September 25, 2009 – Silicon wafer demand bounced back significantly (79%) in 2Q09 thanks to inventory rebuilds, but will soften in 4Q with "moderate production cutbacks" before gradually upshifting to an expansion mode again, according to a Gartner analyst note.

The assumed bottoming of semiconductor demand fueled the inventory rebuild, adding to strong demand from electronics (primarily for PC and cell phones), helped by the Chinese government’s stimulus efforts, writes Gartner analyst Takashi Ogawa. Those wafer inventory rebuild efforts peaked in June and July, he says; seasonal trends will keep demand around 12%-13% through 3Q09. Overall his full-year outlook for wafer demand (-23%) is improved from his previous one (-30%).

But that return to seasonality also means production pullbacks will happen in 4Q — in particular, there are concerns of decline in demand from Taiwanese foundries, Ogawa notes. And chipmakers continue to close and consolidate ≤200mm fabs to maximize production efficiencies and profits, while revamping their 300mm operations.

Ogawa’s advice to wafer suppliers: quickly get a handle on demand outlook for each diameter class and set production accordingly, and find ways to cut operational costs to improve profitability in 300mm business. "It is also important to take such measures to put a brake on the accelerated downward price trend by controlling capacity expansion and reinforcing customer relations," he writes.