LONDON, UK: According to Malcolm Penn, chairman and CEO, Future Horizons, October's WSTS data confirmed the slump has hit the semiconductor market, with monthly sales down 10.9 percent versus September, 12.9 percent versus October 2007. We suspect November will be worse, meaning that Q4 will now come in less than Q3 and 2008's growth will now too be negative.
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One cannot also now just blame the beleaguered memory market; the corresponding market growth numbers without memories was down 11.9 and 7.9 respectively. Clearly, the market has turned ugly, but it is important to remember that this is a side effect of the worldwide financial problems, not the problem of the industry itself.
How long this will last depends on the extent of the global recession, but it's bound to get worse before it gets better … now, more than ever, is the time to work smarter not give up; the market will rebound, better start planning for that now.
Industry capacity
Overall MOS wafer fab capacity increased 0.9 percent in Q3-08 versus Q2-08, from 2,121k 200mm equivalent wafer starts per week to 2,140k. The net increase by wafer size was in line with expectations, with growth centred on 300mm and sub-0.12 micron technology. Q3-08's capacity growth was well below the 6.5 percent experienced this time last year, reflecting the slowdown in capital expenditure that began mid-2007. Given the continuing, and increasing level of, slowdown in 2008 cap ex, low levels of capacity expansion will continue well into 2009.
300mm wafers now account for 47.6 percent of the total MOS capacity, up from 44.8 percent in Q2-08 and 36.0 percent from the same period last year. 300mm wafers now make up the bulk of capacity with 200mm in second place at 39.3 percent, down from 41.3 percent in Q2-08 and 47.9 percent in Q3-07.
Q3-08 also saw the actual size of the 200mm capacity decline by 3.8 percent versus Q2-08. We expected this sector continue its steady decline in the overall market share and absolute size over the coming decade. The vast majority of new fab additions are now in 300mm wafers, following the well-trodden path of the prior 200mm and 150mm wafer transitions. Again, hardly surprisingly, capacity at 0.08 micron and below is still in its market build out phase.
Despite the very low level of Q3 capacity increase, utilisation rates decreased slightly to 87.5 percent in Q3-08 from 89.5 percent in Q2-08. The comparable utilisation figure for Q3-07 was 90.2 percent.
Advanced IC capacity, i.e., 0.08 micron and below, was flat at 95.2 percent, whilst 300mm and 200mm wafers checked in at 96.5 percent (Q2 = 94.8 percent) and 84.3 percent (Q2 = 88.4 percent), respectively.
It takes a while, but the cutbacks in cap ex that started mid-2007 are now clearly impacting net new capacity additions. Interestingly these cutbacks were instigated against a backdrop of high levels of capacity utilisation, not excess capacity, which clearly differentiates the capacity situation now from previous situations.
When these cutbacks occurred, there was no sign of an economic recession on the horizon. In short, by good fortune, the industry is entering a major economic downturn with Cap Ex curtailed and negligible new capacity in the pipeline. Given the abrupt reduction in demand, near-term excess capacity is inevitable and utilisation rates will trend downwards for a while, as reflected by Q3-08 (Q4-08's unit sales) rates. This makes this recession much different from previous ones, especially 2000-01 when Cap Ex was $60 billion and on a steep ramp curve just as demand fell 20.8 percent.
With Cap Ex to sales running around 16.5 percent in 2008, we expect to see this level hold during 2009, despite an anticipated significantly negative IC unit growth. From a capacity point of view, the industry is in good shape to weather the ensuing storm.
