Price wars have cost the semiconductor industry $23bn in lost revenues over the last two years, $18bn in 2007 alone, it was said at IFS2008, the annual forecast seminar run in London last week by Future Horizons.
"Because of price wars between AMD and Intel, the microprocessor market lost revenues of $5bn in 2006, and $6bn in 2007," said Malcolm Penn, CEO of Future Horizons, "and the DRAM people lost $12bn in lost revenues last year by insane competition. If there hadn't been this madness on ASP the market would have grown 12 per cent in 2007 instead of 3.6 per cent. The temptation in the chip industry is to buy market share today and worry about profits tomorrow."
Nonetheless Penn expected more sensible DRAM pricing policies in 2008. "We expect memories to stop their bleeding-to-death curve and return to the normal 30 per cent learning curve."
Although the last three years for the chip industry have been "pretty horrible", according to Penn, he pointed out that the semiconductor industry's CAGR over the last five years was 12.8 per cent - not far off the industry's historic norm of 15 per cent. "One good year of 28 per cent growth makes all the difference," said Penn.
For European semiconductor manufacturing the prospect is decline. "There is no end in sight for Europe's market share decline," said Penn, pointing out that European companies' market share peaked at 23 per cent in 1998 and is now down to 16.3 per cent, below the 17 per cent level of 1983 which triggered the Megaproject and JESSI.