Third-party wafer-foundry capacity could end up in short supply by the year 2000 if chip manufacturers increase their use of
contract manufacturing, said a new report from Semico Research
Currently, there is a glut of silicon-foundry capacity, but Semico said
that condition could quickly change if major semiconductor makers
decide to shift more of their wafer processing to third-party fabs at a
time when chip markets begin recovering from the current slump.
The Phoenix market researcher estimated that demand for processed
wafers is increasing at a compound annual growth rate of 13 percent over the
next five years. Silicon-foundry demand is expected to grow at 21 percent in
the five-year period.
Today, fab-operating chip suppliers -- known as integrated-device
manufacturers, or IDMs -- get about 5 percent of their processed wafers from
foundries, according to Semico's report. If IDMs increased their use of
foundries to about 10 percent of their processed wafer, the silicon-foundry
business could grow 40 percent, which would lead to a potential shortage of
capacity in 2000, the report said.
A number of major IC manufacturers are planning to increase their use
of outside foundries as part of a restructuring of their business models
and a hedge against uncertain times. Motorola, for example,
intends to get 30 percent of its chips from third-party foundries by 2000
compared to just 7 percent last year. In four years, Motorola wants to move
50 percent of its wafer-processing needs to outside foundries.