Following a host of forecasts for 2014, it is now the turn of Applied Materials with its forecast for the year. First, I asked Om Nalamasu, senior VP, CTO, Applied Materials regarding the outlook for the global semicon industry in 2014.
Semicon outlook 2014
He said that Gartner expects the semiconductor industry to grow in mid-single digits to over $330 billion in 2014.
“In our industry – the semiconductor wafer fab equipment sector – we are at the beginning of major technology transitions, driven by FinFET and 3D NAND, and based a wide range of analyst projections, wafer fab equipment investment is expected to be up 10-20 percent in 2014. We expect to see a year-over-year increase in foundry, NAND, and DRAM investment, with logic and other spending flat to down.”
Five trends for 2014
Next, what are the top five trends likely to rule the industry in 2014?
Nalamasu said that the key trends continuing to drive technology in 2014 and beyond include 3D transistors, 3D NAND, and 3D packaging. 3D remains a central theme. In logic, foundries will ramp to 20nm production and begin early transition stages to3D finFET transistors.
With respect to 3D NAND, some products will be commercially available, but most memory manufacturers plan to crossover from planar NAND to vertical NAND starting this year. In wafer level packaging, critical mechanical and electrical characterization work is bringing the manufacturability of 3D-integrated stacked chips closer to reality.
These device architecture inflections require significant advances in precision materials engineering. This spans such critical steps as precision film deposition, precision materials removal, materials modification and interface engineering. Smaller features and atomic-level thin films also make interface engineering and process integration more critical than ever.
Driving technology innovations are mobility applications which need high performance, low power semiconductors. Smartphones, smart watches, tablets and wearable gadgets continue to propel industry growth. Our customers are engaged in a fierce battle for mobility leadership as they race to be the first to market with new products that improve the performance, battery-life, form-factor and user experience of mobile devices.
How is the global semiconductor industry managing the move to the sub 20nm era?
He said that extensive R&D work is underway to move the industry into the sub-20nm realm. For the 1x nodes, more complex architectures and structures as well as new higher performance materials will be required.
Some specific areas where changes and technology innovations are needed include new hard mask and channel materials, selective material deposition and removal, patterning, inspection, and advanced interface engineering. For the memory space, different memory architectures like MRAM are being explored.
FinFETs in 20nm!
By the way, have FinFETs gone to 20nm? Are those looking for power reduction now benefiting?
FinFET transistors are in production in the most advanced 2x designs by a leading IDM, while the foundries are in limited R&D production. In addition to the disruptive 3D architecture, finFET transistors in corporate new materials such as high-k metal gate (HKMG) that help to drastically reduce power leakage.
Based on public statements, HKMG FinFET designs are expected to deliver more than a 20 percent improvement in speed and a 30 percent reduction in power consumption compared to28nm devices. These are significant advantages for mobile applications.
Status of 3D ICs
Finally, what’s the status with 3D ICs? How is Applied helping with true 3D stacking integration?
Nalamasu replied that vertically stacked 3D ICs are expected to enter into production first for niche applications. This is due primarily to the higher cost associated with building 3D wafer-level-packaged (WLP) devices. While such applications are limited today, Applied Materials expects greater utilization and demand to grow in the future.
Applied is an industry leader in WLP, having spear-headed the industry’s development of through silicon via (TSV) technology. Applied offers a suite of systems that enable customers to implement a variety of packaging techniques, from bumping to redistribution layer (RDL) to TSV. Because of work in this area, Applied is strongly positioned to support customers as they begin to adopt this technology.
To manufacture a robust integrated 3D stack, several fundamental innovations are needed. These include improving defect density and developing new materials such as low warpage laminates and less hygroscopic dielectrics.
Another essential requirement is supporting finer copper line/spacing. Important considerations here are maintaining good adhesion while watching out for corrosion. Finally, for creating the necessary smaller vias, the industry needs high quality laser etching to replace mechanical drilling techniques.
How will the global semiconductor industry perform in 2013? After a contrasting spell of predictions for 2012, I see no change in 2013! So, what’s the answer to the million-dollar question posed as my headline?
After a disappointing and challenging 2012, global semiconductor executives believe that the worst is nearly behind them, and they are making investments to position their companies for a sustained, broad-based, multi-year recovery in 2013, as per a KPMG global semiconductor survey.
On Feb. 3, the Semiconductor Industry Association (SIA) announced that worldwide semiconductor sales for 2012 reached $291.6 billion, the industry’s third-highest yearly total, ever but a decrease of 2.7 percent from the record total of $299.5 billion set in 2011. Total sales for the year narrowly beat expectations from the World Semiconductor Trade Statistics (WSTS) organization’s industry forecast.
The World Semiconductor Trade Statistics (WSTS) estimated that the global semiconductor market in 2012 will be $290 billion, down 3.2 percent from 2011, followed by a recovery of positive 4.5 percent growth to $303 billion in 2013.
The worldwide semiconductor revenue is projected to total $311 billion in 2013, a 4.5 percent increase from 2012 revenue, according to Gartner Inc. The worldwide semiconductor revenue totaled $298 billion in 2012, a 3 percent decline from 2011 revenue of $307 billion, according to preliminary results by Gartner.
The outlook for the global semiconductor industry in 2013 will likely be 7.9 percent, according to Future Horizons. It means, the industry will likely grow to $315.4 billion in 2013. The Cowan LRA foreasting model put out the following sales and year-on-year sales growth numbers for 2012 and 2013: $292.992 billion (-2.2 percent) and $309.244 billion (+5.5 percent), respectively.
Databeans expects 2013 will see a rebound, with the semiconductor industry growing by 7 percent from 2012 totals to reach $313.04 billion. IDC forecasted that the worldwide semiconductor revenues will grow 4.9 percent and reach $319 billion in 2013.
IHS iSuppli claimed that the semiconductor silicon revenue will close 2012 at $303 billion, down 2.3 percent from $310 billion in 2011. The projected decline comes in contrast to the 1.3 percent gain made last year.
IC Insights forecasted 6 percent IC unit growth for 2013 based on expectations of global GDP to rise to 3.2 percent. According to IC
Insights, in 2017, China is expected to represent 38 percent of the worldwide IC market, up from 23 percent, 10 years earlier in 2007. Does this mean the USA and Europe are loosing their sheen?
The global semiconductor industry may record only 1.5 percent growth In 2013, as per The Infornation Network. There is, however, the possibility for a snap-back in revenues for 2013, irrespective of macroeconomic factors, such as what occurred in 2010.
Over the next three years, industry analysts estimate the global industry will grow approximately 6 percent 2013-2016 CAGR, according to Somshubro Pal Choudhury, managing director, Analog Devices India Pvt. Ltd.
Late 2012, I was speaking with Dr. Wally Rhines, chairman and CEO, Mentor Graphics. He said: “After almost no growth in 2012, most of the analysts are expecting improvement in semiconductor market growth in the coming year. Currently, the analyst forecasts for the semiconductor industry in 2013 range from 4.2 percent on the low side to 16.6 percent on the high side, with most firms coming in between 6 percent and 10 percent. The average of forecasts among the major semiconductor analyst firms is approximately 8.2 percent.”
WSTS also anticipates the world market to grow 5.2 percent to $319 billion in 2014, with healthy mid single digit growth across most of geographical regions and semiconductor product categories, supported by the healthier economy of the world.
Lastly, Forbes said that 2013 will be a turning point for the global semiconductor market.
According to Malcolm Penn, CEO, Future Horizons, the outlook for the global semiconductor industry in 2013 is likely to be +7.9 percent. This means, the global semiconductor industry will likely grow to $315.4 billion in 2013.
Should this happen, it would be significant, given that this is the third year in a row that the market failed to break the $300 billion barrier! The global semiconductor clocked around $292.3 billion in 2012, as against $299.5 billion In 2011.
I asked Malcolm Penn the rationale behind this. He said, the rationale is exactly the same as that for 2012. There is said to be no change to last year’s fundamental market analyses. That’s not all! There are likely to be exactly the same (economic) downside risks as well.
The unit demand, capacity and ASPs are all ‘positively aligned’. Here, it is advised that one should never underestimate the economy’s capacity to derail the chip market. Even the downside forecast has been to break the $300 billion barrier.
The global chip industry growth is driven by four factors. These are economy, which is on hold due to complete loss of confidence, unit demand, which is back on the 10 percent per annum treadmill (inventory gone), fab capacity, which is currently tight (very), especially at the leading technology edge, and ASPs, which are structurally following the usual ups and downs.
There is a very safe, long-term bet, provided companies execute properly. As it is, most firms don’t, as they are too pre-occupied with chasing short-term targets.
Finally, if the year 2013 does show a recovery, the global semiconductor market will likely go ballistic in 2014.
How will 2013 turn out to be for the global semiconductor industry? Will there be growth for the global EDA industry? Importantly, how will the Indian semiconductor industry perform in 2013? I asked Jaswinder Ahuja, corporate VP and MD, Cadence Design Systems India these questions.
Outlook for global semicon industry in 2013
First, how is the outlook for global semiconductor industry in 2013 going to be? Ahuja said: “The long term outlook for the semiconductor industry remains positive, with mobility and cloud computing being the key drivers. The global economy is forecast to grow around 4 percent annually through 2016, according to an April 2012 report from the International Monetary Fund (IMF).
“In its June 2012 report, Gartner predicted growth in electronics and semiconductor industries to outpace that of the world GDP growth, at 5½ percent annually to approach $2 trillion for electronics and 6 percent annually for semiconductors through 2016. So, the semiconductor industry outlook remains very positive overall.
“In the near term, multiple challenges will need to be weathered with respect to the global economic climate, especially in European markets. The JP Morgan/GSA Semiconductor Index of Leading Indicators points to a soft semiconductor industry in 2013. However, there are lot of new products in the mobile and tablet space that are driving demand, such as the iPhone 5, Microsoft Surface, and Samsung Galaxy S III.
“The China semiconductor space is emerging as a key market for semiconductor company revenue, and forecasts predict that it will show rapid annual growth rate. The consolidation and M&A activities that we are seeing in the global semiconductor industry also indicate a positive outlook for the upcoming year.
“In India as well, the semiconductor industry will continue to see growth. The injection of funds and other support outlined in the National Policy on Electronics will provide an impetus to home-grown design and manufacturing, which should start gaining traction in 2013.”
Five trends for 2013
What would be the three or five trends likely to be visible in 2013? Ahuja said Cadence sees five big trends that will drive growth in the near and long term. These are: mobility, application driven design, video, cloud and security.
Probably, the most pervasive change in electronics recently has been mobility. When we talk about mobility, it’s just not about smart phones or tablets, but any kind of device which is mobile. Within the mobile space, software applications help system manufacturers and vendors differentiate themselves and stand apart from the competition. The need to have apps on all kinds of devices is driving rapid growth, as well as placing new demands on EDA companies.
The entertainment industry will be the key driver for video, and as the year progresses, we will continue to see more and more products and solutions introduced to tap into the demand. For the semiconductor industry, video will drive growth both in the end consumer market (mobile platforms) and the enterprise space (networking industry).
In many ways, the backbone to mobility is the cloud. With its network servers and infrastructure, the cloud is what delivers much of the content and value to all of those mobile devices. Statistics show that we need one server for every 600 smart phones and one for every 120 tablets. So there is a big need for data centers which can provide support for all the computing and back-end operations.
Security of data in mobile devices and the cloud will continue to be a challenge in the near future. There will be renewed calls to develop products that can protect critical infrastructure and sensitive information from security breaches.
Too many new entrants on sapphire for LED market with unrealistic capacity plans. Most underestimated the technical challenges! Prices are likely to remain low through 2013. Many new entrants will fail in 2013-2014: rationalization (M&A, bankruptcy, attrition). In the long term, vertical integration is desirable to avoid margin stacking, said Eric Virey, senior market and technology analyst, LED Materials and Sevices, Yole Developpement. He was presenting a seminar on how new sapphire applications can trigger an investment cycle.
According to him, adoption of CFL and LED stretches the replacement cycle and cannibalizes lamp volume sales. As for LED manufacturing capacity, with respect to nitride MOCVD reactors, 2009 and 2010 saw increases in Taiwan and Korea in late driven by LCD display market. The years 2010-2012 saw phenomenal increase in China. Government subsidies are likely to build up epitaxy capacity in the mainland, which should be more than $1.5 billion.
Currently there are ~110 companies with epitaxy capacity. Many will likely disappear! The current excess MOCVD capacity will be fully absorbed by mid-2014. The MOCVD reactor installation will resume mid-late 2013. The global MOCVD utilization rate is 61 percent. There is wide variability between leaders and tier 2 players in China. The Q4-2012 LED sapphire consumption was worth 3.9 million two inch equivalent per month.
As for companies in sapphire wafer, 130+ companies are involved in the sapphire substrate (established or development stage). Less than 30 currently are deriving meaningful revenue from LED substrates. The capacity is ~80 percent higher than demand. It could get worse in 2013! Prices are likely to remain low. Many new entrants will disappear, and others will scale back. A few will succeed.
Conditions for survival through 2013 include, having a lot of cash, be qualified in supply chain, achieve <$4/mm cost (2” basis), and serving other market could be a plus. As for wafer price trends, the finished wafers following similar trends. The 6” is now offered for <$200, but price can vary significantly based on specifications. There are said to be simulated 4” core cost structure for various manufacturers.
Device volume, variety and complexity are only going to increase. Transformative technologies like virtual prototypes give organizations the tools to transcend challenges. Companies like Altera are creating competitive advantage and innovation with these solutions. Virtual prototyping is now ready for the masses.
Industry trends and challenges make virtual prototyping a must-have solution. New realities make prior adoption barriers mere myths. Virtual prototyping has become a key process for early software development and supply chain enablement. Industry trends also alter design requirements. For instance, earlier, it used to be computing and single core, which has since moved on to connectivity and multi-core.
This opens up implications for SoC development, especially, in terms of increased complexity and volume of software. There is a need to get the architecture right. No amount of downstream tools will compensate for the fundamentally wrong architecture. There is also a need to start software development earlier, in parallel with hardware design. Needless to say, hardware-software integration must be accelerated and system validation will minimize waterfall development process.
New realities of prototyping render prior barriers as mere myths. For instance, earlier, it was believed that creating a prototype is hard. IP models, TLMCentral and model creation software have come a long way, in reality. Earlier, there was a need to wait for complete prototype. Now, software can be developed incrementally and VDKs are jumpstarting the software development. Earlier, one felt the need to change software environment. In reality, the very same tools, debuggers and environment used for hardware can be used here.
Also, today, there are multiple use cases, verticals and customers of virtual prototyping. There is industry support for system-level models. The TLMCentral is an open, web-based portal that provides consolidated access to transaction-level models available across the industry, helping virtual prototype developers accelerate the creation and deployment of their prototypes for early software design.
Open and free, TLMCentral is the first industry-wide portal to aggregate available transaction-level models. It has over 1,000 models of most common IP blocks and interfaces for wireless, consumer and automotive applications. TLMCentral is supported by leading IP vendors, tool providers, service companies and universities. It also offers model developers, architects and software engineers an infrastructure for news, forums and blogs.
Integrated into the software development environment, there are popular debuggers, powerful controls and debugging information. VDK is a great starting point and for ongoing use. One can install and start using. There is no need to wait for months for a prototype. Templates, sample software and reference prototypes are available in one place. Post-silicon support and validation is provided, besides early availability for software development and testing.
Key process for earlier software development includes hardware-software integration and system validation. Semis are engaging customers earlier. The VDKs are driving tangible time-to-volume reduction. Tangible benefits of virtual prototyping include faster time to revenue, faster customer success, and faster field and ecosystem readiness.
This is a continuation of my coverage of the fortunes of the global semiconductor industry. I would like to acknowledge and thank Mike Cowan, an independent semiconductor analyst and developer of the Cowan LRA model, who has provided me the latest numbers.
Based on the WSTS’s June (posted August 5th, 2012) global semiconductor sales of $26.329 billion, actual sales number, the latest monthly forecast expectation for total global semiconductor sales calculated by the Cowan LRA forecasting model came in at $297 billion.
This represents a 2012 year-on-year sales growth forecast expectation of minus 0.85 percent, which declined from the previous month’s year-over-year sales growth forecast estimate of plus 0.1 percent. It is also lower than the joint WSTS/SIA Spring 2012 sales growth forecast of 0.45 percent, which corresponds to a global sales forecast estimate of $300.9 billion.
Consequently, the latest model’s forecast output is presently (based on June 2012′s actual sales) predicting negative sales growth for 2012 compared to 2011.
It should be pointed out that the model’s previous month’s forecast expectation for June was $27.65 billion. This forecasted sales (published last month) was much higher than the actual June sales result of $26.33 billion (lower by $1.32 billion or down 4.8 percent) resulting in an M.I. (Momentum Indictor) of minus 4.8, implying that the sales growth trend will be ‘mildly’ down over the near term.
Inserting June’s actual sales number into the Cowan LRA forecasting model also yields the latest updated sales forecast expectations for the remaining two quarters of 2012 and the first two quarters of 2013. These results are summarized in the table below. Also included in the table are previous month’s sales and sales growth forecast results for comparative purposes.
As displayed in Table 1, the latest projected full year 2012 global semiconductor sales forecast estimate fell to $297 billion from last month’s sales forecast expectation of $299.8 billion, a decrease of $2.8 billion.
Correspondingly, the updated 2012 sales growth forecast estimate went negative, dropping to minus 0.85 percent from last month’s slightly positive sales growth forecast estimate of plus 0.11 percent, a decrease of almost a full percentage point.
Also note that July’s actual sales estimate is forecasted to come in at $23.2 billion. Thus, July’s actual sales forecast estimate equates to a July 3MMA sales expectation of $24.15 billion, which is down slightly from June’s 3MMA sales result of $24.4 billion. It should be highlighted that this forecasted July 3MMA sales number assumes no (or very minimal) sales revisions to either May or June’s just published sales results by the WSTS.
Additionally with the ‘wrap up’ of the second quarter sales results, year-to-date sales for 2012 (cumulative sales through June) came in at $143 billion compared to last year’s year-to-date sales of $150.6 billion. This coincides to a 2012 year-to-date sales growth of minus 5.1 percent.
This implies that global semiconductor sales for the second half of 2012 must demonstrate some significant strength to reach last year’s sales result of $299.52 billion in order that the full year’s 2012 sales growth is to break even with last year’s sales, let alone show a mildly positive sales growth for the year. Read more…
The Semiconductor Industry Association (SIA) announced that the worldwide semiconductor sales for 2011 reached a record $299.5 billion, a year-on-year increase of 0.4 percent from the $298.3 billion recorded in 2010. While this is a very small increase over 2010, the SIA has said this is a record! Perhaps, it is, as the $300 billion mark is about to be breached!!
The SIA, in its release, has talked about the challenges that the global industry has had to face in 2011, notably, the tsunami in Japan, and the floods in Thailand. That the global semiconductor industry has still managed to reach nearly $300 billion is a feat in itself! And, as usual, Asia does continue to play a relatively large role.
According to the SIA, the optoelectronic, sensor and actuator, and microprocessor markets have showed solid year over year growth. In fact, sensors and actuators are said to have showed the highest year over year growth at 15.5 percent to $8 billion in 2011. Likewise, MOS microprocessors have also shown commendable growth.
So, what does 2012 hold for the global semiconductor industry?
Last November, IC Insights had said that although low single-digit growth is forecast for the total semiconductor market in 2011, several companies are likely to register results that are quite different. There have already been some forecasts since then. IHS iSuppli has said that the semiconductor industry revenue is likely to reach $323.2 billion in 2012. As of now, the global semiconductor sales has been forecast at $329.4 billion for 2012 by Mike Cowan, while the Singapore Semiconductor Industry Association (SSIA) has a figure of $313 billion for 2012. Keep your eyes wide open!
Here’s the concluding part of my discussion with Dr. Robert Castellano of The Information Network, from New Tripoli, USA.
Repercussions of a deteriorating semiconductor industry
I asked Dr. Castellano regarding the repercussions of a deteriorating semiconductor industry.
He said that the semiconductor equipment industry seems to be in serious trouble. There could possible be little growth in 2011, and the how is that there will be sufficient pushouts in equipment that revenues are moved to 2011 from 2010.
Dr. Castellano said: “We warned two months ago about pushouts, and today, Veeco stated that they “recently experienced rescheduling of tool shipments from the fourth quarter into the first quarter by several customers in Korea and Taiwan.” In other words, pushouts! We will continue to see this more and more.
“Problem is, will the equipment vendors admit it? ASML vehemently denied any customers’ pushouts last quarter, but with tools selling for $35 million each and customers such as Nanya and Inotera announcing losses, there is no way in creation pushouts won’t happen.
“Then, there is the issue of 450mm wafers. The only ones pushing it are the semicons, because they recognized that they could generate twice the number of chips for almost the same capital equipment cost. The equipment industry was dramatically impacted by the 300mm transition, and growth was nearly flat from 2001 to 2009. Not so for the semicons.
“No equipment supplier wants 450mm, it is being pushed by Sematech and Intel, plus a consortium in Europe that feels that perhaps 450mm will knock off competitors and they can make up the vacuum in sales. Only the top 15 equipment suppliers will survive.”
How will pushouts benefit the industry?
On the subject of industry pushouts being highlighted time and again, it is also necessary to see whether and how will these benefit the industry in the long run.
Besides the reasons mentioned above, semiconductor sales are intimately tied to the economy. There is a direct correlation between semiconductor sales and GDP, as well as the PLIs of The Information Network. If the economy is robust, more money is available to purchase electronic items containing semiconductors. The reverse is true, indicative of the present economic climate.
The Information Network has also indicated that firms will announce lower results, and it’d get worse in the following quarter. Why will this happen and which firms could be likely ‘hurt’?
Dr. Castellano said: “This will happen because the crest in the tidal wave was only reached in the past month or so, and it is a long and slippery slope down because it went so high up to begin with.
“The DRAM manufacturers will be hit the hardest. Growth was strongest for them for the first half of the year, where sales grew 135 percent in Q2 2010 compared to Q2 2009.”
Is there a way out? If yes, when?
Finally, when will there be some recovery in the semiconductor equipment sales and why? Surely, as with everything, there has to be a way out!
Dr. Castellano concluded: “We see minimal growth in 2011, again depending on macroeconomic factors. We see two years of downturn in the industry – 2012 and 2013.”