Asia's silicon foundries flourish
04/01/2000
Pieter "Pete" Burggraaf, Senior Technical Editor
There was a time when silicon foundries were fabs for fabless IC manufacturers, and functioned as the semiconductor industry's extra capacity, and even as low-tech centers for mass production, typically in Asian countries. Such is definitely not the case today. While Asian locations are still prevalent, silicon foundries in many cases have become the advanced centers of expanding capacity for leading-edge production. In some cases, foundries are even the focus of roadmap-pushing technology development. They are definitely the first to be on track for the transition to 300mm wafer production.
Consider these scenarios that reflect today's advanced state of silicon foundries in Asia:
- Communications ICs are in short supply worldwide, in part because the mobile phone market is growing rapidly, so many manufacturers of these advanced chips are consigning production to Taiwan's foundries.
- Programmable logic market leaders, such as Altera and Xilinx, who are among the largest IC companies worldwide, and leading-edge graphics processor makers, such as Nvidia, depend entirely on foundries for their manufacturing.
- Motorola has announced that by the end of 2000 it will have outsourced at least 50% of its production to foundries.
- Kawasaki cancelled plans for a new 180nm-wafer fab. The company is instead pursuing an alliance for this technology with a foundry service supplier, noting it to be "the more economical and competitive alternative."
It is clear that Taiwan's foundries are leading the drive to 300mm manufacturing facilities. In addition, some foundries are now at the very forefront of logic process technology. For example, a recent joint development program between IBM, Infineon, and United Microelectronics Corp. (UMC) could result in 130nm technology being available a full six months ahead of the industry's roadmap.
With the semiconductor industry's most recent economic recovery apparent by 2H99, concern quickly emerged over worldwide manufacturing capacity. The emphasis on and switch to relying on outsourced production, as seen at Motorola, have made silicon foundry capacity even more acute.
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Geographical silicon foundry supply estimates for 2000. (Source: Semico Research Corp., 2-2000; Courtesy Amkor Wafer Fabrication Services)
Joanne Itow, senior analyst at Semico Research Corp., Phoenix, AZ, said, "The overall foundry market will experience shortages by 2003, but even before that, foundry users will encounter shortages and tightening of supply in certain product categories using 0.35µm technology and below." (As an indication of how demand is outstripping supply, Taiwan's foundries TSMC and UMC, discussed in detail below, are already in a tight allocation situation at all geometries.)
Asian foundry capacity
Foundry supply is a worldwide business with capacity from both integrated device manufacturers (IDMs) and dedicated ("pure play") foundries in virtually all regions. The current data, however, clearly indicate that Asia is the epicenter of foundry capacity (see figure). Analyst Itow says, "Taiwan Semiconductor Manufacturing Co. (TSMC) and Taiwan's UMC currently supply over 70% of dedicated-foundry wafers, and by 2004 dedicated foundries will supply over 60% of the total foundry wafers worldwide, compared to only 42% in 1999."
Indeed, driven by Taiwan's brisk foundry business and new fabs, the country is expected to start enough 200mm wafers by 3Q00 to push it to third place in overall semiconductor manufacturing. This would enable Taiwan to overtake Korea, which is behind the US and Japan; it is very possible that Taiwan will overtake Japan by the end of 2000.
While TSMC and UMC capacities dwarf other Asian foundry suppliers, Singapore's Chartered Semiconductor Manufacturing and Anam/Amkor's factory in Korea are seeing proportionate shares of the growth in wafer demand. At Chartered, for example, the combined factors of new customers and bigger wafer demand swelled wafer shipments from 439,700 in 1998 to 695,300 in 1999, an increase of 255,600 or 58%. More specifically, wafer shipments in 4Q99 totaled 191,200, an increase of 62,700 wafers or 49% over shipments of 128,500 in the same period only 12 months earlier.
Foundries not just for the fabless
The title of analyst Itow's December 1999 report, "Foundry Supply and Demand: Not Just for the Fabless Anymore," seems to capture the essence of the silicon foundry business targeted by TSMC, UMC, Chartered, Anam/Amkor, Silterra, and other Asian companies. Using the basic premise that wafer fabrication demand continues to increase, Itow summarized, "Semiconductor manufacturers are not allocating as many capital dollars to building new fabs. In addition, the advent of the 300mm fab is causing some quandary. No one wants to build the first 300mm fab, but then again no one wants to build the last 200mm fab either. Thus, pure-play foundries and joint-venture fabs will continue to be a source for adding new capacity."
Itow concluded that total foundry demand will grow at a compound average rate of 24% for the next five years. Pure-play foundries will provide approximately 42% of the total foundry wafer demand in 1999. By 2004, that number will grow to 60%.
Ito also found that integrated device manufacturers provide a large potential market for the foundries. The next couple of years will be a test to determine whether IDMs will use foundry services on a large scale and continual basis or whether this will just be a transition period until increased semiconductor demand will justify new merchant facilities. IDMs and system houses will increase their usage of foundry services to take advantage of the flexibility they offer.
In the past, foundry customers demanded more sophisticated, leading-edge manufacturing services. It appears the pure-play foundries have caught up and maybe even surpassed the needs of the general foundry customer, Itow's report concluded. Copper, 300mm, and 180nm technologies are all being offered by the top foundries.
As foundries become a larger part of the semiconductor industry, the report said the dedicated foundries will also begin to share in the industry cycles. The next downturn will be a major challenge for foundries.