Foundries find bottom, anticipate the bounce

By Christina Bruns

It’s actually a good sign for the semiconductor industry that one of the top three foundries already hit its capacity utilization bottom – and the other two big foundries aren’t far behind.

This may mean that the industry has left the doldrums it has been caught in for the last 12 months or so. It may also mean that enough inventory has burned off, causing a need for production to begin again. The foundries are banking on the industry being ready for more advanced linewidths as it moves to smaller and smaller geometries.

“[Taiwan Semiconductor Manufacturing Co. Ltd.] was the first to hit the bottom as far as utilization and sales,” said Bill McClean of IC Insights. “I think May was its low point and June onward has shown an improvement in capacity utilization. 4Q will be better than anticipated.”

TSMC has already released its fourth quarter figures, and fared a bit better than its main competitors, reporting overall capacity utilization in the mid-40th percentile.

But at smaller linewidths, the foundry is running at capacity utilization rates much higher than the overall average. Production of smaller linewidths may be the catalyst to spur better utilization rates as the industry looks to dig itself out of the current slump.

“For 0.18-micron and below geometries, TMSC is currently running at 80% capacity utilization,” said spokesperson Chuck Buyers.

Buyers told WaferNews that linewidths of 0.15-micron and below accounted for 15% of its revenue in 3Q01. By revenue, TSMC’s chip breakdown for 3Q01 was 49% PCs, 25% consumer electronics, 16% communications, 6% memory, and 4% industrial applications.

United Microelectronics Corp. (UMC), Taipei, Taiwan, reported a capacity utilization of 36% for the third quarter, and sequentially, the foundry’s numbers are getting better.

UMC said October’s capacity utilization was up more than 12% over September. Jim Kupec, president of UMC USA stated that the fourth quarter will be higher than the third.

“3Q was the bottom,” Kupec stressed.

“UMC looked like they hit bottom in June and from July had shown some increase in sales although it’s fairly small,” agreed McClean. “I think overall we have seen somewhat of a bottom in the foundry industry and we’re starting to see a pick up there.”

While Kupec couldn’t release UMC’s capacity utilization for specific linewidths, he did say that 34% of UMC’s third quarter revenue was from chips with linewidths of 0.18- to 0.25-micron. Chips with linewidths of 0.25- to 0.35-micron accounted for 31%, and those greater than 0.35-micron accounted for 18.5% of the Taiwanese foundry’s 3Q01 revenue. The remaining 17% went to linewidths smaller than 0.18-micron.

From a design standpoint, Kupec said UMC is seeing a “real strong adoption rate” of 0.13-micron linewidths. He told WaferNews the UMC currently has 80 products from 40 different customers.

“The volume is extremely small, but the adoption rate is far greater than we had anticipated. Most are in communications with the dominant being high performance orientation,” Kupec noted.

In UMC’s third quarter, 39% of its chips went to computers, 21% to communications, 38% to the consumer space, and 2% to other.

Singapore’s Chartered Semiconductor reported 22% capacity utilization during 3Q01 and is forecasting the fourth quarter to be somewhere in the mid-20’s, but the foundry wouldn’t release capacity utilization figures by linewidth.

“We’re cautiously optimistic about the change in the slope of the numbers. The number of formal design activities has kicked up significantly in the new technologies,” said Michael Buehler-Garcia, VP of business development and worldwide marketing at Chartered.

“I don’t believe I’d say we’ve hit the bottom,” Buehler-Garcia said of Chartered. “We’ve seen some changes that points to recovery. We have data that says it’s not as bad as it was in 2Q and 3Q, [but I’m] not ready to make that strong of a statement yet.”

Even so, things do seem to be improving.

“We see some increases from our customers. Design activity is back high and we have engaged with four [or so] new customers that could turn into new revenue over the next couple quarters,” he noted. “We have seen an acceleration to the fabless model, but that’s a ‘grow the entire industry’ type comment.”

For Chartered’s third quarter, 45% of revenue was logged in its communications segment, 32% in computers, 12% in the consumer space, 10% in memory, and 1% in other.


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