By the end of 2011, there may be only three sources for high-volume, leading-edge semiconductor foundry manufacturing: Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), GlobalFoundries Inc. and Samsung Electronics Co. Ltd., according to new research from IHS iSuppli.
Several other foundries, including United Microelectronics Corp. and Semiconductor Manufacturing International Corp., will be capable of providing near-leading-edge foundry manufacturing in high volume, but, the big three foundries will be the major players.
Will another company join the party? Quite possibly in 2011, Intel Corp. may decide to use some of its advanced manufacturing capacity and offer foundry services to design companies and fabless semiconductor suppliers that are incorporating the Atom microprocessor into their designs. Although this would represent a dramatic change in the philosophy at Intel, it potentially could lead to significant revenue growth as well as more favorable asset utilization. The strategy of providing the Atom design to TSMC and its clients did not meet the expectations of either TSMC or Intel.
By the end of 2011, there will be no Japanese suppliers manufacturing at the 32-nanometer and smaller geometries. This is significant, since Japan long has been a leader in technology development.
What’s next for Japan? 450-millimeter wafers?
This is hard to predict, but the Japanese semiconductor industry has been dominant in the design and manufacture of semiconductor manufacturing equipment.
Conceivably, Japanese equipment suppliers could leapfrog their competitors with the appropriate funding. If this were to happen, 2011 has to be the year that Japanese companies come out of their shells and become active in the foundry business. The alternative is far less pleasant, and the Japanese semiconductor industry could suffer greatly if it chooses to remain in the sidelines.
Competing with TSMC
So which company will be the winner in the foundry market in 2011?
The obvious answer is TSMC, a company that owns 50 percent market share of the foundry market, possesses leading technology and enjoys the most available capacity. The company now has an empty shell waiting for tools to be installed as demand materializes. Most likely, if TSMC were to begin selling directly to the merchant market, it would become the largest supplier of semiconductors, with revenue eclipsing that of the current chip industry leader, Intel.
The real question is how much business Samsung, GlobalFoundries and Intel will take from TSMC.
Samsung has stated that its goal is to be the world’s leading supplier of semiconductors. This means Samsung must surpass Intel in terms of revenue. To accomplish that goal, Samsung must become more aggressive in both memory manufacturing as well as in the foundry business.
In 2011, look for Intel, Samsung and TSMC to outperform the other foundries. All three companies have the technology, capacity and the money needed to maintain their leadership position within their segments.
One other company that has lurked in the shadows but should outperform in its sector is ON Semiconductor. If On is able to successfully merge Sanyo into its operation and improve Sanyo’s ineffective manufacturing—a real stretch for the management team—the company could see significant revenue increases with corresponding margin improvement.
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