Pure-Play Chip Foundry Market to Grow by 12 Percent in 2012

By Beecher Tuttle April 11, 2012

Following a relatively stagnant 2011, the global semiconductor foundry industry is expected to see a 12 percent increase in revenue in 2012, powered mostly by strong demand for Apple products and Ultrabook PCs, according to a new report from market research firm IHS.

Pure-play foundry suppliers – companies that produce chips for gadget makers that don’t operate their own semiconductor-manufacturing facilities – are expected to see their revenues grow to $29.6 billion in 2012, up from the $26.5 billion that was generated last year. The largest revenue jump is projected to occur in the third quarter, traditionally the most profitable time of year for semiconductor suppliers.

The report comes as good news for the global semiconductor foundry industry, which saw its growth rate drop to just 3 percent in 2011 after an astounding 45 percent surge the previous year. IHS speculates that the semiconductor foundry business will continue to flourish in the coming years, achieving double digit growth from 2013-15.

“This year’s notable performance is a result of the widespread growth of consumer-related products requiring advanced technology for low-power applications,” said Len Jelinek, director and chief analyst of semiconductor manufacturing at IHS. “For such applications, the overall number of semiconductors –or semiconductor content – must grow in order to support the more sophisticated functionalities.”

The top four pure-play foundry in 2011 was Taiwan Semiconductor Manufacturing Corp. (TSMC), which generated revenues of $14.0 billion. The remaining tier 1 suppliers were UMC, GLOBALFOUNDRIES and Semiconductor Manufacturing International Corp. (SMIC), which combined to generate around half the revenue booked by TSMC.

While the future is bright for the semiconductor foundry industry, IHS details a number of challenges that remain, highlighted by the still-sluggish global economy, inventory concerns and an industry-wide reduction in capital spending. Foundries have also expressed concern over dwindling average selling prices that result from increased competition.

Edited by Jennifer Russell

TechZone360 Contributor

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