IFS 2010Annual semiconductor industry forecast seminar

Citation

(2010), "IFS 2010Annual semiconductor industry forecast seminar", Microelectronics International, Vol. 27 No. 2. https://doi.org/10.1108/mi.2010.21827bac.002

IFS 2010Annual semiconductor industry forecast seminar

Article Type: Conferences and exhibitions From: Microelectronics International, Volume 27, Issue 2

Future Horizons held one of their regular semiconductor industry forecast seminars in London on 26 January, and CEO Malcolm Penn welcomed all the many delegates to the event with the news that the global economy has pulled out of recession. However, stabilisation is still uneven and recovery is fragile, especially in the UK. Malcolm has been in the business since 1962, so he knows a thing or two, and with his experienced team, which include Mike Bryant and Alan Brown, it has been suggested that no other analysts have such a depth of experience. One could not possibly disagree.

The IMF reports that the world GDP is to be 2.5 per cent by July this year, up from −1.4 per cent in July 2009. Although all economies are now recovering, there are big regional variances. In 2009 World Output was $60 trillion, and it was the established economies that were the hardest hit, but all is positive for 2010. China about to become the world’s second biggest economy growing twice as fast as anyone else. When one talks about the “World” it is no longer based on what is happening in the states, it is now what is happening in China. Europe is not a world economic player any longer, and the forecast for the Eurozone recovery in 2010 is 0.25 per cent GDP growth, against 2 per cent in Japan, 1.5 per cent in the USA and 9.0 per cent in China. India is looking at 6.4 per cent. The business climate in Europe is at its lowest for five years, with the UK, Italy, France, Portugal and Spain seeing slowing economic activity. It is anticipated that interest rates will rise later in 2010, reflecting the balance between fuelling the next bubble and triggering inflation, and stalling the recovery and triggering deflation.

Latest IMF figures are shown in Table I.

Elsewhere, the USA is bouncing back from the recession very strongly, and there is government stimulus in Japan, but yen is very strong, up 40 per cent, and Japan will be overtaken by China this year. In Europe confidence is not very high, with the euro being overvalued. ECB are set to raise interest rates later this year.

Industry forecast and outlook

This time last year Future Horizons took a judgement on the future, and their optimism was optimistic enough. The economy lagged the chip market by six months, as the dynamics of the chip market is different to the world market. As a result everything was cut back much too far. We are going into 2010 in a growing situation, with 20 per cent growth for 2010 says Future Horizons and that is going to be wrong, it is going to be higher, with 30 per cent being entirely possible.

It is happening as they said it would for the last 12 months so one perhaps has no reason to doubt it.

The chip market has its own momentum; there is no correlation between the world economy and the IC chip industry. Investor confidence is quite strong, about average. Chip fundamentals are in very good shape, but we are starting the recovery with shortages, and average selling prices have stopped falling, with inventory levels at an all time low. So, we have a nice recovery profile.

One should base unit demands on a figure of 10 per cent per annum, this is the average. There is a 12 month period between investment and return right now and we need to be looking three years ahead. Memory prices have doubled in the last six months. It is a $60 billion market, with a $20 billion profit.

Market drivers

PCs and mobile phones are recovering, but automotive and consumer markets are still slow. The forecast for 2010 is up 22 per cent. The outlook for 2011 and beyond is+28 per cent, for 2012+18 per cent, for 2013+3 per cent, for 2014+12 per cent, and 2014 will the start of the next cyclical recovery. Given the 2010-2011 fab shortage, the outlook for 2010-2012 is wonderful.

Industry issues include the avoidance of Fab-Lite, by staying IDM. A small in-house fab can never be cost effective, so the answer lies in building a joint fab with a consortium of competitors, with the advantage that, if run and operated properly, it will have the advantages of a foundry, with the benefits of and IDM and one will have control of ones destiny. Otherwise someone else will.

The average age of the top 40 fabless companies is over 20, so being fabless means that one could get to market more quickly.

Europe’s market share of the semiconductor market is declining, we had 13.3 per cent in 2009, against 15.4 per cent in 2008, so we are on track to have only 5 per cent world-wide market share by 2014. This is not the answer, if any form of manufacture in Europe is to be maintained. Malcolm wondered just what is wrong with Europe’s chip executives, governments, and EU trade associations, as going offshore and going to Fablite is NOT the answer.

If Malcolm tells us that the first snowdrops have been sighted, then its time for everyone to get their lawnmowers serviced.