China's Semiconductor Manufacturing International Corp. (SMIC) became the growth leader in the foundry business during 2016 after the company saw a surge in demand from customers in China, according to market research firm IC Insights.

Shanghai-based SMIC saw its annual sales in 2016 surge by 31 percent while the top-ten foundry players had growth averaging 11 percent during the same period, according to IC Insights.

In 2016, four companies had a dominant 85 percent of the worldwide foundry market, IC Insights said in a Jan. 13 press statement.  The largest foundry, Taiwan Semiconductor Manufacturing Co. (TSMC) held on to the 59 percent market share that it’s maintained since 2015, with sales that increased by $2.9 billion last year, more than double the $1.4 billion increase it logged in 2015. 

During the next five years, foundries are likely to lead growth in the chip business as more semiconductor companies such as Fujitsu, IDT and AMD shift to fabless business models, the Scottsdale, Arizona research firm said in the report. The foundry business is forecast to have a compound annual growth rate (CAGR) of 7.6%, expanding sales from $50.0 billion in 2016 to $72.1 billion in 2021.

The three top-10 pure-play foundry companies that displayed the highest growth in 2016 were led by X-Fab (54%), which specializes in analog, mixed-signal, and high-voltage devices and acquired foundry rival Altis last year to move into the top 10 for the first time. In the number two and three rankings were SMIC (31%), and analog and mixed-signal specialist foundry TowerJazz (30%). 

In contrast to X-Fab’s 2016 growth spurt, TowerJazz and SMIC have seen strong growth over the past few years.  TowerJazz went from $505 million in sales in 2013 to $1.2 billion in 2016 (a 35% CAGR) while SMIC more than doubled its revenue from $1.2 billion in 2011 to $2.9 billion in 2016 for a 19 percent CAGR over the five-year period.

In its announcement of fourth quarter 2016 results, TSMC said that it expects the global semiconductor market to grow by 4 percent while the foundry business expands by about 7 percent and TSMC’s business increases within a range of 5 to 10 percent.  The company’s 2017 forecast is in line with that of Deutsche Bank, which in December last year said chip industry growth will reach 5 percent in 2017.

Growth in the foundry business has typically outpaced the expansion of the overall semiconductor industry in recent years as more chip supplies have turned to outsourcing strategies.

By: DocMemory
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