Another perfect storm is hitting the semiconductor industry in 2011 and its impact will be felt well into 2012. Jim Walker, VP, Research of Semiconductor Manufacturing and Emerging Technologies, at Gartner, gave a sobering forecast at the MEPTEC lunch forum (9/14/11, Santa Clara, CA). Inventory correction, foundry and DRAM overcapacity, and macroeconomic trends are hitting the industry. All the bad news has resulted in a significant slow down in the supply chain.
Gartner's revised forecast indicates that most likely, the semiconductor revenue growth for 2011 will be -0.1%; in 2012, the growth is projected to be 4.6%. The risk in the 2011/2012 forecast is if the economy takes a turn for the worse. The worst case forecast is -2.2% for 2011 and -4.9% for 2012. It is projected that 2013 will see a rebound as ASPs recover.
As an example of inventory correction, Walker noted that the industry saw no growth as a result of the "back to school" selling cycle and there is a reduced holiday build. Therefore, semiconductor companies' guidance for 3Q11 is well below the seasonal norm. Consumer confidence is at a 30-year low and Global Insights has said that the odds of a double-dip recession have risen from 25% to 40% in one month, said Walker. The DRAM sector has also been hit hard by reduced PC demand.
It would not be hyperbole to say that Walker's observations that ~85% of 2012 semiconductor growth will come from just three applications (tablets, smart phones, and SSDs) caused audible gasps from the audience. As Walker notes in a podcast interview (watch www.electroiq.com or my author page, http://www.electroiq.com/authors/vogler.html) for the podcast, to be posted soon) with SST, consolidation is a very real possibility in this situation.
Another of Walker's comments at the event elicited gasps. He believes that Apple's iPad/operating system is so entrenched in the market (75-77% of total market), that if competitors hope to make a dent in Apple's market share, they will have to price their tablets well below the iPad. He suggests a price in the range of $200-250-275 will be necessary to buy market share.
An interesting observation by Walker was that the industry was not particularly impacted by the Japanese quake. As result, the inventory correction has been continuing while "economic head winds mount," he said.
Walker also suggested that with respect to the transition from gold to copper wire bonding, it could be that in some applications, instead of converting to copper, it may be a better idea for some companies to go directly from gold wire bonding to a low-cost FC-type process (e.g., Cu pillar), which the industry will have to eventually do anyway as he questions the viability of wire bonding at around 32nm, 28nm, and below.
There were a few positives in the Gartner forecast. For the next couple of years the major growth markets will be in smart phones, the tablet PCs, and SSDs. These areas will start to grow a little bit in 2011. In 2012, however, the growth market for tablet PCs will be 250%. But, he cautions, if you're not in any one of these markets, there's not much happening for the rest of 2011 and the first half of 2012. "In the second half of 2012, we think the economy will start turning around and we'll start seeing growth in PCs, LCD display drivers and LCD TVs, etc.," said Walker.
-- By Debra Vogler, senior technical editor
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