Before GlobalFoundries entered the foundry market, TSMC was by far the technology leader among the major pure-play foundries.  For 2013, 51 percent of TSMC’s revenue is expected to be from ≤45nm processing.  As expected, with GlobalFoundries’ fabs having a large portion of their capacity dedicated to producing AMD’s MPUs over the past few years, its processing technology is skewed toward leading-edge feature sizes.  In 2013, 50 percent of GlobalFoundries’ sales are forecast to be from ≤45nm production.

In 2012, only TSMC, GlobalFoundries, and UMC had significant sales of ≤45nm technology.  In 2013, TSMC is expected to have about 4x the dollar volume sales at ≤45nm as compared to GlobalFoundries and about 12x the ≤45nm sales of UMC ($10.33 billion for TSMC, $2.53 billion for GlobalFoundries, and $0.89 billion for UMC).  In contrast, SMIC only entered initial production of its 45nm technology in early 2012, more than three years after TSMC first put its 45nm process into production and is forecast to sell only $0.22 billion of ≤45nm technology this year.  In fact, only 22 percent of UMC’s 2013 revenue and 11 percent of SMIC’s 2013 sales are forecast to come from devices having ≤45nm feature sizes, which is why their revenue per wafer is so low as compared to TSMC and GlobalFoundries.

It is interesting to note that all of the increase in pure-play foundry sales in 2013 is expected to be due to ≤28nm feature size device sales (Figure 1).  Although forecast to represent 78 percent of total pure-play foundry sales this year, the >28nm pure-play foundry market is expected to decline three percent in 2013.  In contrast, the 2013 leading-edge ≤28nm pure-play foundry market is forecast to triple this year.  Not only is essentially all the of pure-play foundry market growth forecast to come from leading-edge production, most of the profits that will be realized are also expected to come from the finer feature size sales.

Figure 1

TSMC had almost $1.5 billion in 28nm sales in 2Q13 and is forecast to have about $6.33 billion in sales of 28nm devices for all of 2013, over 3x the $2.10 billion worth of 28nm product the company sold in 2012.  As a result, TSMC is expected to hold a 78 percent share of the pure-play foundry industry’s $8.10 billion of ≤28nm sales this year.

Figure 2 illustrates how important it is for the major IC foundries to be able to offer leading-edge IC process technology.  As shown, there has been a strong correlation between the percentage of sales a major foundry has for leading-edge IC devices and its net income percentage.

Figure 2

IC Insights continues to believe that the more profitable (i.e., successful) major pure-play foundries, which include TSMC, GlobalFoundries, UMC, and SMIC, will be those that keep at the leading edge of the process technology roadmap.  This can be accomplished through joint ventures and licensing agreements, (e.g., the partnership between IBM and GlobalFoundries) and/or through significantly increasing R&D spending to develop advanced technology, as TSMC has done.