After three quarters of contraction, the pure-play foundry semiconductor manufacturing industry will enjoy robust growth in the second quarter - but how long will the good times last?

Global revenue for pure-play foundries, i.e. companies dedicated to producing semiconductors on behalf of other chipmakers, is set to rise to $3.6 billion in the second quarter, up 59.3 percent from $2.2 billion in the first. The increase follows a 1.8 percent sequential decrease in the third quarter of 2008, a 32.3 percent decline in the fourth quarter of 2008 and a 38.2 percent plunge in the first quarter of 2009.

“The foundry market in the second quarter is benefitting from both a major reduction in semiconductor inventories throughout the electronics supply chain  and innovative new designs requiring innovative technology,” said Len Jelinek, director and principal analyst, semiconductor manufacturing, for iSuppli. “However, while this growth will come as a relief to the foundries, it will not result in 2009 being a growth year for the foundry industry. Sustainable semiconductor growth will come only when the global economy recovers and consumers return to more normal patterns of purchases.”

For all of 2009, the pure-play foundry market will underperform the overall semiconductor industry, with foundries suffering a revenue decline of 26.5 percent.
 
Q1 catastrophe
Global pure-play foundry revenue in the first quarter of 2009 fell by 57.7 percent from $5.3 billion in the first quarter of 2008.

The foundry market’s disastrous performance in the first quarter was reflected in the weak results of the Top-10 players, nine of which suffered double-digit percentage declines in revenue, both on a sequential and a year-over-year basis.

The attached table presents iSuppli’s ranking of the world’s Top-10 pure-play foundries in the first quarter.

The best performers among the Top-10 were Chartered Semiconductor and the newly-combined Tower Semiconductor Ltd. and Jazz Semiconductor Inc.

No.-3 ranked Chartered managed to outperform the overall foundry market by limiting its year-over-year sales decline to 43.4 percent. Company market share increased to 11.3 percent in the first quarter of 2009, up 2.8 points from 8.5 percent during the same period in 2008.

Tower’s revenue remained flat compared to a year earlier, allowing the company to expand its share by 1.5 points to 2.6 percent, up from 1.1 percent in the first quarter of 2008.

“Chartered’s and Tower’s relatively strong performances in the first quarter were due to acquisitions that expanded their revenue, rather than organic growth,” Jelinek said.

Chartered purchased  an 8-inch manufacturing facility previously operated by Hitachi Semiconductor, while Tower acquired Jazz.

“Although 2009 will continue to be a challenging year for pure-play foundries, those companies that took aggressive actions to strategically prepare for the future in the second half of 2008 will emerge with increased market share and financial strength,” Jelinek said.
 
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