2010 will be a very good year for chip-makers, say analysts
VLSI Research, with even
the memory manufacturers making a profit as low capital spending
translates into longer lead-times and rising prices.
'Even memory suppliers are using the 'P' word," says Risto
Puhakka, a senior analyst with VLSI Research, "the memory
manufacturers were either already profitable in the third quarter
or are expecting to be profitable in the fourth quarter,", "the
great capex famine that started in 2008 has done wonders for chip
pricing. Low capital expenditures aged fabs faster, and inventories
quickly burned off. Since then inventories have been very low,
resulting in chip shortages in 3Q09 as seen by increasing lead-time
push-outs, as noted in recent reports from companies such as
Nokia."
While some companies have reported high inventories, which have
risen for much of the year, they are actually low by historical
standards, reckons VLSI.
The 'Inventory to Billing Ratio' is the best way to measure
inventory level, says the company, and September's inventories
equalled only one month of IC billings.
"The I:B ratio is very low compared to data stretching well back
into the early eighties," says VLSI's Dan Hutcheson, "it's not
surprising to see inventories rise since the semiconductor industry
normally moves into the critical Christmas production ramp in the
summer months. The reported chip shortages tell you there's not
enough inventory in the supply chain for the fourth quarter."
Hutcheson says low capex last year resulted in a diminishing
production capacity base which led to high utilisation rates
recently, as chip makers tried to catch up with a turnaround in end
demand, which actually started last January. It took some time for
industry executives to be convinced it wasn't just a bump. So,
lower capacity combined with low inventories is likely to continue
to keep chip prices high, which will make for a very good year for
chipmakers in 2010."
See also:
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