Research Firm Raises Forecast For 2010 Semiconductor Revenue

Pure-play semiconductor foundries are expected to do even better in 2010 than originally forecast thanks to resurgent demand for consumer electronics products, according to a new report from iSuppli. The industry researcher this week raised its revenue forecast for contract semiconductor manufacturers to $29.8 billion, a 42.3 percent increase over 2009’s 22.1 billion.

The El Segundo, Calif.-based research firm had earlier projected a 39.5 percent year-over-year revenue increase for the pure-play semiconductor foundry industry, led by foundry giants like Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) and United Microelectronics Corp. (UMC).

“Consumer spending has come back with a vengeance following a dramatic downturn in the fourth quarter of 2008 and for all of 2009,” said Len Jelinek, iSuppli’s director and chief analyst for semiconductor manufacturing, in a statement.

The forecast excluded in-house revenue generated by semiconductor manufacturers like Intel and Samsung which design and produce semiconductors for their own use, also known as Independent Device Manufacturers (IDMs) -- though they indicated that whatever contract work was conducted by IDMs was included.

Starting from the baseline of $26.8 billion in 2008 revenue, pure-play foundry sales will enjoy a 9.4 percent Compound Annual Growth Rate (CAGR) through to 2014, according to iSuppli’s forecast, resulting in an expectation of $45.9 billion in revenue for the industry in that year.

Foundry revenue slipped to $22.1 billion in the recessionary year of 2009, according to the research firm. Resurgent consumer demand should see sales rebound to close to $30 billion this year, then climb to $33.7 billion in 2011, $36.8 billion in 2012, $40.6 billion in 2013, and then eclipse $45 billion in 2014.

The research firm said it was holding to its prediction that foundries would spend 123 percent more on equipment in 2010 than they did in 2009 as semiconductor companies invested in advanced manufacturing processes.

One result of the increased push to future technologies was that companies seeking increased capacity for legacy semiconductor products would not be able to find it, according to iSuppli.

Jelinek also said that China had not done enough in the recessionary period to expand its semiconductor industry or differentiate its technology to maintain its edge as a low-cost supplier of silicon.

“The era may be coming to an end when fabless suppliers look to China for low-cost manufacturing that could be used as leverage to obtain lower pricing from other foundries,” he said. “With no significant manufacturing expansions in China during the past two years, and with no major capacity increases forecasted for this year, this prediction may come true quickly.”

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