iSuppli’s recently published a report on the current NAND market conditions, which highlighted that Micron had managed to buck the weak NAND market conditions, and was actually closing the gap with Hynix in Q2 2008.
To find out more about the global NAND Flash market scenario, I managed to discuss the health of the NAND market conditions, performance of certain companies, and the possible impact of SSDs on the NAND market, in depth with Nam Hyung Kim, Director & Chief Analyst, Memory, for the market research firm, iSuppli Corp., El Segundo, Calif., USA.
I would also like to thank Jonathan Cassell, Editorial Director and Manager, Public Relations, iSuppli, for helping me out a lot! Without his assistance, this would not have been possible! Many thanks.
Now on to iSuppli and the NAND update. First up, NAND continues to be weak. How much longer, before we can see some sort of recovery?
Nam Hyung Kim says that the NAND market conditions will depend on the suppliers’ manufacturing capacity plans and on the global economy. The health of the NAND flash market is largely determined by consumer spending, since more than 85 percent of demand for the memory is generated by consumer-electronics-type products like digital still cameras, mobile handsets and flash storage devices.
“Market conditions won’t improve much this quarter. However, iSuppli Corp. does expect NAND prices to stabilize to some degree during the fourth quarter due to a slowdown in certain suppliers’ capacity expansion plans. A major recovery is expected in the second half of 2009,” he says.
So, what’s the reason for Micron to have done better in a weak market scenario?
According to Kim, Micron is doing well based on market share and sales growth—but not in terms of profitability. Micron has been expanding its market share by ramping up production aggressively. The company joined the flash market later than its competitors and is trying to catch up. In the memory world, a supplier needs to have critical scale. Without scale, the company won’t be competitive. Thus, Micron is increasing its scale—i.e., its volume—to be more like the size of the top-three suppliers at this moment.
If Micron has been aggressive, why haven’t the others? Possibly, the others could have also planned or migrate to 34nm! However, except for Samsung, all of the suppliers are losing money in their NAND businesses now.
“Each supplier has a different product mix and strategy, so being aggressive during tough times is not a suitable approach for certain firms. Others also plan to migrate their process to sub 40 nanometers. However, Micron will be the first one that produces 34nm products this year,” adds Kim.
iSuppli has now cut its 2008 NAND annual flash revenue growth forecast from 9 percent to virtually zero. When the slowdown had already been predicted during the end of last year, what was the need to cut predictions?
Kim agrees that this is indeed the second cut this year. “We cut our forecast early this year to 9 percent, which was a dramatic reduction from the more than 20 percent growth forecast previously. I believe, we were the first research firm that cut the market growth dramatically this year, followed by other research firms.
“The NAND flash market is relatively new and has lots of growth potential. However, oversupply issues, along with weak consumer spending, prompted us to cut the growth outlook further this time.”
Coming to the subject of solid-state drives, what are the chances of SSDs in helping with a turnaround in the NAND market? Or, are they (SSDs) hyped?
“I should not say SSDs (solid-state drives) are overhyped,” adds Kim. “There are lots of issues that the industry must overcome when bringing SSD technology to the real world. Hard disk drives (HDDs) have been used in PCs for more than 30 years, so the movement to SSD technology won’t be very rapid.”
iSuppli had predicted that SSDs would not impact the market this year or next year. The real prime time for SSD adoption will be in 2010. There are many optimization problems associated with SSDs, which is typical at an early stage in the technology industry. By 2011, iSuppli believes SSDs will be the number one NAND flash market driver in terms of dollar value.
iSuppli also believes that the global NAND flash per-megabit average selling price (ASP) will decline by about 60 percent in 2008, compared to its previous forecast of a 56 percent decline. On quizzing, he says, “As mentioned, the NAND flash market, even in third-quarter, holiday season, won’t have a turn around, which brings the ASP down to the 60 percent level.”
When NAND is taken out of the equation, how does the semiconductor industry look like? iSuppli believes that the 2009 global semiconductor market growth will be higher than that of this year. The semiconductor market is also cyclical, so it will be impacted by global GDP growth this year.
Finally, how does the research firm forsee Nymonyx (there was an article saying it will conquer NAND Flash)?
According to Kim, Numonyx is still a major NOR flash supplier with limited NAND flash market share. Unlike Intel, Numonyx’s focus is on mobile applications. Its joint-venture partner, Hynix, is scaling down its NAND flash production at this time and is focusing on DRAM production.
iSuppli doesn’t expect Numonyx to be a formidable competitor in the NAND flash memory market during the near term.
There is an interesting piece of news on Digitimes, Taiwan, which says that Samsung has recently told its downstream customers that it will start reducing supply of NAND flash chips from July as Apple, Samsung’s key customer, has placed a large batch of orders.
Will this move do anything to the NAND flash market? In the earlier blog, I had highlighted what Future Horizon’s Malcolm Penn had mentioned — that the impact of the Apple iPhone has been minimal so far on the chip market. “It’s just one item in a very large and complex mix of products. The overall iPhone volume is miniscule,” he says. I would probably go with that statement.
Even Semico, in its recent report, has said that the NAND market has not experienced the ‘Apple effect’ as has been seen in previous years, so far in 2008, despite the upcoming 3G iPhone (with up to 16GB of storage) and the SSD option for the MacBook Air.
With a majority of the analyst community yet to give the green signal about an industry revival of sorts, everything depends largely on how the new iPhone will do! However, even if it does do well, it just may not be enough!
The consumer confidence is still quite low, and rising oil prices are not really helping. Will these factors have any effect on the consumer electronics segment in the long run? Too early to say though, and do bear in mind that one product or one brand can find it a tough ask to turn around, rather, lead the memory market, and the consumer electronics industry to huge growths.
All of us in the semiconductor/chip industry keep hoping that a strong rebound does happen, and that the industry remains on course of a strong growth in 2008. However, it is not right to pin faith on one product or one brand to lead a revival.
We are probably either to hung up about numbers or about technologies. Especially, whenever a new product or technology comes around, we start banking on that product or technology to revive the industry’s fortunes. Great technologies do not essentially lead to market revivals. We have seen that happen umpteen number of times.
Perhaps, it’d be wiser to let the industry have a ‘free fall’ or ‘free growth’, if you may, for some time, and let corrections happen over time, rather than bank on something or the other to carry the industry’s fortunes forward.
Future Horizons recently released the May WSTS results on the global semiconductor industry, which indicate that the chip market is slowly starting to buzz again. With the ‘hum back among the chips’, it was important for me to quiz Malcolm Penn, chairman and CEO, Future Horizons, in the UK, to find out why this was happening!
Now then, why is the chip market exactly humming? What has actually happened? Well, nothing specific! It is merely an overall step-by-step general improvement in everything, helped along by the normal seasonal improvement in business in the second half of the year!
So many forecasters and firms have their own forecasts. What happens now if some of these forecasts are cut or revised? Will that affect the market overall market? The answer is simple — a forecast is simply just that — a forecast — not fact!
Penn says, “The market will judge whether the other forecasters’ analyses of the market were right, as it wll indeed judge whether we are right too!”
Earlier, I had written about Future Horizons forecasting 12 percent growth in 2008 for the global semiconductor industry. Keep an eye on that one!
Further, have the ASPs stabilized, as those are indeed a dodgy lot? Penn feels, “We believe yes, although, there will still be the normal month-on-month variations and wobbles.”
Now, where does all of this leave the DRAM and NAND markets? According to the forecast, prices have already stopped falling as fast as they were this time last year.
However, they do fall and will fall; this is what they do! The question is: by how much? In other words, is the current fall above or below the long-term trend line? This will be analyzed in the long run as well.
Finally, what’s happening with the semicon equipment capex? Again, it is continuing to fall! “Right now we are in the middle of an underinvestment period, which means a capacity shortfall in 12 month’s time,” notes Penn.
No ‘fab’ times for fab spends
Is the fab spend going to see any change then? Well, unfortunately, no luck there! At least, not yet. Penn adds that fab spend is lower than expected at the beginning of the year.
He says: “The call then was for a 10 percent reduction, and this is now getting to be closer to 20 percent. In fact, Mike Splinter of Applied Materials is quoted as saying that he thinks that fab spend will end up 30 percent down.”
It is good to see that the global semiconductor industry is starting to hum a little bit more than what it was doing last month. Sincerely hope that the rest of the year pans out well!
It is always interesting to write semicon blogs! Lots of people come up to me with their own comments, insights, requests, etc. One such request came from a friend in Taiwan, who’s involved with the semiconductor industry.
I was asked forthrightly what I thought of the top 10 global predictions, which I had blogged/written about some time back late last year.
Top 10 semicon predictions
For those who came in late, here are the 10 global predictions on semiconductors made at that time (late December 2007.
1. Semiconductor firms may have to face a recession year in an election year.
2. DRAM market looks weak in 2008.
3. NAND market will remain hot.
4. Power will remain a major issue.
5. EDA has to catch up.
6. Need to solve embedded (software crisis?) dilemma.
7. Consolidation in the fab space.
8. Capital equipment guys will continue to move to other market.
9. Spend on capital equipment to drop.
10. Mini fabs in developing countries.
Well, lot of water has flowed since those predictions were made. Let’s see how things stand, as of now. The updated predictions would look something like these:
1. There have been signs of recession, but the industry has faced it well, so far. In fact, Future Horizons feels that if there is going to be a global economic recession, the chip industry (but not all companies) is in the best shape possible to weather the ensuing storm.
2. Memory market is changing slightly as well, though people are very cautious. According to Converge, memory market prices appear to be stabilizing. iSuppli has predicted a poor year for DRAM though!
3. NAND Flash could show some recovery later this year. Yes, Q1-08 QoQ sales seems to have slipped, but the market remains hopeful of a recovery. Even iSuppli warned of NAND Flash slowdown in 2008, while Apple slashed its NAND order forecast significantly for 2008! Keep those fingers crossed!!
4. Power remains a big issue, and will continue to be so. This will remain as we move up newer technology process nodes.
5. EDA is seemingly catching up with 45nm designs. Magma, Synopsys, and the other leading EDA vendors are said to be playing big roles in 45nm designs.
6. Fabless companies are gaining in strength. No doubt about it! The 2007 semicon rankings show that. Also, Qualcomm is now the leader in the top wireless semicon suppliers, displacing Texas Instruments.
7. There have been consilidations (or long term alliances) in: a) fab space b) DRAM space. In the fab space, Intel, Samsung and TSMC have combined to go with 450mm wafer fab line by 2012. And in the DRAM space, there have been new camps, such as Elpida-Qimonda, and Nanya-Micron partnering to take on Samsung. With the global semiconductor market seeing steady decline in growth rate, which would continue, look forward to more consolidations.
8. Investments in photovoltaics (PV) have eased the pressure on capital equipment makers and spend somewhat. In fact, 2007 will be remembered as the year when the PV industry emerged as a key opportunity for subsystems suppliers and provided a timely boost in sales for those companies actively addressing this market. Perhaps, here lies an opportunity for India.
9. Mini fabs — these are yet to happen; so far talks only. In India, a single silicon wafer fab has yet to start functioning, even though it has been quite a while since the semicon policy was announced. Conversely, some feel that India should focus on design, rather than go after something as mature as having wafer fabs. However, several solar fabs — from Moser Baer, Videocon, Reliance, etc., are quite likely.
10. Moving to 45nm from 32nm is posing more design challenges than thought. This is largely due to the use of new materials. Well, 45nm will herald a totally different structure — metal gate/high-k/thin FET/deep trench design, etc. It will herald a new way of system design as well.
Now, I am not a semicon expert by any long distance, and welcome comments, suggestions, improvements from you all.
IC Insights recently published the May update to The McClean Report, featuring the Top 20 global semiconductor companies. Not surprisingly, there have been some significant movers and shakers. The most telling — quite a few of the major DRAM and Flash suppliers have dropped out of the Top 20 list!
First the movers! Fabless supplier Qualcomm jumped up four spots, ranking as the 10th largest semiconductor supplier in Q1-08. Next, Broadcom, the third largest fabless supplier, also moved up four positions, up to the 20th position. Panasonic (earlier, Matsushita), moved up to the 19th position, while NEC of Japan moved up to the 13th position.
TSMC, the leading foundry, moved up one position, registering the highest — 44 percent — year-over-year Q1-08 growth rate, besides being ranked 5th. Nvidia, the second largest fabless supplier, was another company registering a high YoY growth rate of 37 percent, and moved into the 18th position. Some others like Infineon, Sony and Renesas also climbed a place higher each, respectively. The top four retained their positions — Intel, Samsung, TI and Toshiba.
And now, the shakers! The volatile DRAM and Flash markets have ensured the exit of several well known names such as Qimonda, Elpida, Spansion, Powerchip, Nanya, etc., from the list of the top 20 global semiconductor companies, at least for now.
Among the others in the list, the biggest drops were registered by NXP, which dropped to 14th from 11th last year, and AMD, which dropped two places, from 10th to 12th. Two memory suppliers — Hynix and Micron — also slipped two places, to 9th and 15th places, respectively. STMicroelectronics also slipped from 5th to 6th. IBM too slipped out of the top 20 list.
The top 20 global semiconductor firms comprises of eight US companies (including three fabless suppliers), six Japanese, three European, two South Korean, and one Taiwanese foundry (TSMC). Also, looking at the realities of the foundry market, TSMC’s lead is now unassailable. If TSMC was an IDM, it would be No. 2, challenging Intel and passing Samsung, said one analyst, recently, a thought shared by many.
IC Insights has reported that since the Euro and the Yen are strong against the dollar, this effect will impact global semiconductor market figures when reported in US dollars this year.
There are some other things to watch out for. Following a miserable 2007, the global DRAM module market is likely to rebound gradually in 2008 due to the projected recovery in the overall memory industry, according to an iSuppli report. That remains to be seen.
Some new DRAM camps — such as Elpida-Qimonda, and Micron-Nanya — have been formed. It will be interesting to see how these perform, as will be the performance of ST-backed Numonyx.
Further, the oversupply of NAND Flash worsened in Q1-08, impacted by the effect of the US sub-prime mortgage loan and a slow season, according to DRAMeXchange. The NAND Flash ASP fell about 35 percent compared to Q4-07. Although the overall bit shipment grew about 30 percent compared to Q4-07, the total Q1-08 sales of branded NAND Flash makers fell 15.8 percent QoQ to US$3.24bn. Will the NAND Flash market recover and by when?
There’s a nice report today by DRAMeXchange on the state of the NAND Flash market. It is reproduced here.
Impacted by effect of the US sub-prime mortgage loan and a slow season, oversupply of NAND Flash worsened in 1Q08. NAND Flash ASP fell about 35 percent compared to 4Q07. Although the overall bit shipment grew about 30 percent compared to 4Q07, the total 1Q08 sales of branded NAND Flash makers fell 15.8 percent QoQ to US$3.24bn.
Although the NAND Flash market share by sales for Samsung in 1Q08 fell to roughly 39.6 percent compared to 4Q07, Samsung continues to be the leader in branded market.
Despite the increase proportion of 51nm node production, affected by the deep decline in NAND Flash price, 1Q08 sales fell 18.7 percent QoQ to US$1.28bn.
NAND Flash market share by sales for Toshiba rose to 26.4 percent compared to 4Q07 and continued to be in the second place among the branded NAND Flash makers.
Due to Toshiba’s successful increase in 56nm node production, it was able to resist the effect of the NAND Flash price decline. However, 1Q08 sales were flat compared to 4Q07 at US$855m.
The 1Q08 market share by sales for Hynix fell to 17.5 percent, though it continued to stay at the number three spot among branded NAND Flash makers. As Hynix lowered its NAND Flash production, 1Q08 bit shipment increased only 9 percent QoQ. However, due to the fall of NAND Flash ASP at 39 percent QoQ, 1Q08 sales for Hynix fell to US$569m, or a decline of 29.1 percent QoQ.
With the ramp up of 50nm node, Micron and Intel continued to see steady growth in a bit shipment in 1Q08. However, impacted by the large decline in NAND Flash price, their 1Q08 sales fell compared to 4Q07. Micron and Intel 1Q08 sales were US$248m and US$181m, respectively, with a market share of 7.7 percent and 5.6 percent, each.
As STMicroelectronics primarily produces NAND Flash for cell phone applications, revenue for 1Q08 was not as severely impacted by the price decline. Revenue for STMicro in 1Q08 fell slightly to US$85m, or a slight decline of 6.6 percent compared to 4Q07. The 1Q08 market share by sales was 2.6 percent.
Since Renesas continued to reduce its AG-AND Flash production in 1Q08, Renesas/PSC camp sales fell roughly 60 percent compared to 4Q07 with a market share of 0.6 percent.
It is really difficult to stick your neck out and predict. That’s what makes the analyst’s jobs so difficult. Things happen and pass you by so quickly. For instance, as an example, who would have thought that Samsung would face a substantial blackout that would halt six chip production lines in a complex operated by the world’s largest flash memory producer?
Plans for the fab in India are now well under way. There have been questions like, do we need fabs? The year 2008 is the year of presidential elections and the Summer Olympics. Will we really see a recession in 2008? Here are some of the trends that are visible for 2008. Would love to hear from you.
1. Semiconductor firms may have to face a recession year in an election year
Yes, strange as it may sound, this just might happen! Concerns about consumer spending, caused by higher oil prices, mortgage crisis in the US and fears of a possible recession have made analysts more cautious, albeit optimistic. Analysts are wary of an impending recession in semiconductors during 2008. That, it should fall in the year of the US presidential elections makes it all the more intriguing. The nervousness is already showing in the slowing down of some markets.
2. DRAM market looks weak in 2008
Will DRAM prices rebound? Remains to be seen, although DRAMeXchange says that Taiwanese suppliers are likely to have their output to trim by 10-25 percent during February (Chinese New Year) as they usually plan for an average of 3-7 days of annual facility maintenance during this period. DRAMeXchange regards this as a possible catalyst for a price rebound in near term. Analysts haven’t helped either, with some saying DRAM will be on the slow side or even negative in H1-08.
3. NAND market will remain hot
You can bet, it will! Analysts remain upbeat for a positive NAND market in 2008. The reason being – new applications such as wireless USB, increase in cell phones memory capacities, higher content in portable media players, etc. We hope it is not a flash in the pan. There are rumors of another iPhone along the way!
4. Power will remain major issue
This isn’t going to change anytime soon! Power awareness is crucial for portable applications. It determines battery lifetime, and there’s an increased amount of computation involved as well. Power awareness is extremely crucial for high-performance applications. It determines cooling and energy costs. Many chip designs today are power limited and still require maximum performance.
5. EDA has to catch up
And fast! Analysts at a recent webcast hosted by Semiconductor International elaborated how the EDA industry was in a position of lag in the market. The DFM issue is increasingly becoming more complex. There is said to be a move to restrict the design rules that is in place now for 45nm. We are likely to see major changes in 32nm. That will have an impact on the EDA tools.
6. Need to solve the embedded dilemma
It is said that in 2007, the cost of designing or developing the embedded software for an SoC actually passed the cost of designing the SoC itself! We seem to be in the middle of a software crisis that is going to hit the entire electronics industry in the next five to six years.
Analysts are wary of an impending recession in semiconductors during 2008
7. Consolidation in the fab space
Some of the other older IDMs and fabs are said to be actually shutting down and going over to the foundries and process wafers for less than what they can do on their own. In this respect, we are seeing a lot of consolidation within the fab space. The mid-level players are consolidating. The customer base is clearly narrowing. The field is narrowing in 65nm and 45nm, and as we get to below 45nm, the field is going to get much, much narrower.
8. Capital equipment guys will continue to move to other markets
The best example, you can think of, is Applied Materials, which is into innovative equipment, service and software products for fabrication of chips, flat panel displays, solar photovoltaic cells, flexible electronics and energy efficient glass. Even the smaller guys are moving into LEDs or MEMS markets. That tells us what these companies are thinking about the semiconductors market.
9. Spend on capital equipment to drop
Gartner is expecting the long overdue capital spending correction in DRAM market to push the capital equipment market into contraction. Another slow year from foundry, along with concerns of US economic recession, adding to the downside. However, NAND spend should ramp up.
10. Mini fabs in developing countries
India has announced fab plans. There have also been talks of mega fabs and mini fabs elsewhere. There are going to be different types of fabs! With globalization, lot of countries may decide they want to have a fab. The market’s going to change.
However, bear in mind that the outlook on new fab starts appears weaker, as many companies have cut back on spending to wait for the market to improve. After a forecasted 8 percent YoY increase in fab construction spending in 2007, levels are likely to be flat in 2008.