Micralyne Newslyne - June 2007

Comparison of the IC foundry business structure with the evolution of the MEMS foundry business

Mr. Jean-Christophe Eloy, Managing Director & Founder, Yole Développement
Mr. Jean-Christophe Eloy, Managing Director & Founder, Yole Développement
According to the Taiwanese Institute for Economic Research, the integrated IC foundry business represented approximately 10% of the total IC market in 2006.

The four main players (TSMC, UMC, Chartered Semiconductor and SMIC) together had a market share of 84% and TSMC alone dominated the industry with more than 50% of the business in 2006. The picture is quite different for the MEMS foundry business. The following table (Figure 1) provides YOLE Développement's analysis of the MEMS foundry business in 2006:

Ranking of MEMS Contract Manufacturers
Figure 1: Ranking of MEMS contract manufacturers (Source: Yole Développement)

Approximately 25 companies provide MEMS foundry services worldwide, with revenues totalling US $400 million. The growth rate in 2006 compared to 2005 was 35%, after a 40% growth in 2005.

At YOLE Développement, we are forecasting the MEMS foundry industry growth rate to remain at the same level for 2007 and 2008 as the first trends gathered for the year indicate a possible 40% growth rate for the year.

Comparing MEMS foundry sales to MEMS product sales in 2006 (which totals US $5.9 billion), 7% of the MEMS product market is manufactured by independent MEMS foundries, a much lower rate as compared to the semiconductor industry.

The main reason for this difference is the diversity of MEMS processes and the existence of the "MEMS law: one product one process". That is, few standard processes today can capture the majority of the market.

Looking to the future, let's imagine the MEMS foundry business in 2016...

In 2016, we expect the MEMS market to generate approximately US $20 billion in revenue based on a 2006-2016 13% compound annual growth rate (see Figure 2).

We also predict that the "MEMS law: one product one process" will be solved, resulting in the evolution to a more mature industry.

If we can extrapolate what has happened in the semiconductor industry:
Approximately 10% of overall semiconductor business is in the hands of foundries.
One foundry (TSMC) has 50% market share, reducing the size of the other players (UMC, SMIC, etc.)

If we apply this ratio to the MEMS industry in 2016, the results are surprising:
10% of the MEMS business would be in the hands of MEMS foundries, meaning a US $2 billion industry (compared to a US $400 million market today).
One player would have 50% of the market, resulting in one US $1 billion MEMS foundry.

Figure 2: Evolution of the MEMS markets
(Source Yole Développement: "Status of the MEMS industry 2007" report).

The question remains, who will be able to build a US $1 billion MEMS foundry company in the next 10 years? And, in order to do this, will MEMS manufacturing processes have to be standardized? This dream may not seem possible today but the semiconductor industry achieved this goal 15 years ago while many people were sceptical about the viability of the semiconductor foundry business model.

Following the semiconductor example, we hope that the dream of building a US $1B MEMS foundry will turn into a reality.

- By JC Eloy, Yole Développement -

email: eloy@yole.fr
web: www.yole.fr

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