Total pure-play foundry market expected to jump 9% this year, up from 6% in 2015

[Daniel Nenni]

IC Insights released its August Update to the 2016 McClean Report earlier this month. This Update included an update of the semiconductor industry capital spending forecast, a look at the top-25 semiconductor suppliers for 1H16, including a forecast for the full year ranking, and Part 1 of an extensive analysis of the IC foundry industry (the ranking of the top-10 pure-play foundries is covered in this research bulletin).

In 2014, the pure-play IC foundry market registered a strong 17% increase, the largest increase since 2010 and eight points greater than the 9% increase in the worldwide IC market. In 2015, the pure-play foundry market showed a 6% increase, about one-third the rate of growth in the previous year, but seven points higher than the total IC market growth rate of -1%. For 2016, the pure-play foundry market is expected to increase by 9% and greatly outperform the growth rate of total IC market, which is forecast to drop by 2% this year.

Figure 1 shows that the top 10 pure-play foundries are expected to hold 95% of the total pure-play foundry market this year. This year, the “Big 4” pure-play foundries (i.e., TSMC, GlobalFoundries, UMC, and SMIC) are forecast to hold an imposing 84% share of the total worldwide pure-play IC foundry market. As shown, TSMC is expected to hold a 58% marketshare in 2016, down one point from 2015, as its sales are forecast to increase by $2.1 billion this year, up from a $1.5 billion increase in 2015. GlobalFoundries, UMC, and SMIC’s combined share is expected to be 26% this year, the same as in 2015.

The two top-10 pure-play foundry companies that are forecast to display the highest growth rates this year are Israel-based TowerJazz, which is expected to edge-out Powerchip for the 5th spot in the pure-play foundry ranking in 2016, and China-based SMIC, with 30% and 27% sales increases, respectively. TowerJazz and SMIC have been on a very strong growth curve over the past few years. TowerJazz is expected to grow from $505 million in sales in 2013 to $1,245 million in 2016 (a 35% CAGR) while SMIC is forecast to more than double its revenue from 2011 ($1,220 million) to 2016 ($2,850 million) and register a 19% CAGR over this five-year timeperiod.

View attachment 18008
Eight of the top-10 pure-play foundries listed in Figure 1 are based in the Asia-Pacific region. Israel-based TowerJazz, and U.S.-headquartered GlobalFoundries are the only non-Asia-Pacific companies in the top-10 group. While LFoundry is currently headquartered in Avezzano, Italy, China-based SMIC agreed in 2Q16 to purchase 70% of the company for approximately $55 million. Since LFoundry has an installed capacity of 40K 200mm wafers/month, the acquisition of a controlling interest in the company essentially serves to immediately expand SMIC’s capacity by 13% this year.

Although SMIC is forecast to register strong sales growth of 27% this year, Chinese foundries, in total, are expected to hold only 8.2% of the pure-play foundry market in 2016, down 5.1 points from the peak share of 13.3% reached in 2006 and 2007. IC Insights believes that the total Chinese company share of the pure-play foundry market will increase through 2020, as the China-based foundries take advantage of the huge amount of government and private investment that will be flowing into the Chinese semiconductor market infrastructure over the next five years.

Report Details: The 2016 McClean Report Additional details on semiconductor foundry sales rankings are included in the 2016 edition of IC Insights’ flagship report, The McClean Report—A Complete Analysis and Forecast of the Integrated Circuit Industry. A subscription to The McClean Report includes free monthly updates from March through November (including a 250+ page Mid-Year Update), and free access to subscriber-only webinars throughout the year. An individual-user license to the 2016 edition of The McClean Report is priced at $3,890 and includes an Internet access password. A multi-user worldwide corporate license is available for $6,890.
To review additional information about IC Insights’ new and existing market research reports and services please visit our website: IC Insights | Semiconductor Market Research.

More Information Contact
For more information regarding this Research Bulletin, please contact Bill McClean, President at IC Insights. Phone: +1-480-348-1133, email: bill@icinsights.com

PDF Version of This Bulletin
A PDF version of this Research Bulletin can be downloaded from our website at http://www.icinsights.com/news/bulletins/

 

[Eric Esteve]

Interesting: TSMC is the undisputed leader, and we don't see any reason for TSMC to lose this leader position.

The real fight will be between GlobalFoundries, UMC and... SMIC. I wouldn't be surprised to see SMIC becoming #2 in a few years.

Why?
- Huge investment made by the Chinese gvmt. in semi and electronic will certainly benefit to Chinese foundries (as well as to others)
- SMIC has mimic UMC and TSMC model: select a preferred ASIC/IP vendor company (Brite semi.). From that I have seen at DAC 2016 + Brite' "YOU" PR announcing their IP strategy, Brite seems very dynamic, I would bet on their success more than for Invecas (Globalfoundries' ASIC partner)
- Technology: SMIC is only at 28nm, like UMC, when GloFo is obviously supporting more advanced nodes. That's the reason why I say "in a couple of years"... it will take some time before SMIC become #2, but I bet they will!

 

[astilo]

Mhm Eric, I think you are a bit too optimistic about the timeline. If you mean within 2 or 3 years, that's simply not possible, if you meant in 5 to 10 years, that's of course another story.

 

[Daniel Nenni]

Having worked with SMIC on the IP side from 130nm to 40nm I can tell you I had very high hopes at first. Unfortunately SMIC failed to execute at every opportunity so I see little hope for success here. The most recent fail, in my opinion, is not adopting FD-SOI which is a perfect fit for the China semiconductor market. Instead they will try to do FinFETs at 14nm with little hope of short term success. Meanwhile TSMC is building a 16FFC fab in China and will own the low cost FinFET China market for years to come.

 

[Eric Esteve]

DAN, there is nothing like real experience acquired in the field, so I respect your opinion! Nevertheless, since you have worked with SMIC, we can identify a new parameter: amount of cash invested by the Chinese gouv. Even if this cash doesn't necessarily guarantee that SMIC business will be successful, it can help! SMIC need to build an efficient strategy planning, and be able to deploy it.

About FD-SOI, I tend to agree with you, but you have to take into account the fact that SMIC is expected (by the Chinese gouv.) to compete on the technology forefront, ie support FinFET technology. Even if it's more a political than business oriented decision... This decision doesn't prevent SMIC to also support FD-SOI (later), but it will allow them to "proudly" support Chinese chip makers developing IC on advanced nodes. That's the problem with funding coming from any gouvernement, you have to tweak the strategy accordingly with political requirements.