Travelling On The Silicon Road

As mentioned by Malcolm Penn of Future Horizons in the IEF 2009, “The ‘A’ word is back on the agenda”,
 

But it is not all smooth sailing for the foundry biz. The semiconductor industry’s capex has hit alarmingly low levels. The normal ratio of capex to sales over the industry’s history is 20%. Last year it was 12% and this year it will be 4%. The industry’s overall capacity is now 14% less than it was in Q3.’08. With the economy and market’s forecasted recovery, foundries will be hard pressed next year to meet the demands.
 

And that is where the “C” word comes in – Collaboration and Consolidation.
 

There has also been a lot of talk on consolidation in the foundry biz – as in other areas of the semiconductor industry. There are some pending mergers - between Hua Hong NEC and Grace Semiconductor; Tower Semiconductor’s 2008 purchase of Jazz Semiconductor, proposed acquisition of HeJian Technologies by UMC and the recent purchase of Chartered by GlobalFoundries.
 

Possible future mergers are: SMIC acquiring Cension Semiconductor Manufacturing International and Wuhan Xinxin Semiconductor Manufacturing - two companies which SMIC is managing. And then there are small foundries like Silterra, Altis and Landshunt which are struggling and open to speculation regarding a merger with another manufacturer.”
In all likelihood, as cited by iSuppli, there may be 3 major pure-play foundries left standing after the consolidation – TSMC, UMC and GlobalFoundries.

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Not too long back, quite a few companies, mostly ranking in the semicon top 10, counted a diverse portfolio as their strength. With the brutal and dynamic market conditions, this is becoming a luxury that only a few can afford. 

Following the trend of consolidation and focusing on core biz activities, Infineon will sell its hard disk drive (HDD) design and manufacture business to LSI Corp. LSI expects the acquisition will further its goal of becoming the leading worldwide provider of silicon solutions for hard-drive makers, especially at a time when the HDD market is going from mechanical to solid state drives. And they get an inlet to a top-tier customer, Hitachi Global Storage Technologies.

For Infineon, it is shedding a non-core biz, an area where they did not stand much of a chance amongst competitors like Marvell, LSI, TI and STMicroelectronics – and to focus its resources on its core businesses where it can be among the top few.

Just a year back, another acquisition between the same companies took place; albeit in a reverse direction - last August, Infineon agreed to pay $563.6 million to acquire LSI’s mobility products business to strengthen their position in mobile phone market. And the top tier customer base to be tapped there was Samsung.

They sure dig each others’ technology!!