PHOENIX Third-party wafer foundry capacity could end up in short supply by the year 2000 if chip manufacturers increase their use of contract manufacturing, warns a new report from Semico Research Corp. here.
Currently, there is a glut of silicon foundry capacity worldwide, 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% over the next five years. Silicon foundry demand is expected to grow at 21% in the five-year period.
Today, fab-operating chip suppliers--known as integrated device manufacturers, or IDMs--get about 5% of their processed wafers from foundries, according to Semico's report. If IDMs increased their use of foundries to about 10% of their processed wafer, the silicon foundry business could grow 40%, which would lead to a potential shortage of capacity in 2000, the report concluded.
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 Inc., for example, intends to get 30% of its chips from third-party foundries by 2000 compared to just 7% last year. In four years, Motorola wants to move 50% of its wafer processing needs to outside foundries.