While the highest margins in the foundry business are at the leading edge of design, providing the yield is good, the real money is at older nodes using fully depreciated fabs. This makes the Chinese market a potential boon for foundries, particularly as the IoT begins ramping because most of those chips will be developed at 28nm or above.

But there are some unusual changes that are raising new uncertainties across the foundry business. One involves consolidation at the leading edge of design. Forecasts prior to the combination of companies such as Microchip/Atmel and Avago/Broadcom, are far different from post-acquisition. Industry insiders say a fair amount of business has disappeared, including some businesses that were healthy prior to acquisition.

“It’s a lot more difficult to anticipate what will happen,” said one foundry insider, who asked not to be named. “In the past, if you were using an 8-inch fab the migration path was to 12-inch, and new applications would always come along to take up that 8-inch capacity. It may become more challenging to fill that 8-inch capacity in the future. Even automotive and other IoT applications are focusing on 300mm.”

That creates market shifts and opens the doors to change, and that hasn’t been wasted on Chinese foundries. The question now is just how big of a force China will become in manufacturing, and that may depend on a number of factors.

“China has the potential to become the biggest manufacturing center, but it’s not going to happen overnight,” said Downey. “It is not easy to fill an advanced technology fab. They seem to be leaning toward memory again, in the case of Intel and XMC. That is one way to get into more advanced markets. I don’t think they can ‘take over’ in the next five years. Even if they do, it will take longer than that.”

By: DocMemory
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