Business TSMC became No.1 IC supplier in Q3

Business TSMC became No.1 IC supplier in Q3

2013/08/20

TSMC Became the world’s No.1 IC supplier in Q3 using the metric ‘final market value’, i.e. the amount paid by end customers for ICs made in its fabs.

The “final market value” figure is 2.22x the reported IC foundry sales number, reports US analyst company IC Insights.

The 2.22x multiplier estimates the IC sales amount (i.e., market value) that is eventually realized when an IC is sold to the final customer (i.e., the electronic system producer).

The 2.22x multiplier assumes a 55% industry-wide average gross margin for the IC foundry’s customer base.

When the multiplier is applied to the IC foundry’s reported sales, the resultant figure is the “final market value” sales figure.

The total “final market value” sales figure for the IC foundries is expected to represent just over 36% of the worldwide $271 billion IC market forecast for 2013, and just over 45% of the $359 billion worldwide IC market forecast for 2017.

The “final” IC foundry share in 2017 is forecast to be slightly more than double the 22.6% “final” marketshare the IC foundries held 10 years earlier in 2007.

The increasingly important role that foundries play in the worldwide IC market, is shown by applying the “final market value” sales multiplier to TSMC’s quarterly revenues and comparing them to Intel’s quarterly IC sales from 1Q11 through 2Q13.

Since TSMC’s sales are so heavily weighted toward leading-edge devices, IC Insights estimates that the gross margin for TSMC’s customer base averages 57% (a 57% gross margin equates to a 2.33x sales multiplier).

Using the 2.33x multiplier, IC Insights believes that TSMC’s “final market value” IC sales surpassed Intel’s IC sales in 2Q13, and that TSMC currently has more impact on total IC market revenue than any company in the world.

Considering that Intel’s IC sales were 45% greater than TSMC’s “final market value” IC sales as recently as 1Q12, this was a dramatic change in a very short period of time.

The “final market value” IC sales figure of TSMC helps to explain why the capital expenditures of Intel and TSMC are expected to be fairly close in size this year ($11.0 billion for Intel and $10.0 billion for TSMC) and next year ($11.0 billion for Intel and $11.5 billion for TSMC).

Thus, when comparing the semiconductor capital spending as a percent of sales ratios for IDMs and IC foundries, the foundries’ “final market value” sales levels should be used.

IC Insights expects continued strong growth for the total IC foundry market, which is forecast to increase by 14% this year as compared to only 6% growth expected for the total IC market.

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