Analyst: Foundry biz slowing in 2H08

August 4, 2008 – A look at the top four global foundries’ latest financials and outlooks suggests the market outlook for foundries heading into 2H08 and early 2009 is starting to weaken due to uncertainties and fluctuation concerning demand.

Browsing through the 2Q08 financials for the top three foundries (TSMC, UMC, and Chartered) shows positive growth in both sales and earnings, while SMIC has fallen in the past 12 months to No. 4 with slowing sales as it exits the commodity DRAM business. Consumer and (in part) communications customers showed greater strength than the PC segment, notes Gartner analyst Kay-Yang Tan, in a report briefing.

TSMC, Chartered, and SMIC expect to roughly maintain their low single-digit sales growth in 3Q08, with UMC projecting flat to a slight decline, as all see strong demand from communications (particularly wireline/wireless networking ICs) and weakness from handset and baseband applications. In the consumer segment, demand from game consoles and set-top boxes also will demonstrate strength, followed by PC graphics and chipsets.

But looking at the numbers (see table) indicates expectations are lower than previously thought, even with expectations of a slowdown in the second half of the year. “The recent market outlook guidance by the top few foundries revealed that the severity of the downturn has intensified,” Tan notes. Smaller foundries with 200mm fabs were the first to feel this pinch with loading not as tight in June as in recent months, he says, and this has now spread to the rest of the foundry sector, with fab loading plans for 3Q already said to be “cut back rigorously from September” even for leading-edge production, which is reducing overall outlooks significantly.

Tan notes that while the late-year foundry slide mirrors similar trends in 2004 and 2006, the reasons this time are different, attributed just to “demand-induced phenomenon” and not an inventory-buildup problem. And macroeconomic questions persist, with visibility into 4Q “especially cloudy and volatile” amid concerns whether “lackluster market sentiment will further curtail consumer spending and end-market demand” into 1H09.

Still, though, Tan’s view of the foundry sector is positive for 2008, with growth “strongly” outpacing that of the overall semiconductor industry. The firm’s outlook is lowered slightly to ~13% growth, down from 14.8% earlier this year.


Easily post a comment below using your Linkedin, Twitter, Google or Facebook account. Comments won't automatically be posted to your social media accounts unless you select to share.