In IC foundry business, capacity is the most important task for company to maintain their competitiveness. Since the IC foundry is such a capital- intensive business and capacity expansion is the major capital expense for IC foundry. In last 20 years, IC business has a routine business cycle. Every 4~5 years, it will have up and down turn. In recent years, the cycle became more and more difficult to catch up. A system dynamic model is build up for the IC cycle forecast and 4 capacity expansion scenarios were simulated. The question will be addressed in the simulation is: What is the reasonable capacity expansion model for IC foundry fab?

The profit of semiconductor industry became slight while the industry is mature today, new competitors enter this market with these strategies such as low price, join venture, committed capacity to build up the good relationship of customers in order to acquire order. How do the IC foundries use their competitive advantage to keep growth when they face the forceful competitors? The IC foundries should focus on the development of advance technology, capacity expansion, and keep proper capacity utilization to increase revenue and growth. At the same time, they also need to keep good customer services on production cycle and on time delivery. The study is to discuss the past history, current status, and future developed trend for global semiconductor industry and IC foundry first. Then uses the performance of operation and capacity utilization to do the relative data analysis. Finally, refer the Five-Forces Framework, Diamond Structure, Value Chain, and Dynamic Strategy to find out the competitive advantage of IC foundries, also provide the best proper model of capacity utilization to create the maximum value for customers.