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August 6, 2007

IC Insights Sends "ALERT" to IC Foundry Customers!

Major IC foundries may be out of capacity in 4Q07 and early 2008

Using data compiled from current foundry company guidance for 3Q07 and IC Insights’ shipment and capacity forecasts for 4Q07, the soon-to-be-released August Update to The McClean Report alerts IC foundry customers about a possible shortfall of capacity at the major foundries by the end of 2007 and into 2008. As shown in Figure 1, the “Big 4” IC foundries (i.e., TSMC, UMC, SMIC, and Chartered) are forecast to go from operating, in total, at a capacity utilization rate of only 78.5% in 1Q07 to 97.5% in 4Q07! It should also be noted that the Big 4 foundries currently hold almost three-fourths of the total worldwide pure-play foundry capacity and 99% of the ≤90nm capacity.

IC Insights’ August Update states: "Given the remarkable turnaround in the Big 4’s capacity utilization during the first eight months of this year, IC foundry customers are strongly encouraged to begin attempting to secure their 4Q07 and 2008 capacity needs as soon as possible."

The largest foundry in the world, TSMC, is forecast to jump from a capacity utilization rate of 83% in 1Q07 to 100% in 4Q07. UMC, the second largest pure-play foundry, is encountering an even more dramatic turnaround, going from a capacity utilization rate of only 70% in 1Q07 to an expected 4Q07 utilization rate of 95%!

SMIC, the large China-based foundry, has significantly cut its capital spending over the past three years. The $720 million in capital expenditures planned by SMIC in 2007 are less than 40% of what it spent three years earlier in 2004—$1.84 billion. As a result, with its shipments starting to heat up, SMIC is also expected to have a capacity utilization rate of over 90% in 4Q07.

Chartered is forecast to be the only Big 4 foundry under 90% capacity utilization in 4Q07 (88%). However, given IC Insights’ outlook for good IC industry growth in 2008, the company is likely to be over the 90% rate in the first half of next year.

In total, the Big 4 foundries are forecast to register 42% more wafer shipments in 4Q07 as compared to 1Q07. In contrast, their total wafer processing capacity is expected to increase only 14% over this same timeperiod! It should be noted that total capital spending by the Big 4 in 2007 is forecast to increase only 9%, after a moderate 8% increase in 2006.

Given the expectations for IC foundry demand in 2H07 and the full-year 2008, IC Insights believes that the Big 4 foundries are currently "behind the curve" in capital spending and capacity additions. This is the main reason why IC Insights believes the Big 4 foundries will need to be among the leaders in capital spending increases in 2008.

Figure 1

Report Details

IC Insights will soon release its August Update to the 2007 edition of The McClean Report—A Complete Analysis and Forecast of the Integrated Circuit Industry. The entire year-long McClean Report service offers over 500 tables and graphs and comes with free monthly updates by e-mail from March through November. A single copy of the report in CD-ROM or binder format is priced at $2,590. A bundled CD-binder set is priced at $3,085. An Internet access password is available as a $695 option. The report is also available under a multi-user corporate license for $5,490.

For more information, please visit www.icinsights.com/prodsrvs/mcclean/.

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About IC Insights

IC Insights, Inc., based in Scottsdale, Arizona, is dedicated to providing high-quality, cost-effective market research for the semiconductor industry. Founded in 1997, IC Insights offers coverage of global economic trends, semiconductor market forecasts, capital spending and fab capacity trends, product market details, and technology trends, as well as complete IC company profiles and evaluations of end-use applications driving demand for ICs.

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