TSMC foundry market share dips

But IBM et al still have a very long way to go to catch it

Whichever way you cut the market, TSMC remained the world's biggest chip foundry during the first half of the year, well ahead of its nearest rival, UMC.

Proof - if it were needed - comes from market watcher IC Insights, which this week published its league charts for pure-play foundries and for foundries that also do their own chip development work. Put the two together and you have a picture of the overall foundry business.

TSMC and UMC dominate the pure-play market and the industry as a whole. TSMC notched up sales in excess of $2.5 billion - more than double UMC's sales of $1.27 billion - giving it 51 per cent of the pure-play market, down a just three percentage points from its 2002 market share, 54 per cent.

Fellow Taiwanese player UMC took the next 25 per cent of the business. Number three in the chart, Singapore's Chartered, recorded sales of $305 million, enough for a six per cent share of the market.

Unlike TSMC and UMC, Chartered sales were insufficient for it to retain the same chart positioning in the foundry market as a whole - it was beaten to the number three slot by IBM. Big Blue's chip division made sales worth $430 million during the first half of the year, enough to push Chartered into fourth place, but still a very long way away from UMC, let alone TSMC.

IC Insights hasn't separated out IBM's third-party foundry business from the company's own chip production so it's hard to see where it ranks as a pure-play. Certainly IBM wants to drive that part of its business, and has won some big customers, most notably Nvidia.

NEC doesn't figure on the pure-play chart for the same reason, but overall it is the world's fifth largest foundry by sales, having sold $200 million worth of chips during the first six months of 2003, ahead of the pure-play chart's number four player, South Korea's Dongbu/Anam, which made sales totalling $175 million during H1 2003. Fifth was China's SMIC, with sales worth $115 million.

Looking ahead, IC Insights expects foundry revenues to grow 29 per cent this year and 45 per cent in 2004, both well ahead of overall chip business growth forecasts. If anyone wanted proof that the industry is splitting into designers and manufacturers, this is it. Intel will continue to hold out as the leading all-in-one chip maker, and Sony seems to be increasingly moving that way too.

But we still reckon, for what it's worth, that AMD is likely to move in the other direction, away from a vertical integration approach and focus more on design rather than production over time. That move will be made, we think, on the back of its relationship with IBM, which will equally enhance the latter's drive to expand it foundry business.

Foundries like IBM and NEC will see overall average annual growth of around 23 per cent between 2002 and 2007, IC Insights reckons. The pure-play foundries' sales will grow on average 24 per cent each year through the same period. ®