During the Semico Summit conference in Scottsdale, Arizona, AMD’s chairman Jerry Sanders and TSMC’s North America president Edward Ross admitted that the semiconductor market is slowing nowadays. Meanwhile, the costs of building a leading-edge plant are soaring towards $4 billion mark, the representatives added. With formidably growing expenses, but significant slowdowns in the pace, there will be less companies able to manufacture semiconductors, but more fables firms involved in research and development of different chips and microprocessors.

AMD executive acknowledged at the conference that he expected the integrated-circuit industry to grow 10% to 12% annually in the course of next 7 years. AMD’s Sanders said that historically the annual growth had been in the mid-teens, though, he does not expect the pace to maintain on the same level in future. TSMC’s Ross was even more conservative with his 10% annual growth for IC industry expectations.

Another important trend is soaring costs of semiconductor foundries. According to analysts, a plant that processes 300mm wafers and utilises 90nm manufacturing  technology costs nearly $4 billion, whereas a bit less advanced facility that makes use of 0.13 micron technology cost around $2 to $3 billion a little bit earlier. With complexity of process technologies going upwards, the costs of plants will continue to soar. Even now very few companies can afford building 300mm fabs and utilise advanced manufacturing technologies, in future it is likely that a lot of firms will have to either jointly build semiconductor foundries, or to go with contract manufacturers.

Generally speaking, the simple rules of the market form the outcome here: either companies make a lot of complex chips and stay profitable, as the cost of building a lot of products is lower compared to the cost of building just a handful of devices, or each company makes small amount of its own chips, but will hardly remain profitability, as the demand growth on all semiconductors will be too slow.

It is very likely that fabs and actual products developers will form strategic collaborative partnerships in order to help each other to understand the needs of customers and restrictions of manufacturers. It will allow the former to have fewer problems with actual hardware implementation of almost any devices provided that both partners worked on a chip from the very beginning.

As a result of strategic collaborations and divisions between “pure-foundry” and “pure-development” businesses, “pure-foundry” business will grow 20% annually during the next 7 years, according to Edward Ross. It will be $40 billion market in 2010, achieving 32% of overall semiconductor industry sales.

Even AMD’s Jerry Sanders, the author of the famous “real men have fabs” statement confirmed that AMD forms ties with IBM and even UMC because it looks reasonable from the economic point of view.