ISuppli raises semiconductor foundry revenue forecast

The increased demand for products is putting pressure on foundries, but will bring in more revenue in 2010

ISuppli has increased its 2010 revenue forecast for semiconductor foundries, driven by a resurgence in demand for consumer products, the analyst firm said on Thursday

ISuppli predicts that revenue for semiconductor foundries will hit about US$29.8 billion [B] this year, an increase of 42.3 percent compared to $22.1 billion [B] last year. ISuppli previously estimated revenue to rise by 39.5 percent this year.

Foundries have come under pressure to meet the growing demand for consumer products after the global economic meltdown slowed down spending starting in 2008, iSuppli said in a statement. Contract manufacturers making semiconductors for chip companies scaled down production when demand for semiconductors fell during the recession.

Some foundries making semiconductors for chip companies include Taiwan Semiconductor Manufacturing Company and United Microelectronics. ISuppli predicted that foundries would spend 123 percent more on capital equipment this year compared to 2009.

The research firm also said that China had lost its role as a leader in contract manufacturing because of lack of expansion and technological developments. Taiwan is China's chief rival in the contract manufacturing sector.

Low-cost semiconductor manufacturers held a price advantage during the downturn, which could be used as bait to obtain lower pricing from competing foundries. Price competition has had a negative effect on the money domestric foundries have available to invest in future growth, iSuppli said.

Foundries were also affected by China's reduction in state-funded expansion during the time, the research firm said.

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