Top 10 Pure-Play Foundries Forecast for 2006

IC Insights: The pure-play IC foundry market is forecast to surge 22% in 2006 as compared to worldwide IC industry growth of 8% (such high growth is a key reason Samsung has decided to enter the foundry market). 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.

IC Insights' forecast of the top 10 pure-play foundries for 2006 is presented in Figure 1. As shown, nine of the top 10 pure-play foundry companies listed are based in the Asia-Pacific region. European-headquartered X-Fab, which is merging with 1st Silicon this year, is the only non-Asia-Pacific company in the ranking.

The pure-play foundry market has been dominated by the Big 4 players (TSMC, UMC, Chartered, and SMIC) over the past few years. In fact, TSMC is expected to register sales of greater than $10 billion in 2006 and keep its 50% marketshare. For all of 2006, the Big 4 companies are forecast to hold an imposing 84% share of the total worldwide pure-play foundry market.

IC Insights expects Chartered to be the third-ranked foundry in 2006, one position up from its fourth place finish in 2005. Overall, Chartered has done an excellent job over the past two years in establishing important business and technology (e.g., IBM) alliances. Currently, it is ramping MPU shipments for AMD as well as increasing output of video game processors for Microsoft’s X-box machines. Moreover, Chartered is expected to begin producing high volumes of leading-edge devices for TI beginning in 2007.

As shown, there are four Chinese foundries in the top 10 ranking. Other major Chinese foundries (not in the top 10) include ASMC, Grace, and CSMC. In total, the Chinese foundries held 12.4% of the pure-play foundry market in 2005, up from only 4% in 2002. However, in 2006, IC Insights forecasts that the Chinese foundries will only slightly increase their marketshare to 12.6%. As the Chinese foundries have moved from the explosive growth of the startup phase to the more moderate growth rates typically encountered by established companies, any future total marketshare increases are forecast to be at a very moderate pace.

Figure 1

McClean Report Publ 20060803

1H06 Top 15 Semiconductor Supplier Ranking Released. TSMC jumps to fourth; Fabless supplier Qualcomm breaks into Top 15

IC Insights:1H06 ranking of the worldwide top 15 semiconductor suppliers (Figure 1). As shown, pure-play foundry TSMC, which ranked eighth in the full-year 2005 listing, moved into the fourth position in 1H06. Further illustrating the success of the foundry business model, for the first time ever a fabless semiconductor supplier (Qualcomm) moved into the top 15 ranking. In total, the top 15 semiconductor companies' sales increased only 1% in 2Q06 as compared to 1Q06.

Figure 1

Caused in part by their on-going price war, Intel and AMD registered the largest 2Q06 sequential sales declines of any of the top 15 semiconductor suppliers. It should be noted that although Intel and AMD each displayed significant 2Q06 sales declines, IC Insights expects full-year 2006/2005 semiconductor sales at Intel to be down at least 10% while AMD is on pace for a 42% surge.

As shown in Figure 1, Freescale (ranked tenth in 1H06) and Philips (ranked eleventh in 1H06) were essentially tied in 1H06 semiconductor sales with only $1 million difference between the two! However, using the 3Q06 outlooks from Freescale and Philips, in addition to IC Insights' estimates for fourth quarter revenue, Philips is expected to finish 2006 ahead of Freescale in semiconductor sales and hold the tenth position.

One of the hottest applications for semiconductors in the first half of 2006 was for cellular phones. In fact, IC Insights forecasts that worldwide cellular phone shipments in 2006 will reach about 950 million handsets, up 18% over 2005. As shown, CDMA/WCDMA semiconductor supplier Qualcomm took advantage of the strong cellular phone market to move into the 1H06 top 15 ranking. Moreover, IC Insights estimates that Qualcomm's full-year 2006 semiconductor sales will reach at least $4.5 billion, up 30% from 2005.

As compared to the full-year 2005 top 15 semiconductor supplier ranking, the top three positions are highly unlikely to change when the full-year 2006 results are posted. However, the number 4-6 positions are truly up for grabs this year. In 1H06, less than $60 million separated the fourth ranked supplier, TSMC, from the sixth ranked company, ST! As mentioned, there will also be stiff competition for the tenth spot between Freescale and Philips.

When incorporating the top 15 companies' outlooks for 3Q06, coupled with IC Insights' estimates for their 4Q06 sales, the top 15 semiconductor companies are on track to post an 8% increase in 2006/2005 semiconductor sales. This figure matches IC Insights' 8% forecast for total 2006/2005 worldwide semiconductor sales growth. 1H06 ranking of the worldwide top 15 semiconductor suppliers Publ 20060731