Capex cutbacks could mean higher prices
Foundries are getting more business but are limiting capacity expansion.
By Jim Carbone -- Purchasing, 6/4/2008 1:38:00 PM
Buyers should keep a close eye on the capital expenditure plans of large semiconductor foundries.
More chip companies are outsourcing production to foundries. However, at the same time foundries have announced cutbacks in capital expenditures, meaning they plan to limit capacity expansion despite growing chip demand. Prices for some semiconductors such as memory ICs could rise because of the cutbacks.
The four major semiconductor foundries-- TSMC, UMC, Chartered and SMIC-- have seen their revenue per wafer fall over the last four years, especially in 2007 when memory chip prices dropped dramatically. Prices for some DRAM fell 70%.
In 2004, foundries’ average revenue per wafer was $1,343, according to researcher IC Insights. By 2006, that figure fell to $1,205 and last year it dropped to $1,080.
While foundries are cutting back on capital spending so are other chip companies that design and manufacture chips. Instead of investing in new capacity, they are outsourcing to foundries. If capital spending continues to decline and more production outsource to foundries, chip shortages are likely.
Also see: Capex cutbacks could cause supply headaches
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