by James Montgomery, News Editor, Solid State Technology
June 11, 2008 – The SIA has lowered its growth expectations for worldwide semiconductor sales to 4.3% (almost half the 7.7% it said six months ago), but the industry is actually doing quite well outside of the memory segment and is still showing immunity to broader US macroeconomic concerns, according to an updated forecast.
The new SIA forecast pegs worldwide semiconductor sales reaching $266.6B in 2008 and $321.4B in 2011, for a 6.1% CAGR, slightly off the 2007-2010 CAGR pace of 7.7% from the previous forecast in November 2007. By individual years, the 2008 outlook is about half of what the SIA originally thought it would be; 2009 is seen slightly lower, and the 2010 outlook essentially the same.
This is a “very interesting time” in the IC industry, proclaimed SIA president George Scalise, speaking in a Webcast presentation. Despite macroeconomic uncertainties IC sales are continuing to grow, and will keep in the mid- to high-single digit range through 2011. Taking away the slumping memory segment, semiconductor sales are up about 12.4%, which he called “remarkable.” He called DRAM “our biggest problem right now,” with monthly sales tracking at -30% Y-Y and 1Q down >50% due to pricing pressures. Demand is still very strong, though (bit growth is >50% Y-Y). NAND sales are up significantly, he said, about 31% Y-Y.
From a device-category perspective, “it’s very much a mixed bag,” Scalise said. Memory sales are way down Y-Y while bit growth is way up. Meanwhile, microprocessors (14% of total chip sales) are “very strong” with unit sales up 15% Y-Y, and projected >10% growth over the next two years. Analog products (also 14% of total chip sales) are seen growing 5.3% CAGR through 2011, driven by consumer/communications sectors, and logic (standard and special-purpose) is seen growing 10.8% in 2008.
SIA spring 2008 forecast, breakdown by product segment. (Source: SIA
Capacity utilization is still strong, nearly 90% overall, with foundries almost at 94% and leading-edge nearly 97%, Scalise noted. That coupled with a projected drop in 2008 equipment capex to ~13.5% of sales (vs. 16.4% a year ago) suggests “a good balance between supply and demand,” he said. Though speaking briefly about equipment sales, he reiterated the SIA’s frequent concern that the amount of tools shipped to the US has fallen to 18.5% of all global destinations (vs. 36% in 1997), and is likely to dip to ~15% by 2010.
Growth in end-markets isn’t seen waning anytime soon either, Scalise said, pointing to forecasted growth in the teens for PCs, cell phones, digital cameras, and nearly 30% growth in LCD TVs. There’ve been more than 300M new consumers in the worldwide market in the past 10 years or so, and he expects another 300M in the next decade, many of whom are in higher-growth global regions and are first-time buyers. Meanwhile the replacement cycle for many end products (e.g. PCs/laptops and phones) is shortening too.
Semiconductor demand drivers in 2008. (Sources: SIA, JP Morgan, iSuppli)
During the Webcast Q&A, Scalise expanded on the troubles in the memory segment, noting that it’s easier for a foundry to put NAND capacity into place and speed products to market, and that such capacity is now more fungible (to DRAM and back) than it used to be — both of which are contributing to more capacity coming online and more pricing pressure. He branded both NAND and DRAM as “commodity” products with typical problems of such markets as very large volumes and very heavy price pressures. In the DRAM segment, he noted, “tremendous cost gains” and huge bit growth have been largely drowned out by pricing woes — sales in 2007 ($33B) were just three-quarters what they were in 1995 ($42B), yet represented roughly 300x bit shipments, he pointed out. It may take consolidation to restabilize pricing in both markets, he said, as those who are willing to make necessary investments “to be major players” will “do what they can to take a major share of the market.”
On the other hand, the industry’s global reach & influence is largely the reason why US macroeconomic softness is unlikely to have any impact on the IC industry. Scalise scoffed at slumping consumer confidence levels, which “seem misaligned to the reality of what actually takes place in the market.” People are reallocating their discretionary spending to electronics products, he said, largely because the value they get for their dollar today is much more than it used to be. He also noted that much of the IC/electronics demand comes from outside of the US where growth in many regions is much better (e.g., 8%-10% in China and India).
Speaking briefly about the upcoming US election, Scalise noted that the two party candidates are “somewhat supportive” of issues important to the SIA, including ways to fund basic research in the physical sciences, immigration reform, and more competitive tax policies (e.g. making permanent tax cuts enacted in 2003) which are probably the most divergent point between the candidates. “They make it very attractive for investment in the US, and we need that,” he said, noting that the vast majority of IC manufacturing (and thus equipment shipments) are outside the US, and domestic ability to maintain leading-edge development at universities (and the industry’s ability to expedite that technology) make this an important issue to be fleshed out between now and the November election. — J.M.