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GaAs industry reaches capacity equilibrium

After several years in which fabrication capacity has far exceeded market demand, the GaAs business reached a significant turning point in 2006, says TriQuint CEO Ralph Quinsey.
By Michael Hatcher in Austin, Texas

Global supply and demand of GaAs ICs is back in balance after several years of overcapacity.

That s according to TriQuint Semiconductor CEO Ralph Quinsey, who opened this year s CS Mantech conference in Austin with a "state of the industry" address.

"Clearly, we have turned the corner," said Quinsey. "The year 2006 will be remembered as a transition year for the compound semiconductor industry."

"This was the first year in many where worldwide GaAs supply and demand came back into balance."

According to both Quinsey and Filtronic s Wolfgang Boesch, the global demand for GaAs ICs rose sharply to around 75 percent of total available capacity in 2006, from only 50 percent the previous year. Global capacity is estimated at about 800,000 6-inch GaAs wafer equivalents.

The extra demand for GaAs was stimulated by the more complex RF requirements of multi-mode and multi-band cell phone handsets.

Quinsey expects 150 million - 170 million of these handsets to sell in 2007, meaning that demand for GaAs will remain well-matched to the available supply.

He added that, for a brief period in 2006, the GaAs industry became supply-constrained after several years of overcapacity.

While the top three GaAs suppliers - RF Micro Devices, Skyworks and TriQuint - now control 50 percent of the industry s capacity, mid-tier suppliers may be under pressure to choose between consolidation and integration into a vertical business model to survive.

Mid-tier foundry consolidation may also emerge to support a more widespread shift to fabless business models, Quinsey added.

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