Analyst: Wafer demand spike in 2Q is temporary

June 14, 2009 – Silicon wafer demand “rebounded strongly” in the second quarter of 2009, but look for a moderated recovery through the rest of the year and a less-than-pretty yearly picture, according to a report from Gartner.

Silicon wafer demand plummeted -34% in 1Q09, but the analyst firm says its data suggests a 50% spike in 2Q09 as inventory adjustments in the supply chain diminish, and recovery returns in Taiwan and China. “This does not represent a full recovery of wafer demand for device production,” however, cautions Gartner analyst Takashi Ogawa. The spike is simply suppliers, who slashed their inventory (as they historically have done) well below semiconductor production, now quickly rebuilding wafer inventory to normal levels.

Uncertainty still looms, but the firm still sees “a gradual recovery phase” in demand in 3Q09 and beyond, Ogawa writes. “If the industry rushes to invest on the basis of the optimistic outlook or bloated expectations, market conditions may deteriorate further if the recovery is short-lived.” Device vendors should monitor inventories while keeping operations in line with a “prudent demand outlook.”

As for the wafer vendors themselves, who too have been slashing production capacity (≤200mm), will have to watch their own ramp-up to meet perceived demand; a rapid recovery has in the past caused temporary capacity shortages, though Ogawa says the chance of this happening now is “relatively low.” Long-term cost-cutting measures should be maintained in line with a maturing market, “including the disposal of unprofitable businesses and operational cost reductions, while building up a necessary production system to meet the recovery-led demand surge,” he writes.


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