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iSuppli raises 2010 foundry forecast; interesting lessons to learn for India from China's story!
Len Jelinek, director and chief analyst for semiconductor manufacturing, iSuppli.
“During the first three quarters of 2010, foundries were under intense pressure to meet customer demand,” said Len Jelinek, director and chief analyst for semiconductor manufacturing at iSuppli. “The pressure is leading to increased revenue, as consumer spending has come back with a vengeance following a dramatic downturn in the fourth quarter of 2008 and for all of 2009.”
By 2014, total pure-play foundry revenue will reach $45.9 billion, managing a CAGR of 9.4 percent from $26.8 billion in 2008. Pure-play foundries are contract manufacturers whose business consists of producing semiconductors on behalf of other chip companies.
Enhancing foundry forecast
I started by asking Jelinek what were the chief reasons for enhancing the foundry forecast. Jelinek said: “The forecast increase is based on the anticipated strength in demand for products in Q2 and beyond. Additionally, it is also simple math. The foundry market had a good Q2, and last year, Q1 and Q2 were quite challenging. So, by having a good first half of the year, the percentage must increase.”
Also, given that there has been renewed demand for consumer electronics products, what are the specific CE products, besides netbooks, mobile phones, that have been seeing renewed demand, and why?
TSMC leads 2009 foundry rankings; GlobalFoundries top challenger!
The leading IC foundries of 2009. Source: IC Insights
Recently, IC Insights released the rankings for the world’s top pure-play and IDM foundries. No surprises, as TSMC continues to lead! The surprise entrant is of course GlobalFoundries, which ranked fourth, after having started operations in March 2009.
However, all of the foundries, barring Tower Semiconductor, registered negative growth during 2009. Tower, which acquired Jazz Semiconductor in 2008, was the only foundry to post positive growth during 2009.
IC Insights further stated that if the revenues of Chartered Semiconductors, which was purchased by GlobalFoundries recently, were combined with GlobalFoundries, their combined sales would have amounted to over $2.6 billion in 2009. That’s not very far from UMC, which is ranked no. 2!
Now, I am not an expert to comment on which foundry has done really well, despite the recession, or whether GlobalFoundries can really challenge and overtake TSMC in the future. However, I followed with great interest a discussion on one of my groups on LinkedIIn on this topic.
Daniel Nenni, a critically acclaimed blogger, and an industry colleague, had recently blogged on this subject. There were some interesting comments following that post. I sought the permission of Malcolm Penn, chairman and CEO, Future Horizons, to use some of his remarks for my blog post.
Penn said that there is a reason why TSMC is the no. 1 foundry in the world. However, as competition breeds innovation, hence, the foundry business will be much more interesting to watch with GlobalFoundries challenging TSMC.
He added: “There was also no reason why Intel is #1 in PC MPUs or Microsoft #1 in PC OS except for one key factor. Once a competitor gets to be a certain size, no amount of innovation will help swing the balance of power.” The real question therefore is: “Has TSMC now passed this tipping point?” I fear it already has.”
Fact of the matter is in the foundry business capacity is king and TSMC already outguns all of the other competitors combined. Given the minimum two to three year lead time to build and ramp new capacity, TSMC has incredibly clear visibility to see any competitive threat coming.
Very interesting! Some other observations later!
Yindusoft rocks embedded domain for India across Apac
India has, for long, been the acknowledged ’embedded superstar’ of the world! It is in no danger of losing that top position, especially in the near future, as several Indian firms in the embedded space continue to rock the world.
One such company is Yindusoft, established 2006, a software services company focused on the following domains: embedded software for IC design houses, OEMS/ODMS in consumer electronics; IT solutions in the semiconductor manufacturing sector; and distribute and customize higher end IT software products in the two areas.
G.K. Pramod, CEO, and a former member of Cybermedia/IDC said: “We are a two-year old company! We cover Asia Pacific especially, Taiwan and Singapore. We would like to expand into Korea and Japan, hopefully, by the end of Q4 2008.”
Yindusoft is present in two domains: providing IT solutions to large semiconductor manufacturing companies, being the first. Pramod said: “We are working with companies like TSMC, UMC, etc. We work with them in CIM (computer-integrated manufacturing). We recently completed a project on wafer analysis in Taiwan. Our engineers developed the software to cut the wafers into precise shapes. We have onsite engineers with TSMC in Taiwan and UMC in Taiwan and Singapore. Now, we are aggressively positioned ourselves in the CIM space for semiconductors.”
The second important domain are OEMs/ODMs. Yindusoft develops embedded software for OEMs/ODMs. Pramod added: “We develop the software for these companies. In Taiwan, we have done work on digital signage systems. We worked on the UI design. We did development on the UI design itself, along with market research, and therefore, the customer received market feedback as well.”
Yindusoft has two recent design wins: designing of digital signage application for a large OEM/ODM in Taiwan. and designing of set-top box application for a large OEM/ODM in Asia Pacific.
Commenting further on Yindusoft’s design wins, he said: “We completed a large project in the area of digital signage product development with the help of an embedded product development domain expert. Our domain consultant adopted methods like market research, making global product feature list and getting the UI design development from design experts who are from art and design background (and, not IT background).”
Too early to estimate Indian semicon
Pramod added that it was quite early to estimate the strength of the Indian semiconductor industry as fabs are yet be commissioned for production. The Indian embedded design industry is estimated at $4-5 billion in 2008-09.
Commenting on the drivers for embedded design, Pramod said these could be the design capabilities of Indians and the requirement of low-cost consumer products. “Big markets like India and China would require lot of consumer devices for common man applications,” he said.
Customers expect strong domain expertise today. Definitely, and I completely agree on this,” he added. “We need domain expertise to speak the “customers’ language, make the project successful and show the differentiating factors in our service delivery.”
As mentioned, Yindusoft also works with the STB companies. “We are developing an STB (Set-top box) application. Typical applications would be PVR, email application, parental security, etc.,” he said.
Yindusoft is also trying out a model called offshore solutions center. Pramod said: “We have identified pain areas of customers, like OEMs/ODMs and semicon companies. Till such time the companies don’t develop the necessary software skills, there orders can get rejected. They can’t add value to their products. Therefore, profitability is a major issue with them. Next, they also have a language problem and cannot provide the essential technical support. Also, they cannot enter the Indian semiconductor market because of these reasons.
“Hence, we are now trying to build up a solution for them. One is the ODC, which is regular. The second factor: localization of their product for the Indian market, is an example. We also have a demo center. We conduct the market research for a particular product and then set up a demo center in India for that product. After that, there’s the technical support center.”
Way forward for embedded
Would the biggest growth factor for embedded come from localization of product design and manufacturing from India? What’s the way forward?
Pramod said that the biggest growth factor for embedded could come from the localization of product design, and it will be the driving factor. “In fact, we provide this as a value addition to our customer, he added. “Indians need to focus on designs, which is our core strength.” However, he felt that China would still lead in manufacturing.
Finally, what did the Indian semiconductor industry offer to the world, and why should the others should come here?
Pramod listed six key capabilities: Design capabilities of Indians; VLSI design, IC design capabilities; software integration capability; good software knowledge; India is also a good pilot market to launch new embedded products; and India is a strategic location for Asia Pacific markets where there is a good ecosystem for the semiconductor industry.
The company’s head office is located in Bangalore, while it has two overseas offices in Taiwan and Singapore, respectively.
Yindusoft’s vision is to be the leaders in providing software services for IC design houses, OEM/ODMS and semiconductor manufacturing companies.
The mission is to act as a software consultant in new product development by providing cost effective co-working models and establish offshore solution centers (OSC) in India. Best of luck!
Pradeep Chakraborty 