By most accounts, the foundries have managed to close the technology gap between themselves and the world's largest integrated device manufacturers. They were working hard to reach parity with these IDMs in an effort to expand their businesses beyond their current fabless semiconductor customers and serve the larger IDMs.

The 2001 downturn and the resulting excess production capacity did, however, result in a disappointing setback for the foundries in their attempts to take on more business from the IDMs. The share of foundry-produced ICs at IDMs slipped to 4.6% in 2001 from 6.2% in 2000.

Faced with a severe production glut in their mainstream 0.25-micron technologies, foundry giants Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp. raced to ramp their 0.13-micron designs into production this year. TSMC expected to ship at least 9,000 eight-inch wafers processed with 0.13-micron technologies by the end of 2001. In Singapore, battered Chartered Semiconductor Manufacturing pushed its first 0.13-micron wafers into production in September.

These three foundry leaders also accelerated their next-generation 0.10-micron process development and planned to start offering this technology to users in 2002.

At TSMC, where the focus was now on the system-on-chip SoC solutions, the first 0.10-micron processed wafers were scheduled to get to its technology foundry partners by the second quarter of 2002. "We will accelerate the development of modules that will make up SoC designs," said TSMC chairman Morris Chang.

But the foundries may not be as successful as they expect in attracting chip making business from the large IDMs during the next industry upturn. Some analysts believe the larger IDMs will build their own 300-mm fabs and maintain control over their own leading-edge CMOS technologies.

A new study from Future Horizons, a British market research firm, predicted that the top 10 IDMs would not outsource anymore than 10-to-15% of their wafer-processing capacity to outside foundries. The rest of the smaller integrated device manufacturers, however, would outsource between 50-to-75% of their ICs to third-party fabs, it said.

Overall, the foundry business is expected to raise its share of global production from 15.5% in 2000 to between 30-to-40%, according to Future Horizons, not half the market as other researchers have predicted. This foundry production would go to fabless chip companies as well as the integrated devices manufacturers.

(Return to 2001 Top 10 list or go to No. 8).