Good Q2 for semicon foundries, but slowdown expected in next 2 qtrs

CALIFORNIA, USA: According to the Semiconductor Manufacturing & Supply Market Tracker Report released by market research firm, IHS iSuppli, pure play foundry semiconductor manufacturers enjoyed a robust second quarter following the enthusiastic consumer purchasing of wireless products like mobile handsets and tablets, but the industry is slowing down in the second half of 2012 as economic tremors roil the supply chain.

Pure play foundry suppliers are those companies which only produces semiconductors for other firms. The revenue for pure play foundry suppliers reached $7.8 billion in the second quarter, up 16 percent from $6.7 billion in the first quarter.

IHS forecasts that, the expansion in the second quarter will prove to be the strongest this year, as a slowdown is likely to occur during the next two quarters. Revenue of $8.3 billion is estimated for the third quarter, equivalent to a weaker sequential growth of 8 percent. A seasonal decline of 5 percent in the fourth quarter then will follow, dropping revenue for the period to $7.9 billion, as per IHS.

There has been a shift in the pattern of manufacturing in the second quarter, this year. Usually, the largest revenue period for the foundry sector is the third quarter. Now the new pattern of manufacturing has emerged with initial product shipments from foundry suppliers for new design wins now moving from the third quarter to the second.

"This shift in seasonality is related to end suppliers introducing next-generation wireless products, like cellphones and tablets, earlier in the year in order to capitalize on sales during a longer period-one lasting three quarters, instead of the usual two quarter time frame that traditionally starts at the beginning of the second half," said Len Jelinek, director and chief analyst of semiconductor manufacturing at IHS.

"As a result of the shift in seasonality, foundry suppliers must start to adjust technology development and factory expansion plans to mirror these changes. Shipments in the third quarter are now also a direct reflection of second-quarter performance," added Jelinek.

As per IHS, in the third quarter, manufacturers will witness reduction in orders for future sales. The major behind this could be attributed to external factors like the deteriorating global economy. In such a case, a huge amount of inventory will be stocked up throughout the industry.

At the current production pace, foundry manufacturing run rates will be negatively affected through the first quarter next year lasting until the first half of the second quarter, IHS believes. The industry will begin to recover after that, with the third quarter next year anticipated to grow by a sequential 10 percent.