Tag Archives: Semiconductor

Market Analysis

Semiconductor Inventories Rise But Don’t Cause Alarm Yet

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Chip suppliers are reporting rising inventory, however, due to an expected increase in demand during the coming months but the swelling stockpiles do not represent a cause for concern in the industry at present with demand, the swelling stockpiles do not represent a cause for concern in the industry at present. Experienced semiconductor industry analysts from iSuppli Corp. confirm this increase in demand.

Midway through the second-quarter reporting period, total chip inventory among the approximately 35 semiconductor component manufacturers tracked by iSuppli climbed to $9.6 billion, up a strong 9 percent from $8.9 billion in the first quarter. This was way better than the seasonal average of 3.2 percent.

Likewise, average Days of Inventory (DOI) grew, increasing by about four days during the period to 73.2 days, up 6 percent from 69.3 days. This is slower than the historical DOI seasonal increase of 9.6 percent, or 6 days.

All said, the numbers suggest a common theme for the semiconductor industry in the second quarter of record revenues, profits and gross margins. Such indicators, along with positive revenue guidance for the third quarter, are instilling confidence in managers to increase inventories for the second half of the year.

“Across the semiconductor market, management comments in earnings announcements have been extremely positive, citing strong results in various end applications and geographies,” said Sharon Stiefel, Researcher (Semiconductor Inventory & Manufacturing) at iSuppli. “The solid second-quarter results—based on higher-than-usual seasonal revenues, favorable Average Selling Prices (ASP) and innovative new products—are allowing companies to finally relax their vice grip on inventories.”

Given the drastic rise in demand, however, semiconductor suppliers are finding it difficult to restock to pre-recessionary levels. iSuppli’s market research analysis has determined that products being shipped are intended to meet current orders and not for placement into inventory.

Consequentially, the current backlog is driving many semiconductor suppliers to increase capacity, although conservative capital spending appears to be the norm. Instead of being committed to long-term capital investments for new facilities, suppliers often are investing with a lot of caution in equipment to relieve constriction points in production. The exceptions to the rule are the large corporations like Intel Corp. and Samsung Electronics Co. Ltd. who have enough cash to invest, the economic downturn notwithstanding.

Overall, however, the increase in inventory reflects a justifiable build, and iSuppli is not concerned over an inventory bubble. And with the market now less volatile, iSuppli believes that semiconductor companies will gradually return to more normal operating conditions and inventory levels over the next few quarters.

Market Analysis

Semiconductor Revenue Expands by Record Margin in 2010

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Semiconductor Revenue Expands by Record Margin in 2010 The global semiconductor market will achieve the largest dollar increase in its history in 2010, courtesy of a boom in DRAM and NAND sales that is benefiting memory suppliers, according to a preliminary forecast from the market research firm firm iSuppli, now part of IHS Inc. (NYSE: IHS). Worldwide semiconductor revenue will amount to $304 billion in 2010, up from $229.5 billion in 2009. This represents growth of 32.5 percent for the year. Percentage growth was higher in 2001 than in 2010, when revenue rose by 36.7 percent. However, revenue increased by $74.5 billion in 2010, a record increase that shattered the previous benchmark expansion of $59.2 billion in 2001. “While many observers expected the semiconductor industry in 2010 to achieve a solid rebound following the deep drop of 2009, the actual growth far outstripped all expectations,” said Dale Ford, senior vice president, market intelligence services for iSuppli. “The enormous expansion in semiconductor revenue was based on renewed demand for electronic equipment, such as computers, televisions and cell phones. However, semiconductor sales in 2010 are set to rise at more than three times the rate of electronics equipment revenue. This augmented growth is being driven by a range of multiplying factors, including inventory rebuilding, upward price pressure due to a supply/demand imbalance and an increase in the average semiconductor content of major electronic products.” Boom times for chips The semiconductor resurgence of 2010 is both broad and deep, as illustrated by results including: •Every major category within the semiconductor market, with the exception of NOR flash and specialty memory, is projected to achieve double-digit revenue growth in 2010. •Despite ongoing economic turbulence and uncertainty, the semiconductor industry achieved six sequential quarters of growth through the third quarter of 2010, marking the longest period of continuous growth since 2004. •The key DRAM and NAND flash memory market segments achieved 80 percent and 40 percent growth, respectively, leading the industry boom. •Out of 150 leading semiconductor suppliers tracked by iSuppli on a quarterly basis, an amazing 90 percent is expected to achieve revenue growth in 2010. Happy memories of 2010 The tremendous expansion in DRAM and NAND sales is benefiting the leading memory suppliers, causing many of them to exceed the expansion of the overall semiconductor market in 2010. Memory suppliers Hynix Semiconductor Inc. of South Korea and Elpida Memory Inc. of Japan are set to achieve revenue increases of 69.3 percent 74.2 percent, respectively-the largest growth among Top 20 semiconductor companies based entirely on organic growth. This will cause Elpida’s ranking to jump five spots, rising from No. 15 in 2009 to No. 10 in 2010. Hynix advanced one place to No. 6. Samsung Electronics Co. Ltd. of South Korea also is benefiting from the dramatic growth of the memory market. Company revenue is expected to surge by 60.8 percent, causing its market share expand to 9.3 percent, up 1.7 points from 7.6 percent in 2009. The urge to merge Growth among individual semiconductor suppliers in 2010 also was driven by mergers and acquisitions. Merger and acquisition activity in 2010 resulted in triple-digit growth for Renesas Electronics Corp. and Micron Technology Inc., allowing them to rise to No. 5 and No. 8 in the rankings, a jump of four and five positions, respectively. Renesas Electronics was formed by the merger of Renesas Technology Corp. and NEC Electronics Corp., which were ranked No. 9 and No. 12 in 2009 before their merger. Micron Technology completed its acquisition of Numonyx in 2010. Semiconductor surprises A deeper examination of the dramatic growth in the semiconductor market in 2010 yields some surprising insights. Despite the relatively modest growth of worldwide car sales in 2010, the automotive semiconductor market is projected to achieve the highest growth of all major chip application markets with growth of 41.1 percent. This will vastly exceed the growth of the second-fastest growing segment, the data processing semiconductor market, which expanded by 36.7 percent largely because of the red-hot DRAM segment. On the other hand, regardless of all the headlines showing the growth of smart phone shipments, the wireless communications segment will see the lowest overall growth among the major chip application markets, with semiconductor revenue rising by only 24.4 percent in 2010. Americas market rises again In another surprising outcome, chip sales to the Americas market are expected to see the highest growth of all worldwide regions in 2010 with an expansion of 38.4 percent. After years of leading the world in growth, the Asia-Pacific region in 2010 is projected to drop to second place in 2010, with 37.6 percent growth. On the other hand, companies headquartered in the Asia-Pacific region should capture in 2010 the No. 2 spot in overall combined market share. As a group, Asia-Pacific companies are expected to grow by 46.6 percent and move past the Japanese suppliers, who are projected to rise by 27.9 percent as a group, to become the second-largest regional faction of chip makers in the world following the Americas. Semiconductor winners and losers Marvell Technology Group Ltd. of the United States in 2010 is expected to achieve organic revenue growth of more than 43 percent and jump five places to the No. 18 spot. Qualcomm Inc. and Advanced Micro Devices Inc. (AMD) of the United States and Sony Corp. of Japan have experienced revenue growth notably less than the overall market and will slip three to four positions in the rankings in 2010. After a number of years of dramatically outperforming the market, MediaTek Inc. of Taiwan fell back to earth in 2010, as it will barely achieve revenue growth at 1.2 percent, the only company among the Top 20 to not achieve a double-digit increase. The company is expected to slip to No. 19 in the rankings, down from No. 16 place in 2009. With all of the market share moves among the Top 20 suppliers, only one company is at risk of dropping out of the list of 20. At this point, iSuppli projects nVidia Corp. of the United States will retain its ranking at No. 20. However, ROHM Semiconductor is competing for the final slot among the Top 20 and the final outcome should be very close. Soft landing in 2011 While growth in electronics revenue is expected to continue in 2011, the multiplying factors that propelled growth in 2010 will lose their potency next year. As a result, iSuppli is projecting a soft landing for the semiconductor industry in 2011 with 5 percent annual growth.

Market Analysis

iSuppli Trims 2010 Semiconductor Forecast Amid Softening Demand Rising Stockpiles

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With consumer demand slowing and inventories rising, the market research firm iSuppli Corp. is trimming its 2010 semiconductor revenue forecast to 32 percent, down from its previous outlook of 35.1 percent.

Global semiconductor sales now are expected to amount to $302 billion in 2010, up from $228 billion in 2009. Despite the reduced outlook, 2010 still will be a year of impressive growth and record-setting revenue for the semiconductor industry. Revenue in 2010 will rise by about $74 billion compared to 2009 and be almost $28 billion higher than 2007, the previous last peak year for semiconductor revenue, according to iSuppli’s semiconductor industry analysis.

iSuppli now expects that revenue in the fourth quarter will decline by 0.3 percent compared to the third quarter, the first sequential decrease since the market collapse in the fourth quarter of 2008 and first quarter of 2009.

“There has been a significant slowdown in the second half in consumer demand for some electronic devices, including PCs,” noted Dale Ford, Senior Vice President (Market Intelligence) at iSuppli. “Meanwhile, inventories have been building throughout the semiconductor supply chain. These factors will conspire to cause a small sequential decline in semiconductor revenue in the fourth quarter.”

Largely because of this fourth-quarter decline, global semiconductor revenue in the second half of 2010 will rise by 7.8 percent compared to the first half of the year. This has reduced from 10.7 percent growth in the first half of 2010 compared to the second half of 2009.

The leading electronic equipment market driving demand for semiconductors in 2010 will be the data processing area, a category dominated by PCs. With shipments of mobile PCs—including tablets—continuing to soar in 2010, semiconductor sales to this area will rise by 38.6 percent. The second-strongest growth area will be wireless communications, fueled by booming demand for smart phones. Global semiconductor sales to the wireless communications area will rise by 30 percent in 2010.

Even the lowest-growth markets are expected to generate impressive semiconductor consumption in 2010. Wired communications and consumer electronics will drive semiconductor revenue growth of 25.4 percent and 26.5 percent, respectively, in 2010.

In terms of specific semiconductor products, the hottest items in 2010 will be DRAM, voltage regulators, LEDs, Programmable Logic Devices (PLDs) and data converters. Revenue for each of these products is projected to grow by more than 43 percent in 2010. DRAM will lead the group with 87 percent growth on the strength of the soaring PC market.
While the industry outlook remains cloudy and revenue will contract in the fourth quarter, iSuppli does not believe this signals the start of a significant downturn in the global semiconductor market.

“Unstable economic conditions and worrisome market reports continue to create an environment of poor visibility and ongoing uncertainty in the electronics industry,” Ford said. “This has led to frequently expressed concerns regarding a potential double-dip downturn in both the overall economy and in the electronics and semiconductor industries. However, based on its most recent analysis of the electronics supply chain, iSuppli expects the chip business to experience a soft landing in 2011 and not to suffer the kind of dramatic downturn seen in 2009.”

Global semiconductor revenue in 2011 will rise by 5.1 percent, iSuppli predicts. Sequential quarterly growth in 2011 is projected to follow a more normal seasonal pattern compared to 2010, with declining revenue in the first quarter followed by improving sales that will reach a peak in the third quarter. The long-term growth expectation is for average annual growth of slightly more than 4 percent between 2010 and 2014.