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SIA's downgraded forecast another sign of consumerist commoditization |
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Jun 14, 2007 at 11:05 AM |
News of the Semiconductor Industry Assn.'s midyear forecast tweak has climbed into the mainstream media, with terms like "downturn" and "slowdown" bandied about to describe the group's reduction of its 2007 forecast from 10% to 1.8%.
But as SIA prez George Scalise pointed out in yesterday afternoon's Webcast, they're still predicting growth this year, although the increase in revenues will be more of a trickle than a stream.
Trotting out that most self-evident of optimistic cliches---"the end-markets remain very strong for semiconductors" (which George pronounces, quaintly, with a long "i," instead of the usual long "e" sound, making it appear he is talking about something that is, in the words of Dana Carvey, "less than a conductor")---he cited the sharp decline in average selling prices (ASPs) and some weakening in near-term demand. Other, historic reasons for soft or declining chip markets---excess inventory (a few billion--not that much in terms of the total market), capacity utilization (85%ish) and the percentage of capital expenditure of that utilization (20-22%)---are not seen as contributing factors.
But one trend is clear: the consumer-driven commoditization of the IC industry continues unabated and is, if anything, becoming even more relentless. My visit to Fry's last weekend---where I picked up a 1-Gb memory stick (flash drive? thumb drive?) for my wife for less than $20 (and there were even cheaper models)---brought that home. My purchase of a Seagate 160-Gb external hard drive for about $120 breaks down to less than a buck a gig.
George noted a WSTS stat that showed ASPs for NAND flash were down 35% year-to-year in April although unit shipments were up nearly 54%. That's right, half again as many chips were shipped for about two-thirds the earlier price. Put another way, if you needed to sell 100 NAND chips at $10 a pop to gross a grand last April, you had to sell 154 chips at $6.50 per unit to reach $1041 this April. It doesn't take a sophisticated analysis of the combined costs of fab operations, tools, materials/consumables, etc. to recognize the price-attrition crunch leaves little room for any profit margin---nor to imagine its implications all the way down the supply chain.
But as a consumer, I don't really care. I want more memory, more processing power, more display capability, more cool gadgets, and I want to pay less and less for them. But as a concerned citizen of the semiconductor community, I continue to be worried as hell about the ever-increasing economic burden of making the coolest tech for the lowest price.
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