Asian chip revenue to double by 2010

Revenue from Asia's giant chip foundries, which make semiconductor chips for other firms, will almost double in the next four years to US$31.8 billion, according to the latest research.

The region's foundries, the largest of which are in Taiwan and China, hold some 91 percent of the world market and recorded sales of almost $16.6 billion last year, analysts at US-based In-Stat reported.

Foundries like Taiwan Semiconductor Manufacturing Co (TSMC) and United Microelectronics Corp (UMC) make chips for many better known firms which lack their own production facilities.

For example, graphics chips designed by ATI and nVidia are actually made by the two Taiwanese firms.

"TSMC has been the undisputed leader in the foundry business over the years, followed by UMC.

"In 2005, Semiconductor Manufacturing International Corp [SMIC], a Chinese foundry, replaced Chartered, the major Singapore foundry, in third position," In-Stat's researchers said in a report summary.

Although political relations between China and neighbouring Taiwan are extremely unfriendly, there has been a considerable transfer of chip-making technology and expertise from Taiwan to China.

This is despite some efforts by Taiwan's government to control the flow of information. TSMC sued SMIC in 2004, alleging that the Chinese firm stole chip making information and infringed its patents, and won a favourable settlement.

The company returned to the courts this week, alleging that SMIC is breaking the terms of that earlier agreement and SMIC has countersued.

"With the foundry business centred in Taiwan, and major memory makers located nearby in Japan and South Korea, China is expected to drive the next manufacturing growth wave in Asia," said In-Stat analyst Mayank Jain.

"Many integrated device manufacturers [IDMs] and foundry players in China are already expanding their production capacities."

Companies which design and manufacture chips in their own foundries are referred to as IDMs.

In Asia these firms, which include major memory chip makers, are based mainly in Korea and Japan. Samsung, one of the world's leading IDMs, is attempting to broaden its chip making business.

"With Samsung venturing into the leading-edge foundry business, competition is expected to heat up among top foundry players offering advanced process technology, while China's foundries will offer low-cost fabrication on older technologies," said In-Stat.