2009 will not be 2001 repeat for global chip industry

November 24, 2008

The fact that the ongoing economic gloom has brought some doom for the global chip market is well known. H1-2008 held up well, better than most had predicted. However, now, the economic gloom in the global financial system has managed to nick the US, and Europe, and lately, Japan, into recessionary conditions, taking the global chip industry along with it!

Some fear that the recession will be as bad as 2001 and that 2009 could re-enact 2001! However, Future Horizons’ Malcolm Penn differs, and I’d agree with him. In 2001, there was this huge dotcom collapse, coupled with the unfortunate happenings of 9/11, and a ‘massive inventory burn just as a huge amount of excess capacity was coming on stream.’

What’s the situation now? There’s no serious overcapacity, and the pre-slowdown utilization rate were in the 90 percent region. Capex was already in retrenchment, well before the slowdown. Nor are there any serious excess inventory in the supply chain.

So, that only leaves the problem of the global financial gloom. Lot of money is being thrown about at the problem, hoping that it would pull the world out of the mess it currently finds itself in.

But, can the industry afford to NOT innovate? This is the time to innovate and find new ways to come out of the hole it finds itself in. The industry must also reconcile to single-digit growths mostly, from now on, I guess.

There has been no new ‘killer device of mass use’ like the mobile phone. Simply, no one has been able to come up with any new device of such mass appeal! The mobile phone, as we knew it, was only meant for voice. Now, it ports a camera, an MP3 player, Internet browsing, email, etc. It gave birth to PDAs, and probably, now, mobile Internet devices (MIDs).

It amuses me a lot when I find companies talking about providing full Internet experience on the mobile phone. It amuses me even further when I find a lot of people and companies talking about how they expect people to be on the Internet all the time! Surely, there are other things to do in one’s life than simply staying hooked to the Internet! Or maybe, they have a crystal ball to gaze in, all the time!

The industry needs to be careful about all the predictions and technologies. Not all will succeed. What they should try their hand at is at being innovative! Or, has innovation completely gone out of the window?

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