Q1 2011 will be better than expected, according to Malcolm Penn speaking at the Future Horizons IFS 2011 this morning.
"Everyone will forecast a bad Q1 and everyone will be wrong," said Penn, "ASPs have been increasing for the last four quarters – the CEOs deny it – but it’s true."
Yesterday ST CEO Carlo Bozotti forecast a 7-12% drop in ST’s sales for Q1.
"I don’t think anyone is forecasting the Q1 market to be minus double digits," said Penn, who said that his company’s official Q1 forecast is -2% but added: "My personal feeling is that it will be at least flat and possibly positive."
"For sellers it's going to be a good market with shortages, allocations, price rises - all the classic things," said Penn
Underlying that is a broken industry model which means that supplies of many essential parts of the supply chain are tight now and will be tight going into 2012.
"The lead-time on capital equipment is now one year," said Penn pointing out that means you not going to increase output for two years from making the decision to order new production equipment.
So tight capacity should keep ASPs rising. But the industry doesn’t believe that, said Penn, because the industry assumes that ASPs always drop.
The industry’s self-perception is ‘awful’, said Penn. "From the CEOs to the trade bodies they’re doing a fantastically good job of talking the industry down."
That is compounded by a broken industry supply chain where people talk to the person next to them in the chain, but don’t talk either to the end customer who’s driving demand, or to the people at the bottom of the supply chain who supply the basic materials and tools without which nothing can happen.
The result of this supply chain disaggregation is screw-ups like the Nissan car factory stoppages last year.
Penn slammed the WSTS decision to stop publishing a book-to-bill ratio, saying it was purely a political decision forced on the WSTS by the CEOs to stop that data reaching the financial analysts.