TowerJazz Rides the Wave of Pure-Play Foundry Boom

3 August, 2017

The second quarter results of TowerJazz shows a continuing growth rates, slightly above the average of the growing industry of semiconductors manufacturing services

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TOWERJAZZ HQ

New trends in semiconductors supply chain creates huge opportunities for the pure-play foundries. The high cost of new advanced CMOS process fabs, along with an increasing number of mid-size companies that are ditching their fabs in favor of the fabless business model.  Companies like Fujitsu, IDT, LSI Corp. (now part of Avago), Avago (now Broadcom), and AMD. They all have all become fabless IC suppliers over the past few years.

A report published by IC Insights a few months ago estimated that during 2016, the pure-play IC foundry market increased by 11% to a total of $50.0 billion. The research company forecast annual growth rate (CAGR) of 7.6% for the next years, to a total of $72.1 billion in 2021. It is interesting to note that this is a very centralized market: The Taiwanese TSMC holds 59% of the worldwide foundry market!

Staggering 35% Annual Growth

This is a good news for TowerJazz from Migdal Haemek, Israel: It went from $505 million in sales in 2013 to $1,249 million in 2016 with staggering 35% CAGR. Accordingly, its shares in NASDAQ rose from $4 in 2013 to more than $15 in 2017. Now, it seems, the growth continues with full steam ahead: Today the company announced a record revenues  of $345 million in the second quarter of 2017, almost doubling the industry growth forecast. The company says it reached net profit of $50 million, up 30% YoY, and record operating profit of $57 million, up 43% year over year.

 

Semiconductor leading foundries

Revenues for the 2017 first half were a record of $675 million, reflecting 16% growth as compared to $583 millionfor the first half of 2016. The future is more conservative: TowerJazz expects revenues for the third quarter of 2017 to be approximately $355 million with an upward or downward range of 5%, representing 9% growth as compared to the third quarter of 2016.

These results strengthen its position in the top 10 foundries. Actually TowerJazz is one of the three top-10 pure-play foundry companies that displayed the highest growth rates in 2016. The two others are X Fab (54%), which specializes in analog, mixed-signal, and high-voltage devices and acquired pure-play foundry Altis in 3Q16 to move into the top 10 for the first time, and China-based SMIC (31%).

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