IC Foundry Market Forecast to Grow 32% in 2006

IC Insights: , The pure-play IC foundry market is forecast to surge 32% in 2006 as compared to worldlwide IC industry growth of 8%. IC Insights defines a pure-play foundry as a company that does not offer a significant amount of IC products of its own design, but instead focuses on producing ICs for other companies. Pure-play foundries include TSMC, UMC, Chartered, SMIC, etc. In total, pure-play foundry sales are expected to display a 21% CAGR from 2005 through 2010, almost double the 11% total IC industry CAGR expected during the same timeframe.

In 2005, TSMC registered an all-time high in sales ($8.22B) and gained three percentage points of marketshare. Given the numerous pure-play (e.g., SMIC) and IDM (e.g., IBM) foundry startups over the past few years, TSMC's 2005 results were especially impressive. In fact, TSMC and SMIC were the only major pure-play foundries to gain one point or more of foundry marketshare in 2005.

The previous Big 3 pure-play foundries (TSMC, UMC, and Chartered) have now morphed into the Big 4 foundries with the addition of China-based SMIC. In 2005, SMIC registered the highest growth rate of any of the major pure-play foundries (19%). SMIC held 7% of the pure-play foundry market in 2005, after holding only 1% three years earlier in 2002.

Even with the poor showing of Grace Semiconductor (registering the largest decline in sales of any of the major foundries in 2005), the Chinese foundries, in total, held 13% of the pure-play foundry market in 2005, up from only 4% in 2002 (Figure 1). In 2010, Chinese foundries will hold 17% of the worldlwide pure-play foundry market, representing a sales level of $7.5 billion as compared to $2.2 billion in 2005.

As shown, IC Insights does not expect the strong gains in marketshare registered by the Chinese foundries in 2003 and 2004 to continue through the rest of this decade. As the Chinese foundries move from the explosive growth of the startup phase to the more moderate growth rates typically encountered by established companies, their total marketshare increases are forecast to average just slightly less than one percentage point per year over the next five years.

Figure 1

McClean Report

Publ 20040123