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Thrive or survive…going for gold in post-recession recovery: Malcolm Penn @ IEF2010, Dresden

Malcom Penn, chairman and CEO, Future Horizons.

Malcom Penn, chairman and CEO, Future Horizons.

According to Malcom Penn, chairman and CEO, Future Horizons, 2010 — a barnstroming year — will likely see the global semiconductor industry grow by 31+ percent. He was delivering the company’s forecast at the ongoing 19th International Electronics Forum (IEF) 2010 in Dresden, Germany, which ends here tomorrow. He said it would take a disaster of the scale of Lehmann Brothers to derail this now!

Some of the other forecasts made by Malcolm Penn include:
* 2011: +28 percent; based on: peak of the structural cyclical boom (could stretch into 2012).
* 2012: +18 percent; based on: normal cyclical trash cycle starting 2H-2012 (1H-2013?).
* 2013: +3 percent based on: market correction in full flow (could be negative, cap ex overspend and inventory build depending).
* 2014: +12 percent; based on: start of the next cyclical recovery (single digit, if 2013 is negative).

Given the now unavoidable 2010-11 fab shortage, the growth upside for 2010-12 is huge!

The forecast track record of Future Horizons is quite interesting. As per forecasts made during the IFS2010 in Jan.2010, the chip fundamentals was said to be in very good shape. The industry was starting its recovery with shortages. Also, the ASPs had already stopped faling. The inventory levels were at an all-tme low. Finally, the capacity was tight, and spending, weak!

All of this added up to two years of very strong growth in prospect. Penn had said: “It doesn’t get much better than this. But, despite what the numbers say, still no-one believes beyond the next quarter!  “Ah but” is still driving the industry consensus!

Industry fundamentals don’t lie — believe in them or die! The capacity famine was instigated two+ years ago — well before the crasj, today’s shortage was inevitable. The recovery dynamics will continue to strengthen. Future Horizons’ forecast is now +31 percent ~$300 billion. The next trash dynamic has still not yet triggered. It is unlikely to happen before 2011, meaning, 2012 impact. However, the economic uncertainty remains the biggest risk. Also, the global financial system is fundamentally flawed. Read more…

Global semicon industry on rapid recovery curve: Dr. Wally Rhines

January 11, 2010 Comments off

Dr Walden C. Rhines, chairman and CEO, Mentor Graphics Corp.

Dr Walden C. Rhines, chairman and CEO, Mentor Graphics Corp.

Thanks to Mentor’s Raghu Panicker and Veeresh Shetty, I had the pleasure of an exclusive meeting with Dr. Walden (Wally) Rhines, chairman and CEO, Mentor Graphics, post his technical keynote at the recently held VLSID 2010.

We discussed a range of issues, such as the global semiconductor and EDA industries, as well as the Indian industry.

Global semicon industry
According to Dr. Rhines, the global semiconductor industry is currently on a rapid recovery curve. However, that the semiconductor total available market (TAM) would decline in 2009 due to the weakness of H1-09.

He added that the global semiconductor industry’s growth could even be as much as 22 percent during 2010, as also advised by Malcolm Penn of Future Horizons. This number can definitely change, rather than remain so optimistically high, as the year goes by. (Yes, Malcolm’s an optimist!)

Dr.  Rhines said, “If you look at the major semiconductor companies, most of them will have an opportunity to grow — after the Q4 results are in.”

On the global EDA industry
So how will all of this contribute to the well being of the global EDA industry?

According to Dr. Rhines, the EDA industry has been a little different. Mentor and Synopsys have probably had more growth and stability. “Mentor could be the only company to grow. Bookings in Q3-09 have grown by 15 percent and revenue by 3 percent. We are perhaps the only major EDA company that has grown,” he said. In the long term, EDA tends to trend with semiconductor R&D. Semiconductor R&D was flat in 2008, down in 2009, and will probably grow in 2010. So, EDA will probably lag in 2010.”

Advise for Indian semicon industry
I also requested Dr. Rhines to advise the Indian semiconductor industry.

He said: “The Indian semiconductor industry needs to look at more of systems and IC design, as well as embedded software development. India should also have more product start-ups. What makes India unique is its talent, education, etc. India is now producing its own electronic design architecture and embedded software, and it also has the systems infrastructure. India can greatly advance what it already does so well.”

Commenting on the industry’s weaknesses, he added that the Indian semiconductor industry needs to increase the infrastructure for its local start-ups. That infrastructure would require things such as VCs and especially, a cultural acceptance of failure. Also, if India does not have the intrinsic semiconductor manufacturing capability, then it needs to stay current on the evolving technologies.

Does India need a fab?
On being asked this question, Dr. Rhines’ reply was immediate: “I don’t think India ever needed a fab! You can easily have closer relationships with other fabs. The highest paying jobs are design and innovation, etc.. The recession has been driving down costs and innovation has been happening. There are big growing markets — in India and Asia.”

MEMS likely to see strong recovery in 2010!

November 27, 2009 1 comment

Recently,Jérémie Bouchaud – Director and Principal Analyst, MEMS, iSuppli, ran a program on High-margin MEMS: Medical, Industrial and Aerospace.

According to Bouchaud, the MEMS market is not immune to the downturn and is down 8 percent in 2009. The bottom was hit in Q1-09. However, the MEMS segment is likely to see strong recovery and regain double digit growth in 2010.

The high end markets enjoy similar growth as consumer and mobile MEMS markets. It has grown at 16 percent CAGR from 2008-2013. There are opportunities for small companies and foundries. Volume manufacturers have also come to high end markets.

Overview for high-margin MEMS
Providing a market and suppliers overview for high margin MEMS from 2008-13, he said: “We don’t believe MEMS market is immune to the current market conditions. It went down 5 percent in 2008 and 8 percent in 2009. The last quarter of 2008 was very bad.

Not only automotive applications are suffering, the entire industry is suffering. Only a few segments in consumer electronics and cell phones, etc., are doing better. However, going 2010 onward, MEMS industry will see +11.5 percent growth from 2009-2013.

Coming to MEMS market by applications, mobile and CE are driving growth. They are not going down in 2009, but slightly growing by 4-5 percent. Most of the other applications are going down, however. Areas such as military and civil aerospavce, medical electronics, industry and process control, are interesting.

High margin MEMS is growing as fast as CE and mobile MEMS — 16 percent CAGR from 2008-2013. Industry and process control will be biggest part of the market by 2013. Also, medical electronics and military and civil aerospace should do well, added Bouchaud.

This market should be more stable than what it is presently. MEMS wafer probe cards, e.g., is extremely dependent on the memory market, which has been going up and down. Demand for memory has been bad in 2008 and 2009.

He also presented a brief overview of the top suppliers for high margin MEMS — such as Formfactor, Honeywell, GE Sensing, FLIR Systems, Epson, DRS, JDSU, BAE Systems, MEAS and Panasonic.

Formfactor is the leading manufacturer, especially in wafer probes. Honeywell is a significant player, strong in accelerometers, gyroscopes for aerospace and defense applications. GE Sensing is a leader for pressure sensors for medical applications. FLIR Systems is a leader in microbolometers for industrial and defence application. Epson is a leader for professional inkjet applications. Panasonic is a key player in pressure sensors, accelerometers, etc. JDSU is a purely fabless optical MEMS company. MEAS has a number of products — accelerometers, vibration sensors, flow sensors, etc.

Bouchaud also discussed the leading MEMS foundries for higher MEMS, where iSuppli calculated the revenue for high margin MEMS products only. These include companies such as Microalyne, Silex, IMT, Tronics, GE Sensing, Coilbrys, Menscap, Dalsa, Honeywell, Semefab, Microfab Bremen, X-Fab, MEAS and APM.


This is a very diverse picture, he said. “We have pure play foundries — purely focused on high end MEMS markets, such as Micralyne, IMT, Tronics.” Another group is covering both high end and volume markets such as consumer and automotive — like Silex, Dalsa, APM, etc. Then, there are those with mixed models, which are IDMs, such as GE Sensing, Colibrys, Memscap, Honeywell, etc.

Read more…

Strong semicon industry recovery likely in 2010!

November 7, 2009 Comments off

If all of the industry analysts are to be believed, the semiconductor market recovery has begun! Nearly all of them have been forecasting a recovery in the global semiconductor market as well. Let’s take a look at their predictions.

* According to IC Insights, the top 20 suppliers’ sales show back-to-back 19 percent growth rates! In fact, four of the top 20 — Samsung, Toshiba, Qualcomm, and MediaTek are likely to show sales growth this year!

* As per Databeans, the Americas was the first to post growth for semiconductors from the same quarter a year ago, up 8 percent. Worldwide, Q3 came in down 10 percent from 2008, but up 20 percent sequentially. This puts the market on target with our current prediction of $217 billion, a contraction of 13 percent from 2008. Databeans is also still predicting that the 2010 revenue will be up 17 percent from this year.

* The Semiconductor Industry Association (SIA) is projecting worldwide sales of $219.7 billion for 2009, a decline of 11.6 percent from the $248.6 billion reported in 2008. Forecast projects that sales will grow by 10.2 percent to $242.1 billion in 2010 and by 8.4 percent to $262.3 billion in 2011. Worldwide sales of semiconductors in the quarter ended September 30 were $61.9 billion, an increase of 19.7 percent from the prior quarter when sales were $51.7 billion, it reported.

* According to DRAMeXchange, 3Q09 DRAM revenue increased 40.7 percent to $5,719 million. Samsung, Hynix, Elpida, Micron and Nanya (of Taiwan) make up the top 5 positions.

* Worldwide silicon wafer area shipments increased significantly during the third quarter 2009 when compared to the second quarter 2009 area shipments according to the SEMI Silicon Manufacturers Group (SMG) in its quarterly analysis of the silicon wafer industry. Total silicon wafer area shipments were 1,972 million square inches during the most recent quarter, a 17 percent increase from the 1,686 million square inches shipped during the previous quarter. The new quarterly total area shipments are 13 percent below third quarter 2008 shipments.

* Malcolm Penn, chairman and CEO of Future Horizons says that Q3-09 chip growth has set the stage for 22 percent surge In 2010 vs. 2009! The market rebound started at the end of Q1, with Q2 coming in at 17 percent sequential growth. With Q3 now up a further 20 percent and Q4 market guidance in the 5 percent to 7 percent range, the 2009 market is set to close out at between $220-225 billion.

* Although global semiconductor revenue is set to decline in 2009 for the second consecutive year, quarterly year-over-year growth is expected to finally return to the market in the fourth quarter, signaling the start of the industry recovery, according to iSuppli Corp. As iSuppli previously announced, global semiconductor revenue is set to contract by 16.5 percent in 2009.

* A note of caution from The Information Network, which said that semiconductor equipment billings were at 1994 levels as semis continue to underspend! Much of the problem in its opinion is the transition from 200mm to 300mm diameter wafers. Also, semiconductor companies, let by International Sematech, are pushing for a transition to 450mm wafers, which in our opinion will be the death knell for a large number of equipment manufacturers. It is critical that semiconductor equipment manufacturers boycott 450mm development. The Information Network also indicated that the “salad days” are over for the equipment industry.

* Late September 2009, the EDA Consortium (EDAC) Market Statistics Service (MSS) announced that the EDA industry revenue for Q2 2009 is $1,125.5 million, a 5.6 percent sequential decline from Q1. Since Q3 results are awaited, and as Walden Rhines, EDAC chair and chairman and CEO of Mentor Graphics, said, “As the electronics industry recovers, and its R&D spending increases to come in line with its growing revenue, the EDA industry would be expected to recover as well.”

* According to iSuppli, foundries played the semiconductor survivor in 2010. It reported that although the global semiconductor foundry market is set to make a welcome return to growth in 2010 after a terrible 2009, the recent downturn is likely to thin the ranks of the top-tier pure-play suppliers down to just three major players in the future,

There you have it! All of the semiconductor pundits are pointing toward a recovery in 2010!

However, there are some questions that remain unanswered, for now.  iSuppli also reported that there has been no double booking in this semiconductor recovery in late 2009 at least. Will this scenario remain? For how long? Or, will those same old mistakes be made once the industry is back to being healthy?

Will there be renewed interest in the move toward 450mm fabs? What happens to all those companies making equipment for 300mm fabs, should that happen?

Will the companies re-write their business plans, as advised by Future Horizons’ Malcolm Penn?

In all of these good tidings, there is some discomfort hidden deep down!

Oh, one last point! What happens to all of those folks who got laid off during the longest recession of our times? Will they be re-instated?

Semicon update Oct. ’09: Will the perfect calm drive 2009-10 recovery?

November 2, 2009 1 comment

Here are the excerpts from the Global Semiconductor Monthly Report, October 2009, provided by Malcolm Penn, chairman, founder and CEO of Future Horizons. There are a lot of charts associated with this report. Those interested to know more about this report should contact Future Horizons.

August IC sales were up 1.7 percent on July, driven by a 2.2 percent increase in ASPs and a 0.5 percent fall in units. Whilst this is nothing to write home about when taken in isolation, both the ASP and unit trends were in line with normal ‘month two of the quarter’ expectations, they did show that the market recovery is not running out of steam as the Q1 inventory correction starts to peter out.

Real demand is thus starting to pick up the baton, just as we forecast in our January IFS2009 forecast seminar. More importantly, it is paving the way for a blockbuster Q3. Already firms are starting to show results well above our 12 percent sequential growth forecast. The future is bright; and it is getting brighter by the minute!

With the third quarter results season now well under way, companies are starting to show stellar results, see sampling below:

* Intel’s Q3 sales top expectations.
* Hynix returns to profitability.
* Broadcom shows second consecutive quarter of greater than 20 percent growth.
* TSMC posts best revenue, profit since Q308.
* Foundries top Q3 forecasts on improved utilisation.
* NXP improves sales, net profit in Q3.
* Chips drive profit at Toshiba.
* Semiconductor sales drive record Samsung profits

Intel set the ball rolling with a 12 percent third quarter growth – right on our forecast number – sizeably up on its earlier guidance and second quarter estimate, which in essence means a 12 percent overall market growth is the minimum.

In Europe, ST announced sequential growth of 15 percent, whilst NXP posted a whopping 20 percent Q3 gain. If even NXP can show this kind of quarterly performance, despite its current selling off the family silver strategy, it just goes to show how strong the third quarter will be.

It also throws into serious doubt NXP’s ‘recovery’ strategy. History has proved time and time again you never save a crippled firm by selling off the assets (especially quality ones) or downsizing the organisation. Selling off the assets seriously damages future growth prospects and downsizing an organisation (other than laying off staff) simply cannot be done.

You always end up with the same bloated infrastructure but with a lower sales base to support it; overheads skyrocket and the stagnation just gets worse.

The only way to turn a company around is by steely determination, vision, strategy and above all growth. This, of course, takes time and patience because it does not produce instant overnight results, something the bean counters and financial community have never managed to grasp.

Yet, given their product range and outstanding R&D capability, a few more ‘20 percent growth quarters’ would soon fix NXP’s problems.

To mis-quote Winston Churchill, we have always been bewildered how “so little (sales) has been achieved by so many (products)”. Growing NXP out of its problems should have been a no-brainer; it is a sales not operations problem that they have.

Ignoring the structurally (and typically) wild individual monthly fluctuations – which simply means no single month’s data is a good indicator of the underlying trends – August’s results places us squarely into our -14 percent 2009 growth estimate range.

Having said that, even this revised estimate is now looking too pessimistic given future monthly 12:12 numbers will be measured against a dynamic, whereby the 2009 numbers are trending up whereas the 2008 numbers were trending down, amplifying the impact of the 2009 positive monthly trends.

We now believe that November will be the month when the 12:12 growth rate breaks back into clear positive territory.

Malcolm Penn further says: “We also believe we will be upping our Q4 and total 2009 forecast in next month’s Report, based on the better than forecast third quarter results. If September’s sales continue to track July and August’s performance, Q3 will grow in the 18 percent region, increasing the likelihood of Q4 to grow 5 to 6 percent rather than our current 3 percent assumption.

“That would put 2009’s market at $220 billion, down just 10 percent versus our current -14 percent forecast. Even a modest quarterly growth patter on this yields a minimum 20 percent growth for 2010, to around US$ 275 billion — sizeably more than its 2007 peak.

“Just as the perfect storm killed 2001, the perfect calm will drive the 2009-10 recovery. Time to re-write the 2010 business plans now.”

I have some more questions that Malcolm has agreed to answer. Stay tuned folks!

Top 5 high growth markets driving (semicon?) recovery, and top 10 hot and emerging technology platforms

October 14, 2009 11 comments

Today, I received two wonderful reports — one, highlighting the top 5 high growth markets driving (semiconductor) recovery, and two, the top 10 hot and emerging technology platforms well poised to profoundly impact manifold sectors across the globe while offering potential high RoI for investors!

First, semiconductors! Semico Research has come up with a report that highlights the top 5 high growth segments driving growth and recovery in the semiconductor segment. For the record, 2009 is likely to see the global semiconductor industry decline by 12.5 percent. The top 5 segments according to Semico Research are:

* Netbooks

* Portable navigation devices (PNDs)

* Digital TVs

* DVD recorders

* Video game consoles

Hey, there really seems to be a lot of light at the end of the tunnel for the consumer electronics industry!

On netbooks, I think Intel needs to be given most, if not, all of the credit. Here’s what iSuppli has to say in its fast facts for Intel’s Q3 results:

* Intel also capitalized on the continued rise in demand for netbook PCs. The company dominates the netbook microprocessor market with its Atom chip. iSuppli predicts global netbook shipments will rise to 22.2 million units in 2009, up 68.5 percent from 13.2 million in 2008.

* While Atom represents only a small share of Intel’s total revenue, its profitability is disproportionately high. “Netbook microprocessors are a high-margin product because they utlilize old technology,” said Matthew Wilkins, principal analyst, compute platforms, for iSuppli. “The Atom is based on the old Pentium M microprocessor and uses a mature manufacturing process. Because of this, Intel is getting very high yields and an extremely high margin on the Atom.”

On PNDs, SatNav has recently introduced a Bluetooth enabled multifunction PND. Also, In-Stat reports that the worldwide unit shipments for PNDs will reach approximately 56 million units in 2012.

However, iSuppli has just sent out a story to me, saying that PNDs have now entered a period of slowing growth, spurring companies throughout the supply chain to re-evaluate their business models. Interesting!

As for digital TVs, according to DisplaySearch, developed markets are starting 2009 with strong growth and emerging markets are transitioning from CRT to LCD TVs faster than expected. However, plasma (PDP) TV is expected to fall about 2 percent Y/Y to 14.1 million in 2009 after strong 28 percent growth in 2008. As per iSuppli, OLED-TV revenue will likely rise by a factor of 240 by 2015—but still remain a niche. Let’s see!

DisplaySearch’s total global TV forecast is 200.4 million units in 2009, down 3 percent Y/Y, the first decline in total shipments in recent memory as the global recession and rising unemployment continue to take a toll on demand. However, the slowdown will be temporary as the worldwide economy emerges from recession and new markets enter the initial stages of the flat panel and digital TV transition.

Among DVDs, Samsung has introduced its first internal Blu-ray disc combo drive with BD-R and 8X BD-ROM read speed. Also, Flex-DVD is the latest technology in the DVD replication industry. This single layer format has the same capacity of a DVD-5 (4.7GB for standard size and 1.1GB for 3″ Mini DVD), but is half the thickness of the standard DVD.

Video game consoles — I find it quite interesting! It has been reported that the only products to see a decline in unit shipments in the second quarter were handheld video games, video game consoles, etc. Watch this market segment!

Now, to the top 10 hot and emerging technologies! According to a report from Frost & Sullivan, these are:

* Nanomaterials

* Flexible electronics

* Advanced batteries and energy storage

* Smart materials

* Green IT

* CIGS solar

* 3D integration

* Autonomous systems

* White biotech

* Lasers

Flex-DVD, above, is a great example of flexible electronics. Green IT — although a much abused term, it has certainly been on the top of the charts for quite some time now. Battery technologies and energy storage — yes, certainly. There are rightful places for CIGS solar — a point also made by Dr. Robert Castellano of The Information Network — and smart materials, as well as lasers and white biotech.

Well, what do you think folks? Do you agree with these top 5 and top 10 lists?

Global semicon mid-year review: Not a blip, but recovery won’t be smooth, says iSuppli

July 20, 2009 Comments off

According to a release from iSuppli today, following four consecutive quarters of reductions, global inventories of chips have declined to appropriate levels, clearing the way for stockpile rebuilding and higher sales in the second half of the year.

However, this particular blog post looks at a previous study from iSuppli where it trimmed the 2009 chip and electronics forecasts, but sees second-half rebound.

Thanks to my good friends, Jon Cassell and Debra Jaramilla, I was able to connect with Dale Ford, senior vice president, market intelligence services, for iSuppli, for a discussion on this particular study.

Given the lingering economic woes and continuing poor visibility into future demand trends, iSuppli, as mentioned, reduced its forecasts for global semiconductor and electronic equipment revenue in 2009.

Worldwide electronic equipment revenue is set to decline to $1.38 trillion in 2009, down 9.8 percent from $1.53 trillion in 2008. iSuppli’s previous forecast in April predicted a 7.6 percent decline in revenue. Global semiconductor revenue is set to fall to $198.9 billion in 2009, down 23 percent from $258.5 billion in 2008. iSuppli’s April forecast called for a 21.5 percent decline.

I quizzed Ford on how iSuppli sees the global semicon market performing over the rest of the year. He said: “We do expect sequential improvement in the second half of 2009 compared to the first half of 2009. However, the market will remain significantly below the market level of the same period in 2008.”

It is also apt to determine the behaviour of the electronic equipment segment in the same period. iSuppli expects a similar pattern in the electronics segment based on the current economic outlook and guidance from key OEMs.

According to iSuppli’s study, while all of the electronics segments are likely to suffer contractions in 2009, the automotive sector was a major culprit behind the downgrade. So, is it fair to only blame the automotive sector for the downgrade?

No, said Ford. “It should be noted that the downgrade is very minor and reflects a more broad-based impact of the economy on the electronics market.”

I mentioned about a new study from iSuppli, which talks about global chip inventories declining to appropriate levels, clearing the way for stockpile rebuilding and higher sales during H2-2009.

Prior to the release of this study, I had asked Dale Ford and iSuppli whether we would see companies revising their forecasts.

According to Ford, companies are already revising their forecasts and this has been noted in some of the earnings announcements this week. However, there is still great uncertainty in the economy and this presents the likelihood that company and industry expectations will continue to fluctuate.

As for iSuppli’s growth prediction for H2-09, its current published second half outlook calls for H2-09 to grow by over 17 percent compared to H1-09. iSuppli also is sticking to the 13.1 percent growth for the semiconductor industry in 2010.

As for the factors now leading to conditions looking up in H2, Ford said that the global economy is the dominant factor driving industry growth. All other factors are secondary in comparison.

It would also be interesting to see how the Japanese semiconductor industry is likely to hold out in H2. Ford added: “Japanese semiconductor suppliers have experienced a very difficult H1. However, with improving consumer sentiment, they have the opportunity for an improved H2.”

There is also a clear indication of the starting of the correction phase to rebalance over-depleted inventories. Ford said that a number of companies have noted that their Q2 sales are influenced both by rebalancing inventories and expectations of H2-09 demand.

If firms still continue in a wait-and-see mode, won’t this serve to make the market dynamics worse as firms are then faced with a massive catch-up problem? What should they do?

Ford advised: “There is the potential for companies to miss opportunities in the market if they are too passive. Companies need to aggressively communicate with their partners and clients to obtain the best visibility possible in planning their tactics and strategies for meeting market demand.”

Recovery or blip?
Finally, is this really the start of the chip market recovery or a blip on the statistics radar screen?

He said: “While we do not consider this to be a ‘blip’, we do expect that the ‘recovery’ will not be smooth. Ongoing uncertainty and volatility in the economy will impact the progress of the market moving forward.”

Semicon recovery in sight? Hope both Intel and AMD are ready — for today, and tomorrow!

June 11, 2009 Comments off

Where were we? Yes, the famous Intel and AMD server battle, and Computex!

Is server battle the only ground Intel and AMD are and should be looking at? Perhaps, not! Has AMD won the server battle? Perhaps, yes, in this particular round, for now, as statistics may suggest. However, statistics also have a bad habit of hiding certain vital statistics — like conditions, etc.

A couple of days ago, iSuppli reported that Intel had lost some share in the global microprocessor segment in Q1-2009. AMD, in fact, had managed a comeback.

As per iSuppli, Intel suffered a 2.5 point drop in share. Its global revenue dropped to 79.1 percent, down from 81.6 percent in Q4-2008. During the same period, AMD moved up from 10.5 percent to 12.8 percent — an increase of 2.3 points.

AMD’s turnaround has been attributed to its strong performances in each area of its microprocessor portfolio, particularly, notebooks. This is impressive, given the downturn and the weakness in the PC and server markets. So, is AMD a winner in the servers market? Not so soon!

The gap between Intel and AMD is still quite significant. We’ve had the EC ruling, we’ve had the various server platform launches, and we are done with Computex.

Recovery in the offing?
There have been indications from other quarters that the global semiconductor equipment market is likely to begin recovery by October 2009. Also, latest data from SEMI suggests an increase in investments for fab construction projects and fab equipping in H2-2009, with the trend continuing into 2010.

Further, iSuppli has also reported that after three quarters of contraction, the pure-play foundry semiconductor manufacturing industry will probably enjoy robust growth during the second quarter.

Given all of these interesting statistics and developments within the global semiconductor industry, a likely recovery for the industry could well be in the offing!

So, if AMD and Intel are done with their server wars, the real game is likely to begin shortly! Maybe, it is time for both to get over the “today and tomorrow affair,” and focus on the future. I hope both are adequately prepared for today, and tomorrow!

Reports of memory market recovery greatly exaggerated: iSuppli

April 24, 2009 Comments off

EL SEGUNDO, USA: Concerned about their image as they face the specter of bankruptcy, many memory chip suppliers are attempting to paint a more optimistic picture of the business by talking up a potential market recovery.

However, while overall memory chip prices are expected to stabilize during the remaining quarters of 2009, iSuppli Corp. believes a true recovery in demand and profitability is not imminent.

After a 14.3 percent sequential decline in global revenue in the first quarter DRAM and NAND flash, the market for these products will grow throughout the rest of the year. Combined DRAM and NAND revenue will rise by 3.6 percent in the second quarter, and surge by 21.9 percent and 17.5 percent in the third and fourth quarters respectively.

“While this growth may spur some optimism among memory suppliers, the oversupply situation will continue to be acute,” said Nam Hyung Kim, director and chief analyst for memory ICs and storage at iSuppli.

“For example shipments of DRAM in the equivalent of the 1Gbit density will exceeded demand by an average of 14 percent during the first three quarters of 2009. This will prevent a strong price recovery, which will be required to achieve profitability for most memory suppliers.”

Painful oversupply
Due to a long-lasting glut of DRAM, the imbalance between supply and demand is too great for this market to recover to profitability any time soon.

“Even if all of the Taiwanese DRAM suppliers idled all their fabs, which equates to 25 percent of global DRAM megabit production, the market would remain in a state of oversupply,” Kim said. “This illustrates that the current oversupply is much more severe than many suppliers believe—or hope.”

Besides cutting capacity, which suppliers have already been doing, they presently have few options other than waiting for a fundamental demand recovery. iSuppli believes that another round of production cuts will take place in the second quarter, which will positively impact suppliers’ balance sheets late this year or early in 2010 at the earliest.

DRAM prices now amount to only one-third-level of Taiwanese suppliers’ cash costs. Unless prices increase by more than 200 percent, cash losses will persist for these Taiwanese suppliers.

While average megabit pricing for DRAM will rise during every quarter of 2009, it will not be even remotely enough to allow suppliers to generate profits in this industry. The industry needs a dramatic price recovery of a few hundred percentage points to make any kind of impact.

iSuppli is maintaining its “negative” rating of near-term market conditions for DRAM suppliers.

Confusing picture in NAND
The picture is a little more complicated in the NAND flash memory market.

Pricing for NAND since January has been better than iSuppli had expected. However, iSuppli believes this doesn’t signal a real market recovery.

Most NAND flash makers are continuing to lose money. The leading supplier, Samsung Electronics Co. Ltd., seems to be enjoying the current NAND price rally as prices have almost reached the company’s break-even costs. However, all the other NAND suppliers still are losing money.

“While the NAND market in the past has been able to achieve strong growth and solid pricing solely based on orders from Apple Computer Inc. for its popular iPod and iPhone products, this situation is not likely to recur in the future,” Kim said. “Even if Apple’s order surge, and it books most of Samsung’s capacity, it would require a commensurate increase in demand to other suppliers to generate a fundamental recovery in demand.”

However, iSuppli has not detected any substantial increase in orders from Apple to other suppliers. Furthermore, Apple’s orders, according to press reports, are not sufficient to positively impact the market as a whole.

It doesn’t make sense for major NAND suppliers Toshiba Corp. and Hynix Semiconductor Inc. to further decrease their production if there is a real fundamental market recovery. This means supply will continue to exceed demand and pricing will not rise enough to allow the NAND market as a whole to achieve profitability.

The NAND flash market is in a better situation than DRAM at least. However, the market remains challenging because fundamental demand conditions in the consumer electronics market have not improved due to the global recession.

One of the reasons why the price rally occurred is that inventory levels have been reduced in the channel and re-stocking activity has been progressing. Overall, memory suppliers will begin to announce their earnings shortly and iSuppli will remain cautious about the NAND flash market until we detect solid evidence, not just speculation, of a recovery.

iSuppli is remaining cautious about the near term rating of NAND market, holding its negative view for now, before considering upgrading it to neutral.

“Production cuts undoubtedly will have a positive impact on the market in the future. However, it’s too early for to celebrate. iSuppli believes the surge in optimism is premature. Supplier must be rational and watch the current market conditions carefully to avoid jumping to conclusions too quickly,” Kim concluded.

Semicon recovery likely in H2-09 after sharp recession: Future Horizons

April 24, 2009 Comments off

This is what I’ve received and heard a few minutes ago! If it does happen, as stated, there can’t be any better news than this for the global semiconductor industry!

According to Malcolm Penn, chairman, founder and CEO of Future Horizons, a recovery is expected in the second half of 2009 after a sharp recession!!

Future Horizons is predicting this recovery in the second half of 2009 in the Annual Semiconductor Report that was released today.

“There have so far been ten chip-market recessions and all but two have resulted in negative industry growth,” said Malcolm Penn, Chairman, founder and CEO of Future Horizons. “The year 2009 will mark the industry’s 11th recession; a further period on negative growth is inevitable at an estimated minus 28 percent, similar in magnitude to 2001.”

He added: “This semiconductor recession is unlike previous recessions and is directly attributable to the worldwide financial problems; it is not a structural problem of the industry itself. This factor will help to mitigate the global recession’s impact on the industry. On the other hand, all markets and all regions were impacted quickly and at the same time. This leads us to predict a minus 28 percent negative growth in dollars for the global semiconductor market over 2008.”

Future Horizons believes that the industry is in structurally good shape to enter a recession. This should make the 2009 downturn shorter than it might otherwise have been, depending on when the confidence in the global economy stops falling and that is expected to be during 2010.

Today, businesses prefer the ‘stop everything/do nothing’ approach, resulting in the dramatic fall in Q4 semiconductor demand, but this cannot continue forever. Future Horizons expects a gradual return to ‘business as usual’ — whatever the new ‘usual’ turns out to be — in Q2 2009, once a degree of confidence returns to the markets.

It is impossible to predict when the recovery will start, but it eventually will and, given the extent and abruptness of the Q4-08 decline, an overshoot is inevitable making the recovery process faster coming, possibly as early as the second half of this year.

I will be in conversation with Malcolm Penn later today, hopefully, and will carry another post on this subject, should that happen. Stay tuned, folks! 🙂

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