The new report highlights that in 2005, SMIC registered a 19 percent growth rate, the highest of any of the major pure play foundries. SMIC had only 1 percent of the market entering 2002, but that has risen to 7 percent in 2005.

IC Insights noted that even with the poor showing of Grace Semiconductor, which had the biggest decline in sales last year the Chinese foundries, in total, held 13% of the pure-play foundry market in 2005, up from only 4% in 2002.

By 2010, China will represent 17 percent of the foundry market, representing sales of $7.5 billion as compared to $2.2 billion in 2005, according to the research firm.

However, going from the start-up phase to critical mass with multiple fabs and customers will prove difficult to sustain rapid market share gains, IC Insights remarked. Chinese foundries are now forecasted to increase market share by only 1 percent per annum over the next five years.

In fact, IC Insights projections for the Chinese foundry business have been lowered all round from last years McClean report, when the research firm projected a market share of 20 percent by 2009.

Overall, the pure play foundries will have accelerated growth in 2006 of 32 percent, much higher than IC Insights forecast of 8 percent growth for the IC industry this year.

IC Insights is now projecting pure-play foundry sales to display a 21 percent CAGR from 2005 through 2010, almost double the 11 percent total IC industry CAGR expected by the research firm during the same period of time.