Reporting a similarly optimistic performance by the IC industry for 2Q09 as the IC Insights news last week, Future Horizons’ Malcolm Penn has revealed that the chip market saw growth of 18% in the three-month period. April saw a 16% month-on-month growth rate, followed by a further growth of 0.9% in May, topped off by June’s reaching through the US$20 billion market for the first time since the start of the industry troubles in September 2008.
“Psychologically this will give everyone a shot in the arm”, commented Malcolm Penn, Chairman & CEO at the UK-based research firm, Future Horizons, “Second quarter growth is usually pretty pathetic… there have been only three historical precedents when such a spurt has happened. The big question now is: Is this the start of the chip market recovery or is it merely a blip on the statistics radar screen?”
As it turns out, it’s a bit of both. Penn continued, “…The forth [sic] quarter market collapse was far too steep - a severe overreaction to last year’s gross financial uncertainty - culminating with the Lehman Brothers collapse in September. The first quarter saw this stabilise with the second quarter restocking, but there are other positive factors also in play.”
As we enter the second phase of the recovery cycle, Penn stresses the importance of bearing in mind that actual demand can be overstated in this kind of situation, with “Phase 2 results in sales [being] equal to OEM demand plus inventory rebuild.”
Demand in the third quarter is expected to increase, countering some of the effects of the sales decline caused by inventory build. Following three years of under-investment in fabs, there will be some moves seen in regards to capacity, with “inevitable” ASP increases.
Amid the prevailing feeling of caution, this is a welcome glimmer of hope for recovery of the IC industry.
“Never forget market trends are not based just on rational decisions, but emotional ones as well; it is this that makes the outcome sometimes so difficult to predict”, cautioned Penn.