Impact of Japan's quake and tsunami on global semiconductor industry

It has not even been a week since the unwanted happenings in Japan. Already. there are reports of nuclear emergency! One hopes it does not turn out to be that way!!

On the semiconductor front, DRAMeXchange of Taiwan has reported that Japan’s earthquake and electrical brownouts could affect silicon wafer supply and global DRAM capacity. WitsView reported that the recovery process of infrastructure in Japan will affect the resurgence of upstream panel supply chain. LEDinside observed that the earthquake generally has not done much damage to the LED industry.

EnergyTrend reported that the earthquake in Japan has relatively slight impact on the global solar industry compared to the other industries. The supply chain sectors influenced are mainly mono silicon and poly silicon suppliers. However, it has sent out a warning: the nuclear crisis in Fukushima continues to appear unsettling. If the radiation leakage widens to Kanzai of Japan, where many solar cell manufacturers are located, the global supply of solar cells may be affected.

The more important impact may be on Japan’s production of components for LCD panels, says IHS iSuppli.

The Japanese earthquake and tsunami has also stunned the global semiconductor industry, given that Japan has been a pioneer and leader in the global chip industry.

The preliminary assessment of Texas Instruments’ manufacturing sites in Japan revealed that the fab in Miho suffered substantial damage during the earthquake. Teams are working to reinstate production in stages, reaching full production in mid-July. TI’s fab in Aizu-wakamatsu was also damaged, but already is being re-started with full production estimated by mid-April. TI’s third fab in Hiji is undamaged and running at normal capacity.

Sony Group Operations are said to have been affected by the Pacific coast of Tohoku earthquake, tsunami and related power outages. For Elpida, the Hiroshima Plant suffered little impact as it is located in Hiroshima in the southwest of Japan, However, the Akita Elpida memory plant is not in operation as of the time of the  announcement due to power shut down caused by the earthquake, and it is hoped that normal business will resume when the power returns.

Iwate Toshiba Electronics did not report any casualties, but as of March 15, there was power lost, with limited partial recovery to start from March 13. One hopes, some power has been restored. And, as of March 15, 12:00pm, seven factories out of 22 of the Renesas Group’s factories in Japan have temporarily shutt down production.

The Shin-Etsu group reported that as of 1pm,, March 15 (Japan Time), necessary inspections were being carried out at Shin-Etsu Chemical Kashima Plant (Kamisu, Ibaraki Pref.) and Shin-Etsu Handotai Shirakawa Plant (Nishigo Village, Fukushima Pref.), both of which were out of operation.

It is implementing inspections of the facilities and equipments at the both plants putting the utmost priority on safety. However, damages were founded at some production equipment at the both plants until now. At present, it is still unclear how long it will take to restore such damaged equipments and facilities at the both plants.

Mitsui Chemicals Group reports the following effects of the Kanto-Tohoku earthquake on its operations.Operations at the Kashima Works (Kamisu City, Ibaraki Prefecture), has been suspended since the earthquake. Operations will be resumed after assessment of damage by the earthquake and tsunami.

At its Ichihara Works (Ichihara, Chiba Prefecture), production at ethylene plants is according to schedule. However, the operations at Mitsui DuPont Polychemicals and Chiba Phenol plants have been suspended since the earthquake. After assessing effect of scheduled “rolling” blackout, operations will be resumed.

At the Mobara Branch Factory (Mobara City, Chiba Prefecture), operations at acrylamide and paint toner binder resin plants have been suspended since the earthquake. After assessing effect of scheduled “rolling” blackout, operations will be resumed. All other facilities are operating according to schedule.

Japan has the enviable track record of bouncing back from adversity. Let’s all hope and pray for an encore!

It’s Q1 seasonal slowdown, and yearly time for denial!

This is a summary by Malcolm Penn, CEO, Future Horizons. For those who wish to know more, please get in touch with me or Future Horizons.

Malcolm Penn, CEO, Future Horizons.

December’s WSTS results were as boring as they were predictable, with no serious data revisions (thankfully) and the results right where we expected. December’s year-on-year IC unit growth was 8.9 percent that, with the 3.5 percent growth (yes GROWTH) in ASPs, yielded a respectable double-digit value growthof 12.8 percent. And this, on the back of a weak Q4 memory market that saw ASPs fall 13.1 percent vs Q3-10!

The yearly growth vs 2009 weighed in at 31.8 percent, hitting $298.3 billion, just shy of the elusive $300 billion threshold. The market is right where we said it would be at our recent 2011 Forecast seminar; we reiterate our position that 2011 will be a good year for the industry. Choppy first-half waters for sure, but watch out for a whopping 2H-11 ricochet.

Connectors are up as well
It is not just semiconductors that are off to a good start. The connector industry is tight as a drum too. Orders in December 2010 were up 13.3 percent versus December 2009, with full year orders up 29.3 percent on 2009, down sequentially 11.1 percent from November 2010. The comparable data for sales was plus 18.7percent, plus 28.4 and minus 13.7 percent.

The December connector book-to-bill ratio was 1.01, unchanged from November. This industry still publishes orders and book-to-bill data by the way, unlike the chip industry which very foolishly stopped publishing this several years ago. All this in the seasonally slow first quarter of the month, yet few people believe there is a supply problem in prospect. Just as this time last year, industry denial is rampant, way beyond reasonable caution and ignoring the underlying trends.

Strong demand for mobile, server and graphics DRAM
We estimate that the worldwide growth rate for PCs in 2011 will be a healthy 10 percent, with 3.9GB the average DRAM content per box. New capacity and die shrinks are putting near-term pressure on over-supply and pricing but there are now move afoot from Elpida and others to start raising prices.

Where they can, to gain a price advantage, DRAM vendors are actively adjusting their supply in favour of mobile from commodity DRAM, given the current strong demand in the smartphone and tablet PC markets, with a 1GB per box average DRAM content.

Server demand continues to be the other star segment, not just in unit demand but in content per box as well, estimated to average around 30GB in 2011. This will drive a 50 to 60 percent increase in server DRAM demand. Finally in graphics demand for specialty DRAM is also very strong, driven by the rapid take off of3D-TV and continuing strong growth in Blue-Ray DVD.

The overall DRAM industry is thus gradually diversifying from manufacturing mainly commodity DRAM to diversified products such as mobile DRAM, serverbasis DRAM, specialty DRAM and graphic memory.DRAM vendors however are faring mixed fortunes, with Elpida and Hynix having the worst net cash positions with barely enough cash to cover their short-term debt.

The Taiwanese vendors find themselves stuck in a technology trap, unable to invest in the immersion technology needed to break through the 5*nm node, meaning that in the absence of a good market uptick to improve cash flow and profits, a shake out in the DRAM supply base seems unavoidable.

Round-up 2010: Best of semiconductors

Right then, folks! This is my last post for 2010, on my favorite topic – semiconductors. If 2009 was one of the worst, if not, the worst year ever for semiconductors, 2010 seems to be the best year for this industry, what with the analyst community forecasting that the global semicon industry will surpass the $300 billion mark for the first time in its history!

Well, here’s a look at the good, the bad and the ugly, if available for otherwise what has been an excellent year, which is in its last hours, for semiconductors. Presenting a list of posts on semiconductors that mattered in 2010.

Top semiconductor and EDA trends to watch out for in 2010!

Delivering 10X design improvements: Dr. Walden C. Rhines, Mentor Graphics @ VLSID 2010

Future research directions in EDA: Dr. Prith Banerjee @ VLSID 2010 — This was quite an entertaining presentation!

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

Indian semicon industry: Time for paradigm shift! — When will that shift actually happen?

Qualcomm, AMD head top 25 fabless IC suppliers for 2009; Taiwan firms finish strong!

TSMC leads 2009 foundry rankings; GlobalFoundries top challenger!

ISA Vision Summit 2010: Saankhya Labs, Cosmic Circuits are Indian start-ups to watch at Technovation 2010!

ISA Vision Summit 2010: Karnataka Semicon Policy 2010 unveiled; great opportunity for India to show we mean business! — So far, the Karnataka semicon policy has flattered to deceive! I’m not surprised, though!

Dongbu HiTek comes India calling! Raises hopes for foundry services!!

Indian electronics and semiconductor industries: Time to answer tough questions and find solutions — Reminds me of the popular song from U2 titled — “I still haven’t found what I’m looking for”!

What should the Indian semicon/electronics industry do now? — Seriously, easy to say, difficult to manage (ESDM)! 😉 

Top 20 global semicon suppliers of 2010!

I’ve just received this report from iSuppli, which says that the global semiconductor revenue expands by record margin in 2010 — to $304 billion in 2010, up from $229.5 billion in 2009. This represents growth of 32.5 percent for the year! Fantastic!!

This growth is said to be courtesy of a boom in DRAM and NAND sales benefiting memory suppliers. One hopes the semicon industry turns in an equally better performance in 2011. That’d be just great!

In the meantime, I’d like to share with you iSuppli’s preliminary ranking of the Top 20 semiconductor suppliers in 2010.

Top 20 semiconductor suppliers of 2010: Source: iSuppli, USA.

As per iSuppli, Marvell is likely to achieve organic revenue growth of more than 43 percent and jump five places to the No. 18 spot in 2010.

Qualcomm and AMD, and Sony have experienced revenue growth notably less than the overall market. Therefore, they will likely slip three to four positions in the rankings in 2010.

After a number of years of dramatically outperforming the market, Taiwan’s MediaTek fell back to earth in 2010, as it will barely achieve revenue growth at 1.2 percent, the only company among the Top 20 to not achieve a double-digit increase. The company is likely to slip to No. 19 in the rankings, down from No. 16 place in 2009.

Only one company is at risk of dropping out of the list of 20. iSuppli projects that nVidia will retain its ranking at No. 20. However, ROHM Semiconductor is competing for the final slot among the Top 20 and the final outcome should be very close.

I hope to get into a conversation with iSuppli regarding the top 20 semicon suppliers.

Strong semicon industry recovery likely in 2010!

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?