The first question on everyone's minds is: Are there finally any signs of the global semiconductor/chip industry turning around? According to Malcolm Penn, CEO, Future Horizons, most of the evidence is still anecdotal and that, the real clear proof will show itself in Q3-08.
There are a set of market fundamentals that are in remarkably strong form. The global economy still strong, and even showing signs of 'not getting worse' in the US. However, there is also tight fab capacity. No matter, the unit demand has been holding firm and ASPs are holding no longer in free fall.
Even the memory market has been holding up much better for now. Penn says that memory ASPs have been 'flat' for six months now. So, there has been some upward movement in ASPs. According to Penn, memories have been flat, and are no longer falling. The logic has been increasing, but micro is still falling, and the overall total ICs is trending up.
The impact of Apple's iPhone 3G has been minimal so far on the chip market. Penn says: "It's just one item in a very large and complex mix of products. The overall i-phone volume is miniscule."
With several advancements and announcements happening in the solar/PV segment, it may seem that the solar/PV market is taking over from where the chip market slipped. Penn says that although it certainly is a growth market for the equipment suppliers, but with still very small numbers, it cannot make up for the semicon equipment/capex slowdown.
Future Horizons had earlier forecasted 12 percent growth for the global semiconductor in 2008. With some other analysts revising forecasts, let us examine whether Future Horizons consider a revision as well.
Penn says: "If I were doing the forecast now, I'd have probably settled on 10 percent rather than 12 percent, but this is fine-tuning the maths, and not the analysis. We will not be changing our forecast at the July seminar. Our overall message is clear. The growth this year will NOT be 4-5 percent. I really do not care, if 10 percent rather than 12 percent is the final real number. We are not in the business of 'guessing the right number', rather, just getting the trends and analysis right."
Penny yet to drop
Finally, there is a need to take into account the falling cap ex, tight capacity, focus on profits, continuing strong market demand, second half seasonal effects, etc. The forecast tea leaves all seem to be pointing in the same positive direction. Has the worm finally turned for the industry? Future Horizons thinks so! It also believes that the penny has yet to drop and that the impact on the market will be dramatic.
Penn explains that low capex means less new capacity (12 months later). And less new capacity means tighter supply. Tighter supply means price increases and rationing.
In parallel, falling ASPs means less profits. Less profits means an unwillingness to invest. Low ASPs means a reluctance to supply. Eventually, either someone exits the business or they increase the price.
“Positive unit growth (it is, IC units are up 9.2 percent YTD on 2007) and a positive ASP growth (so far 2008 YTD the trend is still negative 3.9, but this will reduce in 2H at least to zero, my guess is slightly positive. It is already only half last year's decline) means strong value growth hence our belief growth will end up in the '10 percent' range,” he adds.