April 14, 2003 – Santa Cruz, CA – New data from the latest World Fab Watch, by Strategic Marketing Associates (SMA), indicates that competition is heating up to provide sub-180nm foundry services among a variety of players. The result is a threat of overcapacity by 2005.

Investments are on the increase by IDMs and established foundry players alike, SMA said. Add to the mix upstarts such as Silterra, Dongbu, SMIC, and Grace, and overcapacity is likely, predicts SMA.

Currently, the top three foundries, TSMC, UMC, and Chartered, own 75% of the sub-180nm foundry capacity, according to World Fab Watch. IDMs, however, are also looking at advanced processes as an attractive market, according to George Burns, president of Strategic Marketing Associates, a market research firm specializing in fab information. IDMs such as IBM and Toshiba now offer leading-edge technologies. According to Burns, IBM poses the greatest threat to the top three. The company’s 300mm fab in East Fishkill, NY, is ramping quickly and should be completely full by year-end. IBM is already siphoning business away from TSMC and UMC by capturing business with AMD and Nvidia.

“Foundry companies are in grave danger of suffering from overcapacity and un-profitability much like the DRAM manufacturers of the 1990s,” said Burns. “The top foundries are looking over their shoulders and seeing more competitors, and not just the IDMs. With so many companies chasing the leading edge, it’s going to be very difficult to find a safe place to stand.”

According to World Fab Watch estimates, from 2000 through 2005 the top three foundries will have brought 12 fabs online, with a capacity when fully ramped, of more than 600,000 equivalent 200mm wafers/month. Other pure play foundries plus the IDM foundries will have added even more capacity.