June 4, 2012 — At The ConFab’s opening session, “The Economic Outlook for the Semiconductor Industry,” capex was a major point of interest. Jackie Sturm of Intel, Dan Hutcheson of VLSIresearch, and Jim Feldhan of Semico all touched on it, with Hutcheson expanding on the idea of capex trends to present an entire ecosystem of semiconductor business management. The ConFab is Solid State Technology’s invitation-only meeting of the semiconductor industry, taking place this week in Las Vegas.

2012 capex will be flat to slightly up compared to 2011, Semico shows. The top-4 capex spenders in 2012 — Samsung, Intel, TSMC, and Hynix — will all spend more than they did in 2011. For other semiconductor fabs, the outlook is either nearly flat or declining spending, most notably at GLOBALFOUNDRIES and Micron.

Jim Feldhan, Semico, shared capex spending predictions for the major semiconductor makers, as compared to last year.

Dan Hutcheson, CEO and chairman of VLSIresearch, chose an inspiring title for his talk, “Beating the Silicon Cycle: Don’t just survive it…Prevail over it.” The semiconductor industry has violent, sometimes unpredictable swings up and down, he acknowledged. A combination of reacting and planning will help companies ride out these swings. If your semiconductor company misses the indicators of a downturn, you’re left with excess manufacturing capacity, and too little cash. Then, if you miss the indicators of an upturn, your company can be left at the bottom of tool suppliers’ order books, without enough product to meet demand, and losing market share.

Dan Hutcheson, VLSI Research Inc., shows the impact of the Lehman Brothers financial crisis in 2008.

While forecasts are rarely spot-on, they allow semiconductor suppliers to react quickly to market changes. Companies that are able to react quickly can dominate markets and make the most of new opportunities, Hutcheson said, using the Lehman Brothers failure as an example, clearly showing a new trend that developed week-by-week as the crisis unfolded. Hutcheson shared VLSI’s Chip Price Performance Index, which is a weekly indicator of market health against the expectations of Moore’s Law.

IC inventories are a coincident indicator, he added, as is capacity utilization:

Capacity utilization is “still crashing” in 2012, Hutcheson said, though the rate of decline started to slow in March. Capacity utilization never abated in leading-edge nodes, which is typical, Hutcheson noted. More mature nodes were hit the hardest (4X and larger). In her talk, Intel’s Jackie Sturm estimated that it takes $9-12 billion in annual semiconductor revenue to support just 1 leading-edge fab. With this factor, it’s no surprise that the semiconductor arena is experiencing consolidation.

Dan Hutcheson, VLSI Research Inc., tracking semiconductor sales in 2012: quarterly, monthly, and weekly.

IC inventories are more positive now. Semiconductor revenue per square inch (RPSI) is better than it was in 2011. The CPPI is bullish on H2 2012. All in all, the picture is “still cloudy,” said Hutcheson. Indicators were too early in April (press time for the numbers) to know if an upturn was in the offing, or just a quick spike.

Video interview: Dan Hutcheson speaks with Solid State Technology editor-in-chief Pete Singer

Want more information from this session? Read about end market demands and global change in Semiconductor industry experts look to the future

The ConFab sessions cover economic outlooks, technology trends, the foundry-fabless relationship, 3D packaging, and tool investments/obsolescence. Click on any of the keywords for a session preview. Also read chief editor Pete Singer’s blogs from the conference.

Today’s keynote address presented the "virtual IDM" concept, from John Chen of Nvidia. The next keynote address will take place Tuesday morning, with Ali Sebt, CEO of Renesas Electronics America, presenting “Smart Society, the Sensing Era and Signal Chain.”

Stay tuned to Solid State Technology for presentation highlights throughout the week.