“The control factor is frightening,” said Malcolm Penn, CEO of Future Horizons, at the company’s IFS2014 meeting in London this morning.
Penn was talking about the constricted supply of advanced logic processes.
“Everyone (except Samsung and Intel) is now fabless for for advanced (65nm and below) logic wafer supply,” said Penn, ” and only four firms have advanced logic foundry capability – TSMC, GloFo, Samsung and Intel.”
And those four have very uneven capabilities.
TSMC has 60% of the foundry market and 100 % of the foundry industry’s profits, said Penn.
GloFo is still in technology and capacity catch-up mode.
Samsung is only for carefully targeted customers.
Intel may become a mainstream foundry sooner or later but isn’t yet.
The result is that industry consolidation in the middle ground is now inevitable. “I’ve never believed in consolidation in this business but I do now,” says Penn.
The cut-off point for being a potential consolidatee is 3% market share, said Penn. That is the figure which, in the semiconductor industry, you need to be able to sufficient fund capex and R&D to grow. “The 3% figure has been true in the industry for 50 years,” said Penn.
Nowadays 3% means revenue of $10 billion. Which means that STMicroelectronics and Renesas are under threat.
“The pressure is on Renesas and ST to re-invent themselves to get back above the 3% level,” said Penn.
If they can’t do it, they’re in danger.
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