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.
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.
Read more…
Introducing SemiWiki — knowledge repository for semicon design and manufacturing!
Friends, it is my pleasure to introduce SemiWiki, a website connected with the global semiconductor industry, a creation of my good friend, Daniel Nenni, otherwise, a renowned blogger on semiconductors and an industry expert!
SemiWiki is projected as a “knowledge repository for semiconductor design and manufacturing, facilitating peer-to-peer communications using Web 2.0 technologies.”
Indeed, it is a site, who’s time has come! As per the site, the SemiWiki project is a cloud based social media platform. It enables mass collaboration using Web 2.0 technologies — such as blogs, forums and wikis — to enable new channels of communication within the semiconductor design ecosystem.
Be careful though — there is REAL user based content and REAL TIME feedback! Don’t be lulled into thinking that some of the content and some (if not, more) of those users are fictitious! In other words, the SemiWiki is a great example of REAL social media having finally come to EDA, semiconductor, IP and foundries!!
I just stopped by the SemiWiki. The site really looks cool! There is a definite attempt to bring the industry together!
There seems to be a problem, or is it due to the newness of the site — the vendor map somehow opens on a page that asks you to sign up. Perhaps, Daniel Nenni should look into this at the earliest. The more content is freely available, the more will be its usage. Of course, the companies involved should look at paying some amount, if possible, and help the site and the owner.
It would be better if the SemiWiki is available in some (or several) languages — since English is not the spoken language in the East and Far East region. There seems to be more of American/English slant as of now! Maybe, that too will change, as SemiWiki progresses.
One post immediately caught my eye — ‘SemiWiki top influencers get Android tablets”! Man, what do I do to get hold of one (is Daniel listening? 😉 )?
Why has the semicon equipment bubble really burst? – II
Here’s the concluding part of my discussion with Dr. Robert Castellano of The Information Network, from New Tripoli, USA.
Repercussions of a deteriorating semiconductor industry
I asked Dr. Castellano regarding the repercussions of a deteriorating semiconductor industry.
He said that the semiconductor equipment industry seems to be in serious trouble. There could possible be little growth in 2011, and the how is that there will be sufficient pushouts in equipment that revenues are moved to 2011 from 2010.
Dr. Castellano said: “We warned two months ago about pushouts, and today, Veeco stated that they “recently experienced rescheduling of tool shipments from the fourth quarter into the first quarter by several customers in Korea and Taiwan.” In other words, pushouts! We will continue to see this more and more.
“Problem is, will the equipment vendors admit it? ASML vehemently denied any customers’ pushouts last quarter, but with tools selling for $35 million each and customers such as Nanya and Inotera announcing losses, there is no way in creation pushouts won’t happen.
“Then, there is the issue of 450mm wafers. The only ones pushing it are the semicons, because they recognized that they could generate twice the number of chips for almost the same capital equipment cost. The equipment industry was dramatically impacted by the 300mm transition, and growth was nearly flat from 2001 to 2009. Not so for the semicons.
“No equipment supplier wants 450mm, it is being pushed by Sematech and Intel, plus a consortium in Europe that feels that perhaps 450mm will knock off competitors and they can make up the vacuum in sales. Only the top 15 equipment suppliers will survive.”
How will pushouts benefit the industry?
On the subject of industry pushouts being highlighted time and again, it is also necessary to see whether and how will these benefit the industry in the long run.
Besides the reasons mentioned above, semiconductor sales are intimately tied to the economy. There is a direct correlation between semiconductor sales and GDP, as well as the PLIs of The Information Network. If the economy is robust, more money is available to purchase electronic items containing semiconductors. The reverse is true, indicative of the present economic climate.
The Information Network has also indicated that firms will announce lower results, and it’d get worse in the following quarter. Why will this happen and which firms could be likely ‘hurt’?
Dr. Castellano said: “This will happen because the crest in the tidal wave was only reached in the past month or so, and it is a long and slippery slope down because it went so high up to begin with.
“The DRAM manufacturers will be hit the hardest. Growth was strongest for them for the first half of the year, where sales grew 135 percent in Q2 2010 compared to Q2 2009.”
Is there a way out? If yes, when?
Finally, when will there be some recovery in the semiconductor equipment sales and why? Surely, as with everything, there has to be a way out!
Dr. Castellano concluded: “We see minimal growth in 2011, again depending on macroeconomic factors. We see two years of downturn in the industry – 2012 and 2013.”
Global semicon market set for slowdown due to deteriorating business climate!
I was going through a report sent out today, by Dr. Robert N. Castellano, president of The Information Network, New Tripoli, USA, of the same title, and decided to get his thoughts.
Deteriorating business climate
According to The Information Network, The business climate for the semiconductor industry is deteriorating, as per its upcoming report, titled, “Hot ICs: Market Analysis and Forecast of the Top 15 IC Sectors”.
As per the report, along with fellow DRAM manufacturers Samsung, Hynix, Elpida, Micron, etc., will suffer from slowing sales of electronic gadgets and PCs. In the CPU sector, the slowdown in PC sales will affect Intel and AMD. Foundries such as TSMC and UMC will also be impacted.
As sales drop in electronic gadgets, the most pronounced affect will be in the DRAM sector, where sales grew 135 percent in Q2 2010 compared to Q2 2009. The drop in semiconductor sales will usher in a corresponding drop in semiconductor equipment and materials sales.
The front-end market will suffer pushouts and the lithography sector will be impacted most, where sales of $35 million immersion DUV tools have flooded the market of late.
Slowdown likely in world economies
He said: The semiconductor industry is directly correlated with the economies of the world, and there is a direct correlation with semiconductor sales and worldwide GDP. Our leading indicators (LI) point to a slowdown in the world economies.
“As these proprietary LIs are correlated with semiconductor revenues, we will se a slowdown in the next few months. We are already seeing signs of a slowdown in the PC and LED indistriies. Numerous public companies have given forward guidance that the next quarter will show some weakness.”
Given the good two quarters this year, how certain is The Information Netwok that the semicon market is now set for slowdown? Dr. Castellano cited similar reasons as above, adding: “Our LIs have an extremely accurate correlation with transition times. We have developed these LIs over the past 15 years.”
What’s the impact on foundries and silicon wafers?
Dr. Castellano said: “Foundries make their money from two sources: sales of ICs from fabless IC companies and sales of ICs from IDMs who do not have sufficient in-house capacity or sufficient technology capabilities for newer ICs. The macroeconomic effect will stymie sales for both revenue sources.”
Does The Information Network foresee an overcapacity situation in silicon wafers during 2011?
“No. We are forecasting 8.4 BSI (billion square inches) of Si wafers in 2010, which is up slightly from the 8.2 BSI in 2008. So, the Si manufacturers have the capacity already on hand. Semiconductor wafers will face competition from solar wafer consumption, which will double in 2010, but polysilicon is plentiful, and the two sectors, for the most part, use different crystal growing methods,” he added. Read more…
This downturn was NOT a classic semiconductor bust and boom, ignore industry fundamentals at your peril: Future Horizons
May’s results mean Q2-10 will show at least 8.3 percent quarterly growth over Q1-10, increasing the full year growth forecast to 36 percent. Given last year’s growth was minus 9 percent, mathematically this is a classic industry cycle. It is NOT, he insists.
At this point in the ‘recovery’, it is much more important to look at sequential and quarterly growth rates rather that the 12:12 rates, given the high double digit rates they show are just as misleading and irrelevant as the high double digit negative rates from this time last year. The reality is they net each other out thereby highlighting the real nature of the current cycle. This downturn was a pause, the recovery a restart, it was NOT a classic semiconductor bust and boom.
Future Horizons has been telling everyone very publicly that the industry recovery started in March 2009, first in the April 2009 edition of its Global Semiconductor Report, substantiated by a very long and detailed analysis at the Geneva IEF2009 Forum last October.
The recovery, together with ever-increasing substantiating data, has been a recurring theme in its Global Semiconductor Monthly Report ever since, as well as at the Dresden IEF2010 event in May 2010.
“While we obviously do not expect firms to run their business based on what we say, if the market recovery really has taken firms by surprise, executives from the top down either failed to recognise the significance of the data we were drawing their attention to over the past 15 months or they simply made the decision to ignore it. Ignore the industry fundamentals at your peril.”
Recovery not quite classic!
Future Horizons clearly states that this recovery is not a classic recovery. On being quizzed further, Penn said, “it was a dead stop and restart, just like hitting the pause button on your remote, rather than a crash and rebuild.” This is perhaps the same reason why the recession is now being termed as a market interruption.
Future Horizons has also been warning that industry was cutting back on the existing capacity far too much and too fast, while simultaneously failing to invest in net new capacity. Is the semicon industry still on this path?
Penn added: “Spending has now resumed (since Jan. 2010) and cut backs have stopped, but there’s a one-year time delay before these will start to impact. Why? Lack of industry confidence, driven too much by short-term financial performance, risk averse management and shareholders, lemming factor, etc.”
The long-term ramifications, should the industry fail to invest in net new capacity, are loss of sales and market position/leadership to those firms who did invest (e.g. TSMC, Samsung).
Well, it seems the global semiconductor industry has not learned enough from the previous recessions! Read more…
Global semicon industry update: 30 percent growth now on radar for 2010, says Future Horizons
Here are the excerpts from the Global Semiconductor Monthly Report, January 2010, provided by Malcolm Penn, chairman, founder and CEO of Future Horizons. There are a lot of charts associated with this report. The report also covers market trends. Those interested to know more may contact Future Horizons.
November’s IC sales continued the year-end rally, down just 2.4 percent on October, up 29.3 percent vs. November 2008. This confirms our earlier prediction that Q4-09 sales would be up around 6.4 percent on Q3-09, one of the strongest year end-closes on record – Q4 sequential growth is typically ‘zero plus minus 2 percent’.
This confirms that 2009 will come in close to our minus 10 percent forecast, most probably at minus 9.7 percent, setting 2010 up for a bumper double-digit growth year. Only a Lehman Brothers-type event can now derail the recovery, the future is bright, and not before time too. For far too long now doom and gloom has spoilt the chip market horizons. Industry faith has been stretched beyond the limit.
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 – November’s result places us comfortably within our minus 10 percent 2009 growth estimate.
Based on November’s WSTS data, it is now very difficult to see anything less than a 22 percent growth year for the semiconductor market in 2010 based on the current industry momentum (i.e. a fourth quarter growth of around 6.4 percent) and a very ‘average’ quarterly growth pattern for 2010. Indeed we are now starting to see the first industry guidance revisions that tend to indicate even this range might be low. If the current growth momentum holds firm, 2010 chip market growth could easily hit 30 percent.
Low double-digit growth is totally out of the question, growth in single digits an absolute impossibility, Figure E3. Either of these scenarios would need a very poor start to the year, which is simply not happening. Order books are strong, inventory levels are low, capacity is tight and demand is holding up. You could not wish for a better start to the year … what a difference from this time 12 months ago. Only a massive economic collapse can now spoil the party.
As we mentioned before, only a massive economic disruption like a Lehman Brothers bankruptcy can now derail the recovery and this is not being forecast by the economists. Quite the opposite, GDP data is trending more and more positively, with an upwards revision at the macro level more likely than not. This is not to say that the economic recovery is not fragile, it is far from out of the woods and many risks still remain.
Of the ‘not so good news’, to our minds the biggest single problem is the world’s financial systems remain unreformed and, worse still, unrepentant. This means the same issues that caused the global financial problem in the first place remain unchecked. In 1929, Wall Street’s shamed bankers jumped from their office windows. In 2009 they stood in line for their bonuses. From a chip market perspective, a sound economic base is important but the correlation is poor.
Whereas a collapsing GDP will trigger a chip market downturn, just as it did in the 2001 dot com bust and September 2008 Lehman Brothers collapse, the rates of recovery are independent of each other. For example, the economy recovered faster than the chip market after 2001 whereas the chip market is leading the recovery in 2009.
The extent of the market collapse can be gauged by looking at the peak to trough data, showing over one third of the chip market simply disappearing overnight. Except ASPs, despite this massive decrease in demand, ASPs help firm, in fact they rose a modest 1 percent. One year after the chip market collapsed, units and value have now recovered to 98 and 90 percent respectively of their Q3-08 (market peak) value, with ASPs coming in just 8 percent lower.
This is quite an extraordinary recovery, seeing as it took a full two quarters more for the world to exit recession. It happens though because there was no chip market bubble prior to the downturn.
With the memory market now in full flood of recovery – we can easily see an upside potential of a $60 billion market for 2010 – and memory prices increasing with barely a flinch from the market, 2010 is set to be a very good year for the industry. The only problem is that no one yet believes it.
Confidence has been shattered ever since the 2000 bust, with a glass half empty mindset dominating collective thinking. “Market growth is now single digit; ASPs will keep on falling; Where are the killer products to drag the chip world out of recession; We need to specialise, merge, narrow the R&D scope, cull the product line and above all dump all the fabs; outsource for capital and operating efficiency; etc”.
Well, to coin a phrase once used by Jerry Sanders III, “Nuts!” It was only 2004 when growth hit 28 percent just after an 18 percent growth in 2003. Better get planning now, it’s already too late. Read more…
It’s back to chip market normal abnormality: Semicon update Aug. ’09
Fig. E1 shows the 12/12 worldwide monthly growth rates for IC sales in dollars, units and ASP for January 1997 to June 2009 inclusive. They need to be looked at in conjunction with the other 12/12 and rolling 12-month charts provided in the Market Summary section of this report.
June’s total semiconductor sales came in at US$19.3 billion, heralding a US$51.7 billion second quarter, up 16.9 percent on Q1-09 (down 20 percent on Q2-08). This compares with Q1-09 that was down 15.3 percent on Q4-08 (down 30 percent on Q1-08) and confirms our 2009 forecast upwards revision, reported in last month’s Report and at our July Mid-Term Industry Forecast Seminar, that the worst of the chip market recession is now over.
We can now expect a seasonally strong Q3 (albeit not too strong) of around 12 percent growth on Q2-09 (down 16 percent on Q3-08) followed by a normal year-end slowdown in Q4 at plus 3 percent (up 14 percent on Q4-08) confirming our minus 14 percent forecast for the year as a whole. At last it is now back to industry normal abnormality.
There are wild fluctuations when looked at on an individual monthly basis meaning no single month’s data is a good indicator of the underlying trends. Each month is thus just another peg in the ground, especially during a period of rapidly changing conditions.
June’s minus 25.8 percent year-on-year growth thus looks closer to our original minus 28 percent forecast for the year, rather than the minus 14 percent we reforecast last month, but this does not take into account (a) the prospective second-half-year rebound and (b) the fact we will be measuring future 12:12 growth rates 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 should start to see this upward trend kick in again with the release of July’s WSTS data. Read more…
18pc Q2 vs. Q1 sequential growth… this improves 2009 to -14pc: Semicon update July. ’09
Here are the excerpts from the Global Semiconductor Monthly Report, July 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.
Figure E1 shows the 12/12 worldwide monthly growth rates for IC sales in dollars, units and ASP for January 1997 to May 2009 inclusive. They need to be looked at in conjunction with the other 12/12 and rolling 12-month charts provided in the Market Summary section of this report.
Following hot on the heels of April’s 16 percent month-on-month sales growth, May grew a further 0.9 percent sequentially (0.4 percent for ICs), putting June on track to break through the US$20 billion barrier, for the first time since the chip market collapsed last September.
It would also set up Q2-09 to show 18 percent quarter on quarter growth, joining only three such precedents in the history of the industry when such a strong second-quarter growth spurt has occurred. The big question now is: “Is this the start of the chip market recovery or a blip on the statistics radar screen?” The short answer is both, the industry’s not out of the woods yet, but the chip market will recover faster than the economy. The stage is now set for a strong market rebound in 2010-11.
We are clearly in the midst of a serious industry recession but different from all previous historical precedents. As we have counselled before, going into this recession (the 12th in the industry’s 60-year history) the industry was in structurally good shape; that is something that has rarely happened before.
In addition, while the economy clearly drives the overall market for semiconductor devices, the correlation is poor meaning chips march to their own drum not just the economic pulse. Both of these factors mean that the chip market can (and will) recover much faster than the economy as a whole.
With the benefit of hindsight, the whole world clearly over-reacted to the 14 September 2008 Lehman Bros collapse, something again with hindsight the US officials probably now regret letting happen, and the massive destocking that followed masked the underlying residual demand. For sure markets too were down but they only declined not evaporated completely. The impact on IC unit demand was a victim of this uncertainty. Read more…