Foundries will turn screw on fabless, fablite firms this year

A report from a senior semiconductor analyst is warning that pessimism will restrain growth during 2010 with most companies refusing to believe that the industry is on the upturn.

Malcolm Penn, CEO of Future Horizons, said that growth less than 22 percent during this year is now “all but impossible”. That would make the industry just worth a tiny bit short of $300 billion.

Penn warned, however, that the industry is “running on empty” with companies refusing to spend money and not hiring staff. That means, he said, “the industry is in a very weak structural position to grow”.

Capacities are limited by wafer shortages, lead times are lengthening, he said, and some foundries are being paid extra money to get to the front of the manufactury queue.

He said: “The chip market sentiment pendulum has clearly swung too far towards pessimism, driven part by the 2000s decade of lost growth.”

He said that doomsayers warning that the glory days for the semi market are behind us are wrong.

He said that wafer fab capacity is sold out and allocations, longer lead times and price increases are the order of the day.

“The fabless and fablite firms will need to adjust to a world of tight foundry wafer supply and increasing prices,” said Penn. “It will be a sanguine moment when they suddenly realise that they are no longer in control of the delivery times and prices they quote to their customers; their business is now at the mercy of their foundry partners.”