Friends, here is the full report on iSuppli’s recent activity titled “Mixed Signals in OEM Design Activities”.
Min-Sun Moon, senior analyst, Semiconductor Spend and Design, iSuppli, discussed how the “values” of design activities are discerned globally and how design decisions are made by a given country.
This report should be of particular interest to the Indian semiconductor design industry as it is apparent there is considerable scope for growth and development.
It is very well documented that everyone has been hit hard by the economic downturn. The electronic OEMs are no exception. They have also reduced shipments. The average selling prices (ASPs) of semiconductor devices have dropped dramatically as well.
Top six design influencing countries
As per iSuppli’s Design Activity Tool, the top six countries leading in the design influence are as follow: USA, Japan, China/Hong Kong, Taiwan, South Korea and Germany. The United States retains the no. 1 position, followed by Japan and China.
The dramatic changes in ASPs of chips and products meant an almost about 5 percent drop in semiconductor spend in 2008, and above 21 percent drop in semiconductor spend by the top OEMs in 2009. Hence, design activities by top OEMs dropped significantly.
The USA apparently has been going through a tough period, and it does not seem to have a bright future in 2009-10 due to drop in design spends. However, in 2010, it should post about 9-10 percent growth. The top design influencers in the USA include HP, Dell, Apple and Motorola.
China seizes opportunity
According to Moon, Japan retained the second position. However, China has seized the opportunity during the recession. It has some growth compared to other countries who have had negative growth this year.
China still remains one of the most attractive markets for OEMs to enter. Many top OEM have either opened or expanded R&D centers in China in the last few years.
However, because of the recession, the expansion by OEMs slowed down in China during 2009. Nevertheless, the Chinese market continues to grow. In the next few years, China will grow and the other countries will have some positive growth as well, but their growth will be slower than that of China.
China has also been showing interesting signs. Some Chinese companies are trying to enter new markets, such as automotive.
China is currently the third largest country in terms of design influence. The design share is about 10 percent in 2009. China could get close to Japan and the USA, but it will not happen in the near future though.
Top five countries in 2009
In 2009, the top five countries by design influence spend share are as follows: USA — 31 percent, Japan — 25 percent, China/Hong Kong — 10 percent, Taiwan — 8 percent, South Korea — 7 percent, and the Rest of the World — 19 percent.
Mixed signals are apparent in the design activities by country. For instance, this year, the USA has been losing market share. A large percent of design activities are moving to the Asia Pacific region. Some business in the USA is being continued or reduced — and being moved to other regions — in order to maintain the business and lower the cost of operations.
Japan’s design spend share increased from 22 percent (approximately $40 bn in 2008) to 25 percent in 2009. Japan is bringing a lot of design activities back home.
Taiwan used to be third largest in the design influence, but has now dropped to the fourth position, with share in design spend reaching 8 percent in 2009. China also contributed to the changes here. However, it is still better than others as some OEMs are still outsourcing to some ODMs located in Taiwan.
Identifying targets by regions
iSuppli gave examples of designing with sensors and actuators, and LEDs, as these are very popular currently.
According to Moon, designs using sensors and actuators have been more than 30 percent in the USA, while Japan has more than 25 percent. It is over 20 percent in Europe, while such designs have been less in Asia Pacific — above 15 percent.
The biggest influencers for sensors and actuators in the USA are said to be Apple, HP and TRW Automotive.
For LEDs, more use has been happening in Japan — over 30 percent. As an example, there are more LED TV design activities in Japan. The biggest influencers for LEDs in Japan are Canon and Sony.
Changes due to M&A
Another trend visible in the design spend share has been the changes due to mergers and acquisitions.
As an example, we have the Mitac Group, which acquired Magellan’s consumer products division. In 2008, Mitac Group had 78 percent spend in Taiwan, and 18 percent in the USA. After acquiring Magellan, Taiwan’s design spend share became 57 percent and USA’s became 13 percent. On the other hand, France’s share grew to 17 percent and Russia’s to 7 percent. This indicates that country-wise, budgets do get changed. This is just one example.
These are indeed very interesting numbers and facts, and as mentioned earlier, India has a considerable opportunity as an influencer in the semiconductor design spend going forward.
Recently, SEMI (Semiconductor Equipment and Materials International) released its World Fab Forecast report. This report mentions that projected decline in world semiconductor fab equipment spending of 20 percent is likely for 2008. However, a rebound of over 20 percent in spending is expected in 2009, driven by over 70 fab projects.
The August 2008 edition of this report lists 53 fab equipping projects and up to 21 construction projects for fabs in 2009. It is sincerely hoped that at least one of the fabs likely from the Southeast Asian region is from India!
With the help of Scott Smith Senior Manager, Public Relations, SEMI, I was able to get in touch with Christian Gregor Dieseldorff, Senior Manager of Fab Information and Analysis at SEMI, in an attempt to find out more about the decline in global fab spends, these new fabs, and how these fabs can lead a turnaround in the global semiconductor industry. Thanks Scott!
So what are the chief reasons for the decline in fab spends during 2008? According to Dieseldorff, given the weaker economic conditions globally, coupled with higher energy and commodity prices and the financial crisis, the overall outlook for semiconductor growth in 2008 is for low-single digit growth in both revenues and units. As such, device makers have responded by cutting back their capital spending and pushing out fab projects or putting them on hold.
I was keen to find out the geographic breakup of these 70 new fabs that are likely yo come up in 2009.
Dieseldorff advised that these are not 70 new fabs coming up in 2009. Rather, the numbers reflect 300mm fabs only, and is a mix of on-going and new projects for fabs equipping and fab construction projects in 2009.
For equipping 300mm fabs, SEMI expects about: Americas 8, China 5, Europe and Mideast 4, Japan 7, South Korea 11, SE Asia 3 and Taiwan 15.
For 300mm fab construction projects, SEMI expects about: Americas 3, China 2, Europe and Mideast 1, Japan 2, South Korea 3, SE Asia 2 and Taiwan 8.
What are the salient features of some of these new fabs likely to come up next year (for instance, new tech nodes)? Dieseldorff highlighted that about 90 percent of the investments are for 300mm capacity, and the amount of spending for advanced nodes, such as 65nm, is increasing.
“Also, device makers are building larger fabs, which are termed “mega fabs,” so, to potentially realize a greater return based on scales of economy,” he added.
How will these new fabs contribute to a better performance from the global semicon industry? This will be quite interesting to witness.
Dieseldorff said that over the past several years, demand for semiconductor devices has been quite strong, and so, the industry has had to bring on capacity to support this need, both in terms of needed capacity and technology. Even with the slower market growth in 2008, recent industry data shows healthy levels of fab capacity utilization, especially for the advanced technology generations and for 300mm manufacturing.
He added: “The expectation is that demand for semiconductors will strengthen once global economic conditions improve. So, the capacity addition that is coming online this year and the fab projects that are equipping and beginning construction in 2009 are necessary to meet the future demand.”
So how will all of this affect the overall memory market (e.g., 42pc increase in share for memory)? Dieseldorff shared his thought, a fact, known well to those in the semiconductor industry, that the memory market has been battered by declining average selling prices and a condition termed by some as “profitless prosperity.”
“Looking at demand forecasts specific to memory, tremendous growth is anticipated,” he forecasted.
However, the manufacturers in this device segment are battling it out for market share, and the general expectation is that consolidation will continue.
Also, joint-ventures and partnerships are becoming increasingly critical in the memory sector as manufacturers seek to leverage their existing resources to meet future technology and capacity requirements.
It would be interesting to find out why Taiwan and Korea are forecasted as likely to exceed Japan in fab spend?
According to Dieseldorff, in Korea, Samsung has been and is the key spender, and as a company, it will continue to invest so to have a dominant share in the memory sector.
He said: “In 2009, our expectation is for the DRAM manufacturers in Taiwan to boost spending after cutting back this year. We expect seven new 300 mm fab lines in Taiwan to come into production over the next two years.”
However, spending in Japan has been more measured and is likely to remain so. Toshiba, and its joint-venture partner, Sandisk are the big spenders in Japan, when it comes to new fab capacity. Other Japanese semiconductor manufacturers are more cautious and are focused more on technology spending.
The last few weeks of this month witnessed some interesting developments in DRAM. No, there are not signs of a recovery, yet. Instead, the appearance of new DRAM camps, as well as a new memory interface working group, does generate some interest.
However, first, the stats. DRAMeXchange recently reported that the Q1-08 revenues of the branded DRAM makers, impacted by continual low DRAM prices, fell by roughly 5.8 percent compared to Q4-07. Likewise, the contract prices and the spot prices fell 19 percent and 11 percent respectively.
DRAMeXchange further reported that barring Elpida and Powerchip, all other DRAM makers experienced a decline in revenues. Both Elpida and Powerchip witnessed slight increase in their market share during Q1-08.
Categorizing the DRAM industry market share by countries, Japan only increased by 0.9 percent from 13.5 percent to 14.4 percent, as Elpida’s revenue increased in Q108. Taiwan’s share increased by only 1.1 percent from 13.6 percent to 14.7 percent, as Powerchip gained market share. Korea sustained the same market shares — 47.2 percent, as in Q4-07.
However, America and Germany lost share. America’s share slipped from 13.6 percent to 13 percent, while Germany’s share fell from 12.2 percent to 10.8 percent, respectively.
In a recent investor conference, Samsung announced it will increase its Bit Growth Rate from 70 percent to 100 percent, an indication of its desire to continue reigning as a DRAM market leader.
Now, to the really interesting developments. First, Nanya and Micron signed an agreement to create MeiYa Technology Corp., a new DRAM joint venture. One of Nanya’s 200mm facility in Taiwan will be upgraded to 300mm starting this year, with the facility going online for production in 2009. Besides MeiYa, Nanya and Micron will co-develop and share future technology.
If this wasn’t enough, close on the heels of the Micron-Nanya JV, Elpida Memory and Qimonda AG, signed a Memorandum of Understanding (MoU) for a technology partnership for jointly developing memory chips (DRAMs), and accelerate their roadmap to DRAM products featuring cell sizes of 4F2.
Analysts at DRAMeXchange believe that the Qimonda-Elpida alliance re-shuffles the DRAM competitive landscape. It is also a sign of Qimonda’s determination to develop stacked process.
Lastly, ARM, Hynix Semiconductor Inc., LG Electronics, Samsung Electronics, Silicon Image Inc., Sony Ericsson Mobile Communications AB, and STMicroelectronics announced the formation of a working group, the Serial Port Memory Technology (SPMT), which is committed to creating an open standard for next-generation memory interface technology targeting mobile devices.
SPMT, a first-of-its-kind memory standard for DRAM, is said to enable an extended battery life, bandwidth flexibility, significantly reduced pin count, lower power demand and multiple ports by using a serial interface instead of a parallel interface commonly used in today’s memory devices.
Handset vendors have joined the fray as this technology will not only extend battery life, it will allow high-performance media-rich applications as well, that are likely to be the norm on next-generation mobile phones.
Surely, these developments and the emergence of new camps promise some exciting times ahead in the memory market.