Semicon to grow 10pc during 2008: Future Horizons
Hold on to your horses, folks. The year 2008 may not be so bad after all for the global semiconductor industry, according to Malcolm Penn, CEO, Future Horizons.
While presenting the mid-term semiconductor industry outlook in London this week, he said that the overall semiconductor outlook for 2008 was somewhere between 7-10 perfect. This includes 5-8 percent unit growth plus 2 percent ASP growth.
Will unit sales will hold up then? This is one of the great unknown answers! Unit visibility is bad, very bad, he adds. The inventory excesses/adjustments can always catch you out, but the underlying 10 percent pa annual unit growth will continue.
When put together with increasing ASPs, will it start to deliver strong overall chip market growth? Penn assumes that this may happen either second half of this year at best, or second half of next year at worst.
How has the memory market been doing among all of this? Well, it has really been lousy, and it is this that is holding back the overall market numbers!
There have been concerns over the lack of investment in the overall semiconductor manufacturing capacity. This trend will likely continue. Penn says: “Yes, this was the whole theme for the capacity section. It’s been going on for a year and will continue that way for most of this year. That earliest correction will come in Q4-08, i.e., capacity in Q4-09.”
In the midst of all of this, it seems that the Asian giants such as China and India, as well as the other emerging markets have been compensating adequately for the recessionary tendencies elsewhere.
Finally, are the Intels, Samsungs and the foundries of this world spending the required billions of dollars to bring on production at the leading-edge? Penn says: “Intel yes, but Samsung is slowing, but the foundries, no! The reason? To put up their prices; the industry is fed up with four successive years of decreasing revenues per wafer start, despite all of the billions spent on new investment.”
So what’s Future Horizon’s overall outlook for 2008? One, no change to IFS2008-09 analysis. If anything, the fundamentals are stronger! Also, the global economic outlook has strengthened. However, fab capacity expansion rate has slowed. The inventory is as controlled as it gets. PC and mobile phone markets remain robust.
However, there is weakening consumer demand in the US and the UK/Eurozone. The memory markets are continuing to be plagued with price wars. As a result, the YoY maths has been slightly impacted (down). The balance still leans to the upside, depending on the ASPs.
Danger signs to watch?
Multiple, he says! Capacity: It’s hard to see how this can spoil 2008-09, provided unit growth holds up (need to watch capex). Next, demand — the current IC unit demand is sustainable provided the economy holds up (need to watch inventory). On the economy itself, the current outlook continues good, but risks still on the downside (if it does tank, run for the life boats).
And finally, ASPs, which are always the industry’s first line of defence (ASPs can still derail Q3/Q4, but they are improving, memories aside).
Chip industry in perspective
Technology marches on, new markets open, old ones expand, enhancing our lives. The fall out at the macro level affects the entire world economy. Next, the electronic market was traditionally Japan, North America and Western Europe. It now encompasses the whole Asian Rim, China, Eastern Europe and India. There has been a middle class market growth from 500 million to 3 billion people.
Large chip markets have become larger, niches have become commodities, and new niches have arisen. Far from maturing, the industry is still in its volatile high growth phase, says Penn, with at least a further 20 years of strong growth in prospect.
Third digital wave leaders will be different from today. The shakeout has started. The underlying growth drivers for chips continues good. The market’s not maturing nor slowing, and neither have the industry dynamics / psyche (globally competitive / intensely competitive).
As Penn says, he who dares may not necessarily win, but the feint-hearted will definitely lose! Aptly sums up the state of the global semiconductor industry.