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June 3, 2010

IC Industry Consolidation Is Here!

IC buyers should expect to encounter firming IC prices in the future

IC Insights keeps a close watch on IC capacity trends as an indicator of future IC ASPs and overall IC industry strength. Since 2Q07, IC suppliers have been paring down their older capacity (i.e., ≤200mm wafers). The decline in ≤200mm capacity picked up speed in 2009 and is expected to continue throughout 2010 as memory manufacturers steadily close or upgrade their 200mm fabs to produce 300mm wafers. Moreover, more companies are expected to shutter their older fabs as they transition to the fab-lite business model or go completely fabless.

The V-shaped quarterly rebound in IC unit shipments in 2009, coupled with the closure of numerous ≤200mm fabs, caused total IC capacity utilization to surge starting in 2Q09. While total IC industry capacity utilization was only 57% in 1Q09, it reached 93% in 1Q10, a level that was higher than before the global economic crisis! As a result, in 1Q10 there were a number of device types that were reported to be very difficult to secure or that saw leadtimes dramatically increase.

As tight as overall IC capacity has been in the IC industry since the first half of 2009, 300mm capacity has been even tighter! In 1Q10, 300mm capacity utilization was 97%. It should be noted that IC industry capacity utilization figures of ≥96% essentially indicate a "sold out" situation.

IC Insights believes that one limiting factor to 30% or greater IC market growth in 2010 might be the lack of IC fabrication capacity needed to support such growth. With most capital spending in 2010 going toward developing and moving to finer feature sizes (with little going toward adding wafer starts), the availability, or lack of availability, of IC devices will become a major factor in the second half of this year.

Given that almost all DRAM, NAND flash memory, and microprocessors are produced using 300mm wafers, it follows that each of these segments registered increasing average selling prices throughout 2009 and into 2010. IC Insights believes that buyers of these IC devices should be prepared for similar ASP trends for these products in the second half of this year.

In the past, IC Insights has pointed out how semiconductor industry capital spending is becoming more concentrated, with a greater percentage of spending coming from a shrinking number of companies. Because of this trend, IC industry capacity is also becoming more "concentrated."

Included in IC Insights’ Strategic Reviews database is a very detailed company fabrication facility listing. This listing includes wafer fab capacity levels, feature sizes, wafer sizes, types of devices produced, etc. This database of fabrication facilities was used to determine how much IC capacity is held by the major IC producers.

After examining the data in the Strategic Reviews database, it was determined the top 10 capacity leaders held about 60% of the total 2009 worldwide IC capacity, and the top 15% held a 71% share. However, when looking at only 300mm capacity, the top 10 leaders held an imposing 84% share with the top 15 companies holding all but 8% of the world’s 300mm IC fabrication capacity (Figure 1)!

Figure 1

With so few companies representing such a large share of the leading-edge IC production, IC Insights’ long-held belief that the companies left standing after the "shakeout" will reap the rewards of increased profitability, is now coming true. However, for the IC user, this also means that IC average selling prices are unlikely to decline as they have in the past. The pricing pendulum is now swinging in favor of the IC producers and it may not be swinging back for a long time.

Report Details

Packed with 400 tables and graphs, the 2010 edition of The McClean Report is available in three-ring binder, CD-ROM, and on-line formats, and also 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 $2,890. A bundled CD-binder set is priced at $3,385. An Internet access password is available as a $695 option. The report is also available under a multi-user corporate license for $5,990.

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

IC Insights’ Strategic Reviews Online database includes extensive profiles of more than 225 IC companies. Company profiles include companies with a fabrication facility as well as fabless companies. The profiles include financial highlights, company strategy, key personnel, products and services offered, process technologies employed, important strategic alliances, detailed fab data when applicable, and contact information. Over 2,000 hours a year is expended on keeping this database current!

An individual-user password to Strategic Reviews is available for $2,490 and is good for access to the database for one full year after the start of the subscription. A multi-user corporate-wide password is available for only $4,190.

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

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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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