Foundry Market Forecast: First Quarter 2009

The semiconductor foundry market is facing a number of challenges in 2009. Most of the burden is being born by the foundry suppliers. The foundries continue to invest in new technologies, not just advanced nodes, but new processes for high voltage, mixed signal and power management. All these investments are forcing foundries to assume most of the risk while margins continue to become tighter. Offering more options is one way to capture customer loyalty but it also increases foundry costs.

Although most companies are cutting back on capital investments for additional capacity, Semico forecasts capacity utilization to remain relatively low throughout 2009. The largest foundries are expecting first quarter 2009 capacity utilization levels to be at record lows.

“The one bright spot is that demand for foundry services continue to expand. Foundry wafer demand is expected to grow by 11% CAGR (compound annual growth rate) over the next five years,” says Joanne Itow, Managing Director of Semico. “Growth is coming from IDMs shifting to a fab-lite or fabless model. Due to the economic environment, growth from new fabless, start-up companies is not expected to play a major role in 2009.”

On the demand side, there is one relatively minor concern. There is a very slight chance that there could be isolated cases of capacity shortages in certain specialty technologies. While foundry wafer demand is expected to grow by over 10% over the next five years, foundry supply growth will average less than 5%.

A detailed analysis of the supply and demand factors driving the foundry market can be found in Semico’s Foundry Market Forecast, 1st Quarter 2009 report.