by James Montgomery, news editor
October 5, 2010 – Just two months after beefing up its semiconductor sales forecast because of the sector’s "roid rage," iSuppli has put those numbers on a cooldown rep, citing concern over end-user demand vs. inventories.
Like others, the firm had bounced up its forecast from initial mid-20s to >30% growth, and its August update hiked that number to 35%. But now iSuppli SVP Dale Ford sees "a significant slowdown" in consumer demand for some electronic devices, including market bellwether PCs, even as inventories build throughout the supply chain. The end result is a slight decline (-0.3%) in semiconductor revenue growth in 4Q10, and 2H10 vs. 1H10 semiconductor revenue growth of 7.8%, down from the 10.7% in 1H10 vs. 2H09.
|Global quarterly semiconductor revenue forecast. (Source: iSuppli)|
In terms of hot end markets, data processing will remain tops (38.6% in 2010), led by PCs and specifically mobile PCs including tablets. Also soaring are wireless communications (30%) thanks to smart phones. Lowest-growth markets will still have some demand: wired communications (25%) and consumer electronics (26%). In terms of device technology, DRAM leads the pack with 87%. Voltage regulators, LEDs, programmable logic devices, and data converters will all exceed 43% growth on the year.
That expectation of slowing growth doesn’t mean the market has peaked and is heading down, Ford noted. Visibility is poor and uncertainty high due to unstable economic conditions and market reports, which has led to handwringing about a possible "double-dip" scenario for electronics and the overall economy. Instead, Ford sees a "soft landing in 2011" and not "the kind of dramatic downturn seen in 2009." He currently projects 5.1% growth in 2011 (vs. 7% in the previous forecast), with quarterly data points returning to more normal seasonal patterns: decline in 1Q, improvements in 2Q and a peak in 3Q.
|Semiconductor revenue by application market. (Source: iSuppli)|
Chinese suppliers, distro houses battle
Also keeping the market hot in 2010: China, where sales from both distributors and suppliers will surge 30% this year to $33.1B, says iSuppli’s Horse Liu, manager for China research. This market is interesting as it approaches a threshold where supplier sales will soon outweigh those from distributors.
Chinese chip distributors focused on memory, logic, and analog components in 2009, and added sensor components in industrial electronics and surveillance. Suppliers, meanwhile, focused on direct-sales in core chip markets such as microprocessors (MPU) and digital signal processors (DSP). As suppliers cement their strategies to reduce reliance on distributors — and as distributors seek to solve their own problems of component shortages, lengthening lead times, rising product costs, and complex market conditions — look for the balance to shift in favor of suppliers taking the majority of regional sales in the 2012 timeframe, Liu predicts
M&A has played a big role in company-specific growth, Liu notes, with Taiwanese distributor World Peace Group vaulting "to a dominant position" not only in China but Asia overall, helped by its March purchase of compatriot Yosun Industrial Group. It has pulled nearly even with US firm Arrow Electronics in worldwide electronic component sales ($9.75B to $9.57B), with US-based Avnet in third with $9.18B; in China, WPG is first, followed by Avnet and Arrow.
Local Chinese distributors have so far exhibited "healthy growth and excellent product resources," and this makes them attractive M&A candidates for global distributors, Liu notes. He notes Texas Instruments has tapped Beijing-based SEED Electronic Technology as its local DSP distributor.
Silicon shipments still chugging
Revenues might be a tad softer than hoped, but silicon shipments are still racing out the doors — nearly 24% growth in 2010 to 8.9B total sq. in (BSI), eventually topping 12.4 BSI by 2014.
Chipmakers hunkered down in early 2010 to undo the damage done in 2009, and although visibility is still a bit murky, they should have enough orders in hand to carry them through the holiday ramp-up (3Q10) and season (4Q10), says Len Jelinek, iSuppli director and chief analyst for semiconductor manufacturing and supply. 2011 should carry over some of that demand too, with next year’s shipments rising about 13%.
300mm wafers are still the driver of silicon shipments and will continue through 2014, and expansions will be necessary to meet demand, he says. To that end, look for continued and increased emphasis on shifting to 300mm platform manufacturing, particularly for mixed-signal and analog technology, sectors that can benefit from 300mm production tools that are deemed no longer cost-effective for leading-edge device manufacturing.
Whither 450mm? Don’t look for it anytime before 2014, Jelinek suggests; even if the technology was ready to support production volumes it likely would be cost-prohibitive. A few companies and consortia continue to mull 450mm improvements, but equipment costs continue to "loom as the final hurdle toward adoption."
|Global forecast of total sq. in. of silicon by wafer type. (Source: iSuppli)|