Thoughts on the News: Mixed Signals are Better than the Alternative

By Jeffrey C. Demmin, contributing editor
At least some of the news is good these days. There are still plenty of stories highlighting industry woes, but for the first time in several months, you don’t have to look particularly hard to find good news. Sub-cons are showing signs of life, for example, and 3D continues to gain steam.

Reports from Taiwan show some of the largest assembly and test service providers seeing double-digit growth in sales on a month to month basis. Among back-end service providers for display driver ICs, Chipbond Technology and International Semiconductor Technology (IST) report over 40 percent growth for their sales. KYEC, which focuses on memory products, saw a 20 percent growth in sales for February. The monthly ups-and-downs should not be extrapolated out linearly, of course, but it’s better to have that spike pointing in the right direction. Some of the sub-cons have even revised their Q1 guidance in the positive direction.

Looking at a longer time scale, SEMI released its numbers for semiconductor manufacturing equipment sales in 2008, which registered at $29.5 billion, a 31 percent drop compared to 2007. One anomaly in the data was the uniformity across sectors, with wafer fab tools dropping 31 percent, packaging equipment dropping 28 percent, and test equipment lagging slightly at a 32 percent drop. I’d be willing to be that that is the most uniform it has ever been across those three areas. Whether going up or down, there is usually some lag time between the segments. Speaking of bets, I would NOT have bet that North America has passed both Taiwan and South Korea in semiconductor equipment purchases. Taiwan fell by over 50 percent, giving the top spot to Japan. North America dropped by “only” 14 percent to surpass South Korea, which fell by 33 percent. I would expect North America to drop out of that #2 spot before too long, as the memory markets especially come back, but this is a useful reminder that there is still a semiconductor manufacturing industry based in the U.S.

One bit of interesting analysis came from Gartner in a recent report on the DRAM markets. Andrew Norwood, Research VP at Gartner, showed how the current downturn in DRAMs is not as bad as some previous ones. The current trough has lasted 9 quarters and has seen revenues drop 64 percent with average selling prices (ASPs) down 85 percent. The previous two downturns, in 1996-98 and 2000-03, have both been longer and with greater percentage drops in revenue and ASPs. On the other hand, the cumulative losses this time around by DRAM suppliers

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