15th January 2013

Some promising application markets for semiconductor biz in 2013

Communication and Consumer Electronics appear as the most promising application market segments for 2013. And within that, portability and wireless connectivity are set to be the main growth drivers for the semiconductor industry.

The other promising markets for 2013 are automotive and medical.

Portability has brought in an increasing importance of power management. Demand for power efficient and high performance solutions in portable devices will continue driving the need for power management ICs - and these represent a significant part of revenues from analog IC vendors.

The rapid growth of wireless applications and the incorporation of computing into communications (e.g. smartphones) and vice versa (e.g. media tablets) is likely to continue in 2013. While smartphones have been the main growth driver in the wireless application, the market also includes all semiconductor content needed for communication infrastructure, equipment etc. The proliferation of 4G, an increasing use of fibre coupled with an increasing data traffic need will catalyse this application market segment. In addition, semiconductors have proliferated beyond the traditional wireless and computing applications, e.g. mobile commerce.

The rise of M2M communications/Internet of things will also provide long term opportunities for wireless communication chip makers. These will span a broad range of applications across automotive, industrial etc. Intelligent, connected, and energy-efficient systems (with sensors and motors being wirelessly connected) will continue leading to higher semiconductor content.

The increasing sophistication of the mobile devices has led to not only increasing semiconductor content but also its varied usage. The traditional content of baseband and RF has morphed into multicore application processors, connectivity supporting various spectrum bands, sophisticated graphics and video, touchscreen displays etc. And the tidings will cascade across the complete semiconductor supply chain supporting these applications. This includes market for components like sensors, displays, power management, MEMs etc.

2013 will also see MEMS becoming a part of mainstream semiconductor content. From gyroscopes, accelerometers, and microphones, they are finding an increased penetration into devices spanning multiple industries and applications – consumer electronics, mobile devices, medical, automotive, aerospace etc. Its growth will be seen through an increased on board processing and integrated and self-contained sensing units.

On sensors, Internet of things is also likely to drive a huge market for low power, cost sensitive sensors. Innovations here are also reshaping the medical imaging industry. While this market is currently evolving, the emerging technologies and products in this space are likely to go main stream with a high potential.

Medical electronics is another promising market for semiconductor. The increasing aging population, increased life-span and various life style related illnesses are spurring the demand here. Medical devices now warrant small and smarter technologies – coupled with wireless connectivity.

Automotive has also seen an increasing amount of electronics. Automotive infotainment, safety, fuel efficiency and enhanced features is making this application market very promising for semiconductor content

posted in Semiconductor, Business, Forecasts, Analog, Automotive | 0 Comments

13th April 2011

IC Insight’s revised capex forecast

IC Insights revised its capex forecast last week in which they indicate that semiconductor industry capital spending is projected to grow to $60.4 billion in 2011, up 17 percent from $51.8 billion in 2010,

I had done some number chewing from the earlier (Jan) report in a previous blog. So was curious to look at the changes. Looks like a couple of big ones in this revised one from the previous (Jan ‘11) forecasts - and they are for ST and Sandisk.

ST’s is 100% (from Jan’s 750M$ to April’s 1500M$) and Sandisk’s is 77.7% (from Jan’s 900M$ to April’s 1600M$). TSMC’s % change from previous is 23.8% increase.

Sandisk had already reiterated its 2011 capex budget of $1.4-$1.6 bn in Feb’11 and IC Insights’ new table reflects that (where did the earlier figure of 900M$ come from??). ST had also announced its capex plans ($1.1 -$1.5b) in as early as late Jan ‘11 (reflected in IC Insights’ latest table)

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23rd January 2011

Analyzing some figures from “5 IC makers join $3B capex club”

Analyzing some figures from “5 IC makers join $3B capex club”…..

Taking just the top 4 spenders and UMC -

Samsung made a quantum jump in total capital spending from $3.5B in ’09 to $9.6B in’10 – a 173% increase, It was the top spender in chip capex in ’10 (interestingly it’s ’10 capital spending was not too less than the combined cap spending of the next two entries in the list - Intel and TSMC). It’s ’11 forecast of $9.2B is a 4% dip from its ’10 spending – making it figure at the bottom of the 2011 major spenders ranked by forecasted spending change from the previous year. The absolute forecasted amount for ’11 is, though, still slightly higher than Intel’s $9B. However Samsung is known to outspend its target every year and analysts still predict a %-10% industry capex outlook.

The company is also cutting down on its DRAM spending. While overall semiconductor spending budget change is forecasted as 0% this year, the foundry spending is up (double of ’10) – still at record levels. Another interesting point to note is that in ’10 (a year in which % change in its capital spending from the previous year was a good 173%), Samsung’s capex/sales ratio (~38% with 9.6B capex and $25B sale, as estimated in mid ’10) was not too far off from its long term average of 32%.

Coming to Intel - Intel’s capex spending in ’10 was much less than Samsung for the same year ($5.2B vs. Samsung’s $9.6B) but is forecasted to be a massive one (73%) this year. However as pointed our earlier, the ’11 forecasted absolute amount will be slightly less than Samsung’s. This comes after a year which Intel called a record year and its best year. Major reasons cited for the industry bellwether’s increased capex in ’11 are - 22nm transition and expected increase in demand. Intel is approaching 22nm transition in ’11 and it also sees tremendous growth opportunities this year, especially with Atom based SoCs in smartphones, tablets, smart devices etc. as well as PC& server segments. Plus, it should not be forgotten that Intel is growing from 3 high volume leading edge fabs to 4.

Next the world’s top pure-play foundry – TSMC made major investment in’10 - a 120% ‘09/’10 % change amounting to $5.9B – slightly higher than Intel and much less than Samsung. However, the table indicates only a marginal forecasted ‘11/’10 % change – 7%, absolute sum of $6.3B. Note, though, that this is the highest absolute sum forecasted amongst all foundries.

Besides capacity, TSMC has always focused on being the technology leader amongst all the foundries. Recent news items point to TSMC’s high R&D spending in ’10 (the company’s R&D spending rose by 44% to reach $945M – moving it into the top 10 in R&D spending - and making it the first pure-play foundry to move into the top 10 semiconductor R&D spending club. TSMC hopes to catch a bigger share of the 28nm market this year.

Coming to GlobalFoundries – The y-o-y % changes are quantum (490% - ‘09/’10 and 96% - ‘11/’10) but then look at the starting point in ’09 - $466m which is quite low compared to TSMC and less than UMC’s too for that year – it had a lot of catching up to do. The foundry is in the process of expanding its current facilities (leading edge facility in Dresden/Germany), building the new manufacturing facility in NY and financing another production facility that will be located in Abu Dhabi.

The expansion focus in Dresden facility will be on adding new capacity to support additional growth opportunities for 45/40/28nm technologies as well as initial 22nm development. Target is to scale output to up to 80 thousand wafers/month over the next two years. The company has also been expanding its Fab 7 in Singapore to reach 50 thousand wafers/month across technologies ranging from 65nm to 40nm. GF’s 300mm output will be around 90 thousand wafers/month when all the new expanded facilities become fully operational.

Things are not looking too well for UMC – it started with a slightly higher capex than GF in ’09, spent half of GF’s (‘10/’09 % change) amount in capital in ’10 and is forecasted to keep the same capital spending in ’11. It could not catch up with TSMC especially on the technology front and now looks to be losing out to GF too. On a brighter note, UMC is reported to put CMOS –MEMS devices into volume production in 2011.

All these point to an intensification of competition on the foundry market as well as a rapid expansion of the contract manufacturers. The question is – will the industry see a foundry capacity glut in late 2011??

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29th October 2010

TSMC continues record-breaking performance in Q3

The company reported its best quarterly net profit and sales ever - net profit rose 54% year-on-year to US$1.52 billion.

Process Technologies as Percentage of TSMC’s Revenue in Q3 2010

150nm+ 28%
130nm/110nm 14%
90nm/80nm 12%
65nm/55nm 29%
40nm 0.33% 17%

In spite of the slow growth rate predicted of the global chip industry next year - CEO, Morris Chang forecasts a mere 5% revenue growth for the global chip industry in 2011, much less than his 30% forecast for this year - the foundry industry bellwether will up its capital spending in 2011 as compared to this year. New capacity for cutting edge 28-nanometer production technology is twice as expensive as 65nm technology; and TSMC will mass-produce chips using 28nm technology in the fourth quarter of this year

posted in Semiconductor, Process, Foundry, Forecasts | 0 Comments

7th May 2010

Analysts bump up their forecasts with “blowout” Q1

Q1 has been good for the semiconductor industry. Very good, especially w.r.t the dismal 2009.

With Q1 results ranging from knock out to good and promising, industry analysts (iSuppli, Future Horizons etc.) are also revising up their forecasts. The average forecast points north of 30. iSuppli noted that even though semicon revenues typically declines in the first quarter (compared to forth quarter of previous year), Q1’ 2010 saw chip sales up 1..1% compared with Q4 ’09.  Malcolm Penn of Future Horizons has been quite bullish. While cautioning about the potential for a second dip in the general economy, he maintained that only a monumental disaster of a scale similar to the banking crisis of 2008 could now derail the chip market recovery.

However, companies are still treading warily and hesitant to ramp up capacities – there is not much sign of the supply chain easing up.

posted in Semiconductor, Business, Forecasts | 1 Comment

10th July 2008

Diminishing semiconductor content ??

According to a recent research in Semiconductor DQ report from Gartner, it is noted that the top 100 OEMs consumed semiconductors worth $209 billion in 2007 or a total 76% of semiconductors sold last year. However their semiconductor consumption did not grow as fast as their revenues. The report highlights 2 ongoing issues faced by the semiconductor industry - significant erosion of semiconductor content and average selling prices (ASPs),
 

While ASP’s have long been an issue especially in the computer and cell phone market, the other aspect of decreasing semiconductor content is a worrying trend for the semicon industry. True, we are seeing some signs of new and innovative uses of semiconductors, such as sensors being implemented in products by firms such as Nintendo & interesting new touchscreen-based products, but then that by itself may not be enough.
 

Reverse trends include:

 

 

  • Talks of Apple selling newer versions of its iPhone s/w through its iTunes stores. Unlike traditional mobile handsets, where users change their handsets quite frequently (hence more semicon content demand), iPhone users may not change their handsets so often and upgrade their phones mostly through relevant s/w upgrades.
  • Recently there was this interesting news article in Biz section of International Herald Tribune (dt. June 23 ’08). It reports that Nokia wants to transform itself into the next generation entertainment company. It has already created (last August) an Internet service and online music store, Ovi, said to compete directly against Apple.
     Nokia predicts that in the next 5 years, phone users will create 25% of entertainment watched on smartphones. – and that Nokia will share that entertainment.
     

Both these examples indicate a growing dominance of s/w content and potentially diminishing h/w demand in the computing and consumer industry – areas which already show a pricing weakness (Gartner made note that the semiconductor content pricing in these areas decreased almost 9% in 2007 compared with 2006).
 

How does this bode for the semicon industry???   

 

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24th January 2008

Wall Street wary of equipment stocks, but there are some bright spots

Read this insightful analysis of the woes of the semicon industry and surviving in a period of “profitless prosperity” by Steve Newberry, president and CEO of Lam Research, as reported by Bob Haavind, Editorial Director, Solid State Technology.

I summarize his main points here:

  • The current period is marked by accelerating IC growth at a time of declining profitability. However, companies “can’t be prosperous if prices are declining faster than costs.”
  • 15 of the top 40 companies are losing money and 23 are making less profit than needed to stay in the business.
  • The trouble is overinvesting to create excess capacity, trying to force-feed a much larger industry than exists. Too many vendors are trying to capture the same market share through rapid supply line ramps that don’t allow much differentiation.
  • The only sectors found to be financially healthy were analog and fabless, which have low capital investment requirements.
  • In the logic sector, no integrated device manufacturer (IDM) can achieve enough volume to effectively compete with the economy of scale of the foundries. Even Texas Instruments, the only IDM with profit over 10%, is moving from a fab-lite to fab-liter strategy.
  • Even in the foundry sector, all the profits in the past five years were made by TSMC, while UMC, Chartered, and SMIC are not generating sufficient operating profits to sustain growth. An important factor here is that TSMC is able to command a price/wafer premium by offering superior value to its customers in terms of libraries, extra services, design aid, etc.
  • The major effort of most chipmakers was to solve the profitability problem through cutting costs — but a quick analysis showed that even if toolmakers cut their costs enough so that the entire process tool industry made zero profit, it would only offer chipmakers savings of perhaps $5.7 billion, when they need about $11.2 billion to close the profit gap, he believes.
  • Thus, Newberry suggested that chipmakers must focus on better value creation for customers, differentiating themselves while also becoming leaders in efficiency.

 

 

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15th January 2008

Used semicon equipment market - expected strong growth this year

Amidst the bleak forecasts for the semicon industry for 2008 including the projected decline by 10% in capital spending, a sector expected to post strong growth this year is the used semiconductor equipment market. According to a report from Semiconductor Partners in conjunction with Semicon Research, Used semiconductor equipment market is expected to reach $8 billion in 2009


 “As leading edge digital memory and logic manufacturers build 300mm fabs for process technologies of 65nm or less, this will obsolete their 200mm fabs at 130nm or 90nm and some of their 300mm fabs at 90nm,” noted Morry Marshall, Partner – Strategic Technologies at Semiconductor Partners. “Analog and mixed signal manufacturers will have a need for these fabs to meet for expansion to satisfy the growing analog, mixed signal and RF markets.  This creates an opportunity for companies that finance, resell or refurbish used equipment.”

IDMs have re-aligned their fab strategies and are going towards fabless or fablite. Plus the ASP declines have catalysed foundries towards the 300mm wafer path, thus giving a boost to the 200mm used equipment market; in particular  from foundries in Asia. While on foundries in Asia, Chartered has been on the speculation radar

  • Toshiba has recently extended its 2 year collaboration with IBM on 32nm and below to include 32nm bulk CMOS process techno. Chartered with its ties to IBM (Common Platform Alliance) looks set to leverage on this and take away biz with Japanese foundry customers from TSMC and UMC
  • Rumors on SMIC being acquired have been afloat since last year. In April ’07, it was rumored to be taken over by venture capital companies. The latest one this year is that Chartered may acquire SMIC.

With the increasing prominence of the foundries in the semicon space and being pitted against the formidable Taiwanese foundries, the others are poised to increase their share of the pie.

 

 

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19th October 2007

ST Economist’s view of tomorrow’s semiconductor industry

An interesting and “down to basics” take on tomorrow’s semicon industry was provided by Jean-Philippe Dauvin,  chief economist emeritus at STMicroelectronics at SAME (Sophia Antipolis forum on Microelectronics).

 

He cited the development of low cost products, the consumerization of the market, the intensification of rivalries due to the number of competitors, the lack of strategic innovation from the semiconductor industry and the intensification of customers’ bargaining power as the reasons behind the low expected growth rate of 4.4 percent in 2010.
 

A statement that I especially liked in his reported address is “We are in a business that addresses the end-user, but we cannot understand the customer. Our obsession is silicon but the final customer cares about the usage not the fabs”.
 

This is so true. While it is essential for the industry to work on tools, fabs, methodologies etc., in our rush to new technos, we often lose sight of the basic tenet: Nobody actually wants we do – they want what it will do for them

posted in Business, Forecasts | 2 Comments

14th June 2007

SIA slashes 2007 semi outlook

The Semiconductor Industry Association (SIA) has downgraded its forecast for 2007 global microchip sales growth to 1.8%. 

Forecasts are always tricky. The uncertainty is compounded with the rapidly changing market conditions. However such a big change i.e. 10% forecasted in Feb this year down to 1.8% 3-4 months down the line is quite dramatic.

Reasons cited for this forecast change: rapid price attrition in three key market segments – microprocessors, DRAMs and NAND flash memories. Incidentally, another news item, “Intel plans 50% price cut for Core 2 Quad chips” was reported on the same day.

Does provide fodder for thinking………………….

posted in Semiconductor, Business, Forecasts | 1 Comment

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