Report: Pure-play foundry revenue to reach six-year high in 2020

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Semiconductor industry growth in 2020 report.

IC Insights posted a report forecasting pure-play foundry revenue would reach a six-year high in 2020. The research company identified the widening deployment of 5G networking technology is the reason for the growth spurt.

The organization also anticipates contract chipmaker sales will experience a compound annual growth rate of 9.8 percent through 2024.

Pure-Play Foundry Revenue is on The Rise

According to IC Insights, the world’s pure-play foundries will generate an estimated $67.7 billion in revenue this year. That means the sector will have improved its annual sales by 19 percent from 2019’s total of $57 billion. The analysis organization notes the market has not grown that much year-over-year since it expanded by 18 percent in 2014.

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The firm attributes the spike in sales to the increased popularity of 5G enabled smartphones. In 2019, handset makers shipped about 20 million fifth-generation mobile data network compatible devices. This year, the organization expects phone makers to move around 200 million 5G units.

Although the size of the sales increase is surprising, its occurrence is not inexplicable.

Samsung, the world’s largest smartphone vendor, released 5G compatible handsets at multiple price points this year. Similarly, Apple will reportedly launch four different versions of its first fifth-generation data network enabled iPhone later this year.

With those two corporations combined reach, 5G smartphones will go mainstream this year. Therefore, handset manufacturers will likely keep ordering parts compatible with the new network standard through the year’s end. IC Insights believes the trend will help push the pure-play foundry market to $90.9 billion in value by 2024.

Explaining the Pure-Play Foundry Boom

While the 5G rollout is pushing pure-play foundry revenue to new highs this year, the same is not true for the rest of the semiconductor industry. IC Insights predicts manufacturers that develop and produce their chipsets will see a -1.53 percent decline in sales in 2020.

That disparity is a consequence of the electronic components industry’s evolution.

Back in the 8-track and bell-bottoms era, semiconductor companies designed and manufactured their products. Corporations like Intel and Samsung, now called integrated device manufacturers (IDMs), still mostly adhere to that practice today.

In recent decades, however, the electronic components sector has seen the rise of several companies that design but do not make chipsets. Qualcomm, Nvidia, Broadcom, and Advanced Micro Devices (AMD) have become billion-dollar enterprises by selling products manufactured by outside firms.

Simultaneously, a new crop of companies that fabricate third-party components without offering many self-made products have emerged as major industry players. Firms like the Taiwanese Semiconductor Manufacturing Company (TSMC), Semiconductor Manufacturing International Corporation (SMIC), and GlobalFoundries belong to the latter category.

Fabless and pure-play chipmakers have thrived together because their specialties allow them to lower development costs and hone their focus. For example, AMD does not have to worry much about circuit miniaturization because its partner, TSMC, leads the world in silicon wafer density.

With end-users demanding major improvements with each new generation of semiconductor products, IDMs sometimes have trouble keeping pace with the market.

As a result, IC Insights found the two electronic components manufacturing types have grown at startlingly different rates. Since 2014, IDMs have increased their annual revenue by $7.7 billion. But pure-play foundries have grown their yearly sales by $25 billion in the same time frame.

Based on the analyst firm’s data, the future of the semiconductor industry belongs to chip design companies and contract manufacturers.

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