For example, there was a peak in 1995, and then it suddenly dropped in 1996. And although chip sales will slow somewhat in 2001, we think that there are several factors that will begin to turn the peaks and valleys into rolling hills. SC manufacturers are outsourcing more to foundries. In-Stat forecasts that by 2012, foundries will supply 50 percent of chips. As with the consolidation in the DRAM market, which has seen a shift from 15 major players in 1995 to five major players in 2000, the rest of the industry will see more consolidation and joint venturing to help absorb the enormous costs of adding additional fab capacity.
Fewer companies can afford to build a multibillion dollar fab.
Most chipmakers will either seek partners or look to outsource manufacturing. This industry is supply-driven. The supply, or lack of, has produced the curves and spirals that we have seen. Although there was considerable new capital investment in 2000, oversupply will creep up gradually, and start taking its toll sometime late in 2001 as 30,000 wafers a month per fab come online, one at a time. This is a good tool for gauging the supply needs.