CEO Viewpoint: Semiconductor industry recovery led by exciting new video and security applications, writes Dave Bell CEO of Intersil
The semiconductor industry is clearly on a full recovery path from the 2008-9 downturn. According to iSuppli, semiconductor spending among OEMs will post double-digit increases during 2010.
The world's top 20 OEMs are predicting an increase in semiconductor spending to about $178bn this year, a 13% increase from the $157bn spent in 2009.
The top 20 companies will account for $104bn - about 58% of all semiconductor spending worldwide.
So a recovery is clearly underway. But what kind of recovery should we expect?
See also: Q5 Interview - David Bell, Intersil
When executives were asked what shape they expect the recovery to resemble, the responses varied widely.
One-third believes the recovery will be in the form of a "W." This group foresees a dip after the current initial upward bounce. Other executives feel the shape will resemble a U, a V, a square root or even a very depressing L.
Being something of a contrarian, I place myself into the 2 percent 'other' category. I call it the "Bell swoosh recovery scenario." I believe that the strong semiconductor industry recovery will continue, but will eventually taper to a more normal growth rate by the end of 2011. I expect the eventual 'normal' growth rate will be approximately 7 percent to 8 percent annually at the end of 2011.
Let's take a look at the phases of this downturn and recovery.
First was the crisis during the fourth quarter of 2008 when the entire global economy fell off a cliff.
This was an extremely abrupt drop semiconductor suppliers came in with almost no bookings in December 2008. Following this precipitous drop came the recovery of demand, starting at the end of the first quarter of 2009.
Demand for electronics suddenly seemed unstoppable, as consumers appeared to refuse to live without new TVs, computers, cell phones, MP3 players and many other types of electronic devices.
The third phase, the period in which new market drivers take hold, is where we are now. Among other drivers, here are three significant examples that are leading the recovery.
Video use is exploding
When I say video is everywhere, I mean everywhere. One example is a regulation size and weight soccer ball with a tiny embedded camera and rechargeable batteries. The ball is obviously pretty rugged to survive on the soccer field, with the ability to transmit video over an RF link, and software image stabilisation for a consistent video stream.
It's just one example of a world tied together by millions of people making and sharing videos of their day-to-day experiences, which is obviously happening in industrialized nations today. Now this trend is spreading to the more remote parts of the world, for instance in Swaziland, Africa, where school children are learning how to use flip video cameras. Like kids everywhere, they are quick adopters of new technology - and it's exciting to see.
In the US alone the video statistics are staggering - 84.8% of the Internet audience has viewed online videos. The average viewer spends 12.2 hours a month watching video. The average length of online video is now four minutes.
The bottom line is this: there are rapidly increasing numbers of people creating more video with more types of cameras than ever before, and the demand for video is driving the need for vastly expanded bandwidth capability. Mobile phone networks that were built to carry only voice are now being strained to carry photos and video. The iPhone alone has driven a 5,000% increase in traffic on AT&T's network since early 2006, and total traffic has increased with each new generation of iPhone. This rapid expansion will continue as video applications proliferate and help drive the semiconductor market forward.
Another major trend contributing to market expansion is security. Surveillance systems are being installed in factories, stores, offices, and even homes. Different kinds of systems are being developed to meet threats that were unimaginable even a few years ago.
The numbers are impressive: IP video surveillance sales are expected to increase by 200 percent between 2010 and 2012, making security a significant growth sector.
Like it or not, our world is becoming filled with security surveillance cameras, providing a real opportunity for leading IC developers.
Dave Bell CEO of Intersil