7th
May
2010
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 |
10th
July
2008
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???
posted in Semiconductor, Business, Forecasts |
24th
January
2008
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.
posted in Semiconductor, Business, Forecasts |
15th
January
2008
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
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.
posted in Semiconductor, Business, Foundry, Forecasts |
19th
October
2007
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 |
14th
June
2007
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 |
