GloFo’s Horizon

The foundry industry is getting interesting. TSMC ended the year with 300mm capacity of 2.5 million wafers a year from two Gigafabs, and GloFo says it will end 2011 with 300mm capacity of 100k wpm.

TSMC has said it will spend more than $5.9 billion this year and, according to some sources – it may be closer to $8 billion.

GloFo is spending $5.4 billion on capex – $1.4 billion than estimated 2011 sales of $4 billion.

So GloFo will lag TSMC in capacity for the foreseeable future.

And if it’s spending 26% more than revenues on capex, GloFo is not going to see a profit anytime soon.

In the long run the issue will be profitability, not capacity, and GloFo does not seem to have a strategy for matching TSMC’s ability to reach break-even at 45% of fab utilisation. TSMC says that 45% figure is made possible by the Gigafab strategy – a strategy which GloFo seems disinclined to match.

So the question emerges: ‘For how long will GloFo’s backers take losses?’

GloFo’s CEO says that the backers have ‘a long-term horizon’.

They’ll need it.