Mannerisms

"Shortage of capacity in 2009 is inevitable", says Malcolm Penn, CEO of Europe's leading semiconductor industry analysts, Future Horizons, "there's nothing you can do about it. There will be wafer allocation; there will be price increases; people will have to fight for the wafers."

"It's the first time the semiconductor industry has cut back on capital investment at a time when capacity is at its tightest", adds Penn, "they're saying: 'I've got too little capacity so I'm stopping investing'. The fabless will be competing alongside the IDMs."

Asked if his fab-lite strategy was vulnerable to the foundries cutting back capex to force up wafer prices, Rich Beyer, Chairman and CEO of Freescale Semiconductor, replies:

"The argument that says they're cutting back on capex so there'll be a massive shortage of wafers is not true Whenever you have a discussion with a foundry they're always out of capacity. Then you get a call: 'Do you need any more wafers?' It's a natural part of our industry."

"As a supplier you either have to live or die by the market price on the spot market and accept that," adds Beyer, "or, and this is where our model is different, you engage with partners over a long period of time, which includes reduction-pricing over a long period of time, so they don't increase prices."

Freescale used Chartered, UMC and TSMC.

TSMC's total capacity for 2008 is expected to reach 9.4m 8 inch equivalent wafers, which is 13 per cent up on the 8.3m wafers processed in 2007, with 12 inch wafer capacity increasing by 27 per cent in 2008 over 2007, says TSMC.

Asked if the intention is to get prices up, Maria Marced, President of TSMC Europe,  replies that TSMC has "firmed up on prices."

This, Marced explains, means that the rate of price decline over the lifetime of a process node will be slower than it has been in the past.