Global Semiconductor Report: Strong 2011 predicted

 
The market fundamentals for the semiconductor industry are strong, but industry pessimism it at its "highest since the Lehman Brothers collapse."

So says Malcolm Penn at Future Horizons  Ltd.

"November’s WSTS results were distorted by a billion dollar downgrade (restatement) to the year-to-date numbers.  These things do happen from time to time, but one of this size quite rare.  The overall impact was to reduce the year to date market by around half a percent; not so bad per se but, due to its leverage, it reduced the overall year-on-year market growth by a couple of percentage points!

"As a result we have downgraded our 2010 forecast to (a still very reasonable) 30 percent.  This falls into the category of ‘tweaking the final number’ though … it is not a change to our underlying forecast sentiment or outlook."

Penn noted that "re-statements aside, what then for the outlook for 2011?  Looking at our four horsemen of the semiconductor apocalypse:

1.  Economy – grew ~4.8 percent in 2010 (IMF) and is forecast to grow 4.2 percent in 2011
2.  Capacity – effectively sold out; with Cap Ex spending now flat and the book-to-bill below parity
3.  ASPs – have been increasing now since Q2-2009 … six quarters in a row
4.  IC Units – are in a ‘steady as you go’ mode with NO excess inventory and NO excess capacity to build any"

"In short, whereas this time last year the problem was getting any orders, the problem today is getting semiconductor product.  The chip market fundamentals really do not get any better than this, yet industry pessimism it at its highest since the Lehman Brothers collapse.

What concerns us is the industry perception that moving from a 30 percent growth year to single digits in 2011 heralds yet another classic chip market boom turned to bust.  It does not.  Do not be misled by the single digit growth number … 2011 will be a very strong year for the chip industry. 2012 will be a double-digit boom."

Email: 

mpenn@futurehorizons.com