While Asian semiconductor wafer contractors -- foundries, as they are better known -- typically garner more attention, two German companies are stirring up serious interest.
With their efforts focused on the fast-growing power management market, X-FAB Semiconductor Foundries AG and LFoundry GmbH are securing a niche as suppliers of analog and mixed-signal semiconductors, notes Len Jelinek, iSuppli Corp. 's director and chief analyst for semiconductor manufacturing, in a recent report.
Additionally, targeted growth strategies -- centered on the expansion of manufacturing operations through timely acquisitions of existing wafer fabs previously facing financial difficulties -- have proven to be an advantage over Asian counterparts, which continue to engage in capital spending wars, according to Jelinek.
Financially, both operations show promise. Despite seeing revenues drop from $369 million in 2008 to $210 million in 2009 as the recession took its toll, privately held X-FAB is expected by iSuppli to rebound and book $315 million this year. LFoundry, which spun off from Renesas Technology Corp. in 2008, had only $33 million in revenues in 2009, its first full year of business. But its recent acquisition of the Atmel Corp. (Nasdaq: ATML) manufacturing facility in Rousset, France, should peg 2010 revenues at $200 million, iSuppli predicts.
How well these companies ultimately fare will depend largely on how they manage their growth as the electronics sector recovers, and how easily they ward off challenges from Asian competitors looking to increase their European presence. Jelinek also alludes to the importance of forging relationships with emerging design companies in Asia, which undeniably will be an important key to meeting shifting global demand.
As far as the global electronics supply chain goes, I wonder what role European contract manufacturers and foundries will play in the next couple of years as the economy and consumer end-markets gain momentum. Every few years, the winds seem to change direction: Sometimes chipmakers and OEMs go the lower-cost route, and at other times they opt to keep manufacturing partners closer to the markets they intend to serve.
Which way are the winds currently blowing? Will the region’s proximity to the developing markets of Russia, the Middle East, and Africa trump lower-cost Asian production? Let me know what you are picking up from the grapevine.