Foundry sales will probably outperform other parts of the market as more chipmakers outsource, according to Primasia's Wu.
Made-to-order chip revenue will jump by a quarter to US$10 billion this year, Wu estimates. In February, Gartner Inc's Dataquest market- research unit said worldwide sales of semiconductors will rise about 9 percent this year to US$167 billion.
The Armonk, New York-based company, which is working with Advanced Micro Devices Inc. to develop ways to make speedier computer processor chips that consume less power, says it will win more customers to its foundry business by using its technological advantage.
IBM has pioneered the use of copper wire in chips instead of aluminum. It will work with Advanced Micro using materials such as copper and new insulation to shrink the size of circuits to less than half today's smallest products.
"It takes a lot more than just low prices to deliver effectively on these very complex technologies," said Sumit Sabana, director of strategy for IBM's Microelectronics Division.
TSMC, whose shares have slumped 46 percent in the past year, disputes IBM's contention that the US chipmaker has an edge on technology.
"We certainly know there will always be competitors coming in and out during our journey," TSMC spokesman Tzeng Jinnhaw (曾晉皓) said. "We must be a technology leader and the most reputable, service-oriented and total benefits provider."
UMC, the world's second-largest supplier of made-to-order chips, says being equipped with the latest chipmaking technology isn't necessarily the best business decision. A rush to stay ahead of competitors can lead to overspending, UMC Chairman Robert Tsao (
Still, among the three biggest foundries, TSMC is in the best position to maintain profitability, said Loomis' Litschke. He would buy the company's shares again if they were to fall to around NT$35. The company's shares declined 0.7 percent to NT$44.50 today on the Taiwan Stock Exchange.
Other investors aren't as optimistic.
"The whole foundry model has a question mark over it," said Richard Keery, a money manager at Edinburgh Fund Managers, which manages about US$500 million in Asian stocks outside Japan. "The next card is TSMC's. We'll see how they respond."
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