Malcolm Penn, head of market research firm, Future Horizons wants to get back to running a division of a semiconductor company on the basis that the industry is set for explosive growth over the coming couple of years, yet no-one believes it! Penn believes that the industry will grow by 22% in 2010, compared to a negative 10% figure for 2009, which is a new revised figure (-14% previously). Growth could be even higher in 2011 as the global economy recovers and tight fab capacity through 2010 pushes ASP’s ever higher.
Penn noted that the recovery started at the end of Q1, with 17% growth in Q2 and Q3 up a further 20% percent Q4 could see growth of between 5 and 7%, resulting in -10% for the year, yet half the decline many analysts and industry bodies had projected. In total the IC industry could post revenue of between US$220-225 billion in 2009.
“Psychologically this ought to give everyone a shot in the arm but instead there’s a strange air of disbelief and denial in the air,” said Penn. “The fact of the matter is no-one believes anything any more; I wish, really wish I was back running a chip division again. The competition’s so befuddled you could walk all over anyone without even trying.”
“A 20 percent-plus growth year will nail the coffin of the ‘chip growth is over’ merchants of doom, especially when 2011 is likely to be even stronger still. This industry’s not changed one iota and market trends are still not based just on rational decisions but emotional ones as well. It is this that creates new market opportunities, but not for the faint-hearted, only those who really understand the chip business,” noted Penn.
In Future Horizons monthly client report, the market research firm noted that the cut backs in capital spending over the last few years has been more severe and orchestrated to drive up ASPs.
‘The level of new front-end capital equipment orders has now been sizeably lower than sales for 36 consecutive months, from September 2006 through August 2009, aside from three brief incursions into positive territory circa Q4-06, Q4-08 and Q3-09, Figure C3. 2008 Cap Ex spend was down 30.6 percent on 2007’s level, with the outlook for 2009 looking to be between 50-60 percent lower still. That would put 2009’s Cap Ex spend at well under a quarter of 2000’s peak, basically at maintenance levels and no serious new capacity build.'
'No amount of productivity gains can offset this slowed investment, especially now the one-off 300mm conversion gain has been absorbed. Net new capacity addition is thus condemned to shrink even further during 2009, the capacity utilisation effect of which will be briefly disguised in the first half year by the inventory /demand adjustment process.’
Penn noted that the ‘just as the perfect storm killed 2001, the perfect calm will drive the 2009-10 recovery.’