IC Insights forum: Capex, chip sales, China, crystal ball

by Michael A. Fury, Techcet Group

September 20, 2010 – Bill McClean presented the IC Insights Fall 2010 Forecast Seminar September 16 in Sunnyvale, CA to an audience of 27 attendees. The 79-slide presentation covered the semiconductor business from a number of perspectives: Worldwide economic trends, electronic system sales trends, IC market trends, IC product market highlights, IC foundry trends, and capital spending and capacity issues.

Check out Bill McClean’s recent comments in Flattening semi equipment capex on the horizon, says IC Insights the podcast. Download or Play Now

I am in no position to critique Bill’s market prognostications; my own interests lie in the semiconductor process, integration and materials domains, as well as layman gee-whiz items. With that personal filter in mind, there were a number of facts and factoids that warranted being scrawled into my notebook. (By which I mean actual pen and paper, not an electronic device of any kind.)

  • Apple is consuming 20% of the global production of flash memory. The iPad is driving about 15 competitors for the 2010 Christmas season, each buying lots of components now and each hoping to capture about 10% market share (do the math…). Expect a chip unit volume slowdown in 1Q11.
  • Only 15 companies are responsible for 90% of the global semiconductor capex. The top five fabs are driving 51% of 2010 capex. Capex as a percentage of IC sales is expected to stabilize at ~15% due to fundamental changes in the industry — specifically foundries and fab-light businesses. Foundry capex for 2010 will be a record high $12.9B. The prominent entry of GlobalFoundries onto the world stage has incited TSMC to step up its capex program, which had been hovering <30% of sales, to 45%.
  • China is now the world’s largest unit market for cell phones and cars, and is #2 for PCs. Its GDP is now larger than Japan’s.
  • Despite the global recession, PC unit sales in 2009 grew 5% and cell phones grew 4%. 2009 saw the crossover in which portable PC unit sales exceeded desktops; this will never be reversed.
  • Smart phones are now 21% of cell phones, and they are huge users of IC components. The cheap cell phone market for China and India never materialized, and likely never will. High-end phones are a status symbol.
  • Best growth rate among IC manufacturers goes to Japan’s Elpida (flash memory), at 18% sequential growth in 2Q10. But five of the bottom seven companies (+1% to -7%) are also in Japan.
  • Unit chip growth for 2010 will be ~29%, the second highest in history. Unit chip volumes have decreased only three times in the last 30 years. Among IC market segments, DRAM unit growth is #1 at 79%; flash is #4 at 45% (the only growth segment during the 2009 recession, at +21%); all automotive IC segments are doing well.
  • 2010 will be the first year in which the Asia-Pacific region comprises >50% of the MPU market (est. 51%). The market share of China-owned pure-play foundries peaked in 2007 and are continuing to decline, due primarily to IP issues and reluctance to disclose. Foreign-owned foundries located in China continue to fare better.
  • Still talking about Intel vs. AMD? Over the period 2002-1H10, Intel’s net income was +$52B. AMD’s was -$7B.
  • 300mm capacity utilization for 2Q10 is at a record high of 98.4%. In 2009, the top five fabs held 56% of the global 300mm capacity; the top 15 held 92%.
  • For the transition to 450mm, the fact that there will be only 10 customers globally is a huge disincentive to the OEMs.
  • 2012 is a wild card with respect to IC forecasting. The common wisdom calls for a slowdown due to inventory build up, but McClean expects that sales will be higher than the current outlooks.

Reconstituting this body of information into a cogent strategy is left to the reader.



Michael A. Fury, Ph.D, is senior technology analyst at Techcet Group, LLC, P.O. Box 29, Del Mar, CA 92014; e-mail [email protected]

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