Samsung among top 10 foundry suppliers

USA: IC Insights released its ranking of the leading IC foundries for 2007. As shown, 11 of the top 14 foundry companies listed are based in the Asia-Pacific region. Europe-headquartered X-Fab, which merged with 1st Silicon in 2006, is the only non-Asia-Pacific pure-play foundry company in the top 14 group.

The "Big 4" (TSMC, UMC, Chartered, and SMIC) have dominated the foundry market over the past five years. With sales of almost $10 billion, Taiwan Semiconductor Manufacturing Co. (TSMC) was clearly the leading foundry supplier in 2007. Its revenue increased 1 percent over 2006. TSMC's sales were only 11 percent less than the combined foundry sales of the other companies listed in the top 14 ranking.

UMC maintained its second place ranking with sales of $3.8 billion, an increase of 2 percent over 2006. SMIC increased its sales 6 percent and edged slightly ahead of Chartered in 2007 to take over the number three position in the ranking (a position it lost in 1Q08). Together, these "big four" accounted for just over two-thirds (68 percent) of the $24.5 billion foundry market in 2007.

TSMC, UMC, SMIC, and Chartered are pure-play foundries — companies that do not offer IC products of their own design, but instead focus on producing ICs for other companies. In 2007, pure play foundries accounted for 84% of the total foundry market.

Integrated device manufacturer (IDM) foundries accounted for 16 percent of the 2007 foundry market. IDM foundries are defined as those companies that offer foundry services in addition to their own ICs. IDM foundries include IBM, NEC, TI, and Samsung.

In 2007, Samsung edged it way into the ranks of the top 10 foundry suppliers. In 2006, Samsung announced it was going to place special emphasis on its foundry business. Aided by a technology alliance with IBM and Chartered and with a new, 300mm wafer fab dedicated exclusively to foundry production, Samsung has quickly emerged as a foundry player. Samsung's foundry sales were $385 million in 2007, placing it in 10th-place in the top 14 ranking.

IC foundries have two main customers — fabless IC companies such as Qualcomm, Nvidia, and Xilinx, and IDMs such as Freescale, ST, and others. The success of fabless IC companies as well as the movement to more outsourcing by existing IDMs has fueled tremendous growth in IC foundry sales since 1998.

Large companies and an increasing number of mid-size companies are ditching their fabs in favor of the fabless business model. Companies in this category include LSI and Avago (ex-Agilent), which have all become fabless in the past few years. Considering its 1Q08 financial results, AMD could be a company that is forced to go fab-lite or possibly completely fabless in the near future.