The pure-play foundry market is forecast to play an increasingly stronger role in the worldwide IC market during the next five years, according to IC Insights’ new 2017 McClean Report, which becomes available later this month. The 20th anniversary edition of The McClean Report forecasts that the 2016-2021 pure-play IC foundry market will increase by a compound annual growth rate (CAGR) of 7.6 percent; growing from $50.0 billion in 2016 to $72.1 billion in 2021.
IC foundries have two main customers—fabless IC companies (e.g., Qualcomm, Nvidia, Xilinx, AMD, etc.) and IDMs (e.g., ON, ST, TI, Toshiba, etc.). The success of fabless IC companies as well as the movement to more outsourcing by existing IDMs has fueled strong growth in IC foundry sales since 1998. Moreover, an increasing number of mid-size companies are ditching their fabs in favor of the fabless business model. A few examples include Fujitsu, IDT, LSI Corp. (now part of Avago), Avago (now Broadcom Ltd.), and AMD, which have all become fabless IC suppliers over the past few years.
In 2016, the “Big 4” pure-play foundries (i.e., TSMC, GlobalFoundries, UMC, and SMIC) held an imposing 85 percent share of the total worldwide pure-play IC foundry market. As shown, TSMC held a 59 percent market share in 2016, the same as in 2015, and its sales increased by $2.9 billion last year, more than double the $1.4 billion increase it logged in 2015. GlobalFoundries, UMC, and SMIC’s combined share was 26 percent in 2016, the same as in 2015.
The three top-10 pure-play foundry companies that displayed the highest growth rates in 2016 were X Fab (54 percent), which specializes in analog, mixed-signal, and high-voltage devices and acquired pure-play foundry Altis in 3Q16 to move into the top 10 for the first time, China-based SMIC (31 percent), and analog and mixed-signal specialist foundry TowerJazz (30 percent). In contrast to X-Fab’s 2016 growth spurt, TowerJazz and SMIC have been on a very strong growth curve over the past few years. TowerJazz went from $505 million in sales in 2013 to $1,249 million in 2016 (a 35 percent CAGR) while SMIC more than doubled its revenue from 2011 ($1,220 million) to 2016 ($2,921 million) and registered a 19 percent CAGR over this five-year timeperiod.
Seven of the top 10 pure-play foundries listed in Figure 1 are based in the Asia-Pacific region. Europe-headquartered specialty foundry X-Fab, Israel-based TowerJazz, and U.S.-headquartered GlobalFoundries are the only non-Asia-Pacific companies in the top 10 group.