Taiwan's world-leading foundries, or manufacturers of custom-made semiconductors, are expected to see dramatic growth in sales this year far ahead of the industry in general, but may have problems expanding their facilities to meet rising demand, analysts said.
"Our forecast is for 18.5 percent growth in the semiconductor industry worldwide this year," said Rick Hsu (
BNP is predicting that UMC's revenues will grow by almost 22 percent this year, and TSMC's by one third.
Over at Deutsche Bank in Taipei the call is for between 26 and 27 percent revenue growth at TSMC and UMC.
As last year drew to a close, international research firms predicted a strong rebound in the US$200 billion worldwide semiconductor market after the worst slump in the industry's history in 2001 and 2002. International Data Corp and Gartner Inc forecast growth rates of between 18 percent and 20 percent this year. In-Stat/MDR is more bullish, calling for almost 26 percent growth.
"Stronger than expected mobile phone and PC shipments have stabilized average selling prices and increased capacity utilization rates among suppliers," the IDC said in a report on Dec. 31. "IDC expects that unit shipments will grow in double digits this year and next year for both mobile phones and PCs, which will drive a healthy growth cycle for over half of the semiconductor industry."
Taiwan's foundries have been humming at near full capacity since the last quarter of last year.
"Both foundries are operating at close to 100 percent capacity, so the focus this year will be on increasing the base and expanding capacity," Nomura's Hsu said. "Whoever ramps up quickly will be the winner."
Hsu added that there are concerns that if the foundries increase their capacity too rapidly, there will be overcapacity in the second half of the year, putting downward pressure on prices and profits.
The makers of the equipment used to make computer chips are looking at a very good year this year as chip manufacturers expand their facilities.
"The outlook for 2004 is bright," said Klaus-Dieter Rinnen, managing vice president for Gartner's semiconductor manufacturing and design research group in a statement last month.
"The return of a corporate investment cycle, a PC upgrade cycle that is gaining steam, a broad-based recovery in end-user applications, low inventories and tight manufacturing capacity all are converging to provide for strong growth in all equipment segments," he said.
But equipment makers -- which downsized drastically during the last downturn -- may not have enough stock to supply the machines the foundries need to increase their manufacturing capacity. The waiting time for some essential machines has increased from six months last year to nine this year, analysts said.
"Even if the foundries place orders in the second quarter, they may not get their equipment this year," Hsu said. "This is a potential bottleneck."
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