September 16, 2011 — Bill McClean presented the IC Insights Fall 2011 Forecast Seminar (September 15, Sunnyvale, CA) to an audience of 33 attendees. The 70 slide presentation covered the semiconductor business from a number of perspectives: Global economic trends, electronic system sales trends, semiconductor market status and forecast, and capital spending and capacity trends.
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 captured and passed along.
Semiconductor industry growth:
After 32% semiconductor growth in 2010, the 2011 forecast is for 5% semiconductor growth, which encompasses 4% IC growth.
The US Purchasing Managers Index has historically been a good leading indicator for semiconductors. It is lately tracking current semiconductors and for now is not leading. The global PMI, meanwhile, shows the hallmark sine-wave symmetry of market cyclicality — and through 2011 it’s been heading down, to now just a hair above the baseline value of 50, below which indicates contraction.
The 2012 semiconductor forecast is highly dependent on global GDP. For example, semiconductor growth would be -5% to 0% if the GDP is 2.5%-2.8% — just barely above a recession — or >10% growth for GDP =3.8%. The long term IC growth CAGR of 9-10% remains intact.
The IC industry is effectively closed to new major manufacturing startups.
Capital expenditures:
Capital spending was up 106% in 2010 over the 2009 low. The 2011 forecast is for another 13% growth, before an 8% decline in 2012. Within that 13% capex growth in 2011, there’s a schism: capex for the top 10 fab companies is growing 21%, while the net for all other fabs combined is -5%.
Actual capital spending is typically greater than the 1Q announced forecast for each fab company. In 2011, though, the actual spending is tracking below the 1Q forecast, reflecting uncertainty.
Overall capex as a percentage of sales will hit 18% in 2011, and is forecast to settle down to 15% in 2012. Capex as a percentage of sales is forecast to be 18% for DRAM and 33% for flash. For foundries, this figure is forecast to be 37% for UMC, 50% for TSMC, 61% for SMIC and 146% for GlobalFoundries.
Cutbacks in capex for 2012 will likely come from the foundry sector.
Spending for 450mm is expected to start showing up after 2013. Technology delays in moving to 450mm, however, will delay the next major cost reduction phase for IC manufacturing.
End applications:
In 2011, China will be the #1 global consumer of PCs, cell phones, automobiles, and digital TVs, ahead of the US. This is largely attributed to their economic stimulus program.
The tablet PC is too new to project its long-term effect, but for 2011 tablet PCs are being bought instead of laptops, rather than in addition to laptops. Expect sales incentives for laptops in 4Q11. Meanwhile, Apple has already pre-announced new tablet functionality that will obviate the need for a laptop. This is potentially bad news for Intel.
Smart phones grew 56% in 2010, with 60% growth projected for 2011.
Government machinations:
It is possible that the White House could reduce interest rates on all Fannie Mae and Freddie Mac home mortgages to 4% without Congressional approval, providing a huge economic stimulus that could reduce mortgage defaults. Watch for this in 1Q12, synchronized with the election cycle.
In the Civil War movie Gettysburg, the competence of Congress was described thusly: "They couldn’t pour pee out of a boot if the instructions were written on the heel." You may safely assume I liked that enough to repeat it — and I don’t disagree.
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].