INDUSTRY NEWS

Chip outsourcing to accelerate, report says

More than a third of wafer processing will be outsourced by 2010, according to a new report from Morgan Stanley's semiconductor research group. The study, "Transition to 300-mm Wafers Should Drive Secular Changes," states that the compound annual growth rate for contracted chip manufacturing will be 24% between 2002 and 2010, with the percentage of outsourced semiconductor revenues rising from 15 to 34% over the same period (see accompanying figure). If Intel and the DRAM, analog, discretes, and optoelectronics companies are excluded from the calculations, the percentage of outsourced chipmaking rises to an estimated 60–65% of the remaining semiconductor manufacturing base by 2010.

SOURCE: MORGAN STANLEY; ILLUSTRATION BY KELLY JOHNSON

The report, authored by Mark Edelstone and his team, notes that the 300-mm revolution will intensify economic and technological pressures on small- to medium-sized IC companies, while well-managed foundries and fabless operations stand to prosper. The hybrid/partial-outsourcing or "fab-lite" model adopted by Motorola, Agere, LSI Logic, and others is portrayed as a medium-term solution in the study, which suggests that many companies must transition quickly to fabless to stay competitive. A handful of the largest, most vertically integrated device manufacturers (e.g., Samsung and Intel) should continue to innovate and thrive, according to the report. The study also posits that the gap between design readiness and process availability may be growing, and that the transitions to 130- and 90-nm technologies could likely be slower than those seen during the 0.25- and 0.18-µm transitions.

Citing the document's findings as a validation of the outsourced business model, Jody Shelton, the Fabless Semiconductor Association's executive director, explains that the trade group "will use this report as a foundation for forecasting discrepancies between supply and demand, as well as to quantify and articulate the opportunity to service this sector." Morgan Stanley and the FSA, which provided data and other input for the report, say they plan to update the macro demand findings and match them with supply forecasts in 2004.

MicroHome | Search | Current Issue | MicroArchives
Buyers Guide | Media Kit