November 14, 2007 – Despite a sluggish 1H07 due to pricing woes, things have improved enough in the latter part of the year to bump up the Semiconductor Industry Association’s (SIA) outlook for chip sales to 3.8% growth, instead of the anemic 1.8% seen just five months ago. The outlook for 2008 is about the same as before (just under 8% growth), but 2009 looks a bit better (7.7% vs. 5.8%), and 2010 is also more optimistic (8.5% vs. 6.2%).
Looking at individual product categories, generally everything will have smoothed out to high single-digit CAGR between now and 2010, with the exception of memory — DRAMs lower (1.5%) because of pricing issues, and NAND flash notably higher (20%) as more applications fuel demand.
The clear driver of industry growth is the consumer, for a number of different product areas, most notably PCs and cell phones, according to SIA data presented in a conference call by SIA president George Scalise. PC unit shipments are seen growing at an 11%-12% clip in 2007, while cell phone shipments are expected to increase 12%, he noted. Other major growth areas in 2007 include digital TV (+50% unit shipments) and MP3/PMP players (+23% unit shipments).
In 2008, look for another 11% rise in PC shipments, with 8% growth in cell phone units. Digital TV and MP3/PMP units should slow a bit but still have growth in the teens (18% and 15%, respectively).
Scalise noted that much of the talk about growth focuses on unit shipments, which is outpacing revenues. Looking at the broad industry that trend isn’t as clear, but it certainly is in certain segments where pricing has been an issue, e.g. memory. For example, bit growth in DRAMs, historically high (averaging roughly 55%-60% annually), might soar to 90% this year, but pricing erosion has been the great counterweight of dollar sales, Scalise noted. “We’re now at about three-quarters of revenues of 1995 — but we’re shipping 300x as many bits,” he said, which indicates chipmakers have significantly improved manufacturing efficiencies and chip densities (packing more transistors onto chips), and in the end that greatly benefits consumers.
Asked in the conference call Q&A session about specific future growth drivers, Scalise noted that 2008 is an Olympic year, which should particularly benefit semiconductor demand in China and probably globally too. Also, the upcoming switch from analog to digital TV signals in 2009 in the US represents unique “event-driven demand” that should spur growth, particularly since prices for flat-panel displays (which are already significantly lower in the past year) should be even cheaper by then.
Asked what changes in the industry or beyond could throw the forecasts offline one way or another, SIA’s Anne Craib noted that the industry’s increased reliance on consumer applications means more sensitivity to macro trends that impact consumer spending, most notably oil prices and credit/mortgage industry woes.
Forecast looks a little brighter
(Revenues in US $B)
………………………2007………………….2008………………2009……………….2010
Midyear 2007………252.1 (1.8%)…….272.1 (7.9%)……..287.9 (5.8%)…….305.8 (6.2%)
Year-end 2007……257.1 (3.8%)…….276.9 (7.7%)…….296.2 (7.7%)…….321.5 (8.5%)
Major semiconductor product categories
(Revenues in US $B)
……………………………….2007……….2010……….CAGR %
Total semi………………..257.1……….321.5……….7.7%
Total IC……………………219.4……….275.9……….7.9%
MOS micro…………………56.2……….69.1……….7.1%
MPU…………………………..34.7……….43.9……….8.1%
MOS logic………………….66.7……….82.6……….7.4%
Memory……………………..59.9……….77.7……….9.1%
– DRAM……………………..32.4……….33.9……….1.5%
– Flash………………………23.1……….39.7……….20.0%
Discrete…………………..16.8……….19.7……….5.5%
Opto………………………..15.9……….19.4……….7.0%
Analog……………………..36.6……….46.5……….8.3%
Source: SIA