With utilization levels still above 90% and forecasted to reach 100% in 3Q10, it seems that the fabs just can't pump out the supply fast enough. While CAPEX spends have also increased, as reported on here, the supply impact will not be felt until 2011, at the earliest. Furthermore the supply mostly geared to new architectures and next generation processes.
Wafer starts are set to grow by 30% during 3Q10 (cf. DigiTimes 6-24-10). "Smaller-scale design houses have seen their orders squeezed out of the already-tight capacity at Taiwan Semiconductor Manufacturing Company (TSMC), United Microelectronics Corporation (UMC) and Vanguard International Semiconductor (VIS), due to strong orders placed by IDMs," according to DigiTimes 7-13-10. Pricing is also rising at a rate of 10-15%, and as this competition continues to heat up, margins for IDMs will be squeezed and those companies with the greater buffers will fare better.
In response to this acceleration, foundry forecasts are also rising quickly, with iSuppli having raised their estimates for revenue for the sector up 42.3% to US$29.8 billion, year-over-year.
iSuppli further notes, that these data spell some trouble for China's ability to hold onto a dominant position as a foundry hub:
China was unable to develop technology differentiation or expand during the downturn and, as a result, manufacturers in the country have found that competing on price alone does not provide sufficient profits to fund future growth for domestic foundries.
As we've noted before in MarketWatch Commentary here, there is an important westward movement in semi fabs and manufacturing hubs, away from China's coastal provinces. In the last Special Series article in the next MarketWatch Quarterly, "The Emerging Question for Semi Markets," we look more closely at these trends in the region from APAC to India, what is motivating the shift, and what the impact will be on the semiconductor industry in the short- and long-term.