Penn was talking about the constricted supply of advanced logic processes.
“Everyone (except Samsung and Intel) is now fabless for for advanced (65nm and below) logic wafer supply,” said Penn, ” and only four firms have advanced logic foundry capability – TSMC, GloFo, Samsung and Intel.”
And those four have very uneven capabilities.
TSMC has 60% of the foundry market and 100 % of the foundry industry’s profits, said Penn.
GloFo is still in technology and capacity catch-up mode.
Samsung is only for carefully targeted customers.
Intel may become a mainstream foundry sooner or later but isn’t yet.
The result is that industry consolidation in the middle ground is now inevitable. “I’ve never believed in consolidation in this business but I do now,” says Penn.
The cut-off point for being a potential consolidatee is 3% market share, said Penn. That is the figure which, in the semiconductor industry, you need to be able to sufficient fund capex and R&D to grow. “The 3% figure has been true in the industry for 50 years,” said Penn.
Nowadays 3% means revenue of $10 billion. Which means that STMicroelectronics and Renesas are under threat.
“The pressure is on Renesas and ST to re-invent themselves to get back above the 3% level,” said Penn.
If they can’t do it, they’re in danger.