q4 08 marked the beginning of a sharp downturn in the global pure-play foundry business. Revenue in the Q4 08 amounted only to Rs. 18,061.71 ($3.7 billion), a 32.3 per cent and Rs. 8298.62 crore ($1.7 billion) plunge from Rs. 26360.33 crore ($5.4 billion) during the previous quarter.

"The strong year-over-year rise in pure-play foundry revenue in the fourth quarter paints a deceptively strong picture of industry growth," said Len Jelinek, director and chief analyst, semiconductor manufacturing, for iSuppli. "The reality is that Q4 09 is bringing only a moderate expansion in revenue compared to the third quarter. Furthermore, foundries are noting a slowing of orders, indicating an underlying uncertainty in the market."

Global semiconductor foundry revenue in Q4 is set to rise by a comparatively mild 6 per cent compared to Q3 09.

Global quarterly pure-play foundry revenue

Foundries are reporting weakness in their sales of semiconductors to the communications and computing segments, with the exception of netbook PCs, an area that is seeing some strength. The companies also note healthy orders in the consumer segment. Foundries also are reporting downward pricing pressure at advanced semiconductor manufacturing process nodes, such as 65nm, as more suppliers enter this segment of the market. However, pricing for more mature semiconductor processes, such as 0.18µm, is holding steady.

"In early 2009, when utilisation rates were low, foundries were willing to cut prices on mature semiconductor processes to fill their fabs," Jelinek said. "However, with utilisation having risen at the end of the year, companies no longer are willing to compromise on pricing for mature technologies."

Global pure-play semiconductor foundry utilisation is set to rise to 83 per cent in Q4 09, up from 72 per cent in the Q1 09.

In one positive indicator for the industry, inventories held by foundries remain in a healthy state of balance. This means that any increase in end demand will result in revenue increases for the foundry industry.

For more statistics and forecasts, click here

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