''The year 2009 is likely to be one that pure-play foundries would love to forget and will make them long for 2010," said Len Jelinek, an analyst at iSuppli, in a statement. "However, next year is likely to bring a new set of challenges, as the rising cost of competition winnows down the number of players in the market.''

Global pure-play foundry revenue is set to rise to $21.6 billion in 2010, up 21 percent from $17.8 billion in 2009. This follows a disastrous 10.9 percent plunge in 2009, according to the firm.

''The expense of developing and implementing next-generation processes for a variety of technologies is rising rapidly. The only way to be a leader and outperform the market is to stay at the cutting edge of semiconductor process development. Only companies with sufficient size can support these costs," according to the iSuppli analyst.

''In the past, some foundries have found success by focusing on low-cost manufacturing, trailing behind the process migrations of the most advanced players,'' Jelinek noted. ''However, this so-called 'fast-follower' strategy no longer is a route to success amid slowing market success. In fact, the fast-follower strategy now serves only as a route to the fringes of the semiconductor manufacturing business.''

In the past, there were four major ''leading-edge'' foundries: Chartered, SMIC, TSMC and UMC. IDMs such as IBM, Samsung, Toshiba and others provide such services.

Consolidation is already taking place. As reported, Abu Dhabi's Advanced Technology Investment Co. recently said it has agreed to acquire Singapore-based Chartered Semiconductor Manufacturing Co. Ltd., for a total of $3.9 billion, continuing its expansion into the contract wafer production business.

Chartered will be folded into GlobalFoundries Inc, the former manufacturing division of Advanced Micro Devices Inc. floated as a separate entity earlier this year by ATIC, which injected funds into the company under a joint venture deal with the microprocessor and graphics IC vendor.

Pooling resources from Chartered and GlobalFoundries will enable the new company to better compete in the tough wafer supply industry with market leader TSMC.

The proposed acquisition of HeJian Technologies by Taiwan's United Microelectronics Corp. (UMC) will further consolidate the Chinese foundry market. ''It likely also will put UMC back into the No.-2 position among global pure-plays, a position it lost to GlobalFoundries Inc. this year,'' according to iSuppli.

''Small foundries Silterra, Altis and Landshunt all are struggling, and thus have become the subject of speculation regarding a merger with another manufacturer,'' according to iSuppli.

China's foundry vendors are also seeing a shakeout.