When the CEOs of major constituents of the chip business publicly announce their expectation of recovery, the chances are that the horrendous slump in demand in Q4 08 and Q109 took the industry to the bottom in one sharp jolt, and that the trend is now upwards and to the right.
"We are seeing signs of a pick-up in technology purchases from the current low run rate", says Eric Meurice, CEO of ASML the world's No.1 provider of lithography machines for the semiconductor industry.
"We are seeing signs that a bottom in the PC market segment has been reached," says Paul Otellini, CEO of Intel, the world's largest IC maker, "I believe the worst is now behind us from an inventory correction and demand level adjustment perspective. We saw order patterns strengthen throughout the quarter."
ASML's Meurice is forecasting a return to normal order levels in the second half of the year.
"We estimate a normalised pattern of technology transitions to yield between €400m and €500m quarterly sales for ASML", says Meurice, "and, in view of the current technology transition activities by our customers, we expect to reach this level some time during the 2009 second half."
The 'normalised technology transitions' are: the ramp of the NAND flash 35nm node, the ramps of the DRAM 55nm node, and the ramp of the logic 45nm node - all of which require immersion scanners.
"We've got three or four months of fairly good trending in terms of where the business is", says Intel's Otellini, "the global environment hasn't changed, but our ability to look and plot some points, historical points, has given us the confidence to essentially say that we've seen the bottom, the industry's seen the bottom, and I feel pretty comfortable in that, having done this for more than a few years."
Positive signs which ASML's Meurice pointed to were a firming up of foundry capacity utilisation and the progress of the Taiwanese DRAM consolidation initiative.
Hi David,
could you please do a post on your view on what is Broadcom doing which is so right?
Their growth is spectacular, again outpeforming the market in 2008: 22% growth vs TI 10% decline!
Thanks
Well Anon, Scott McGregor's a sharp cookie, Broadcom is shrewd at identifying, integrating and extracting value from acquisitions, and Broadcom's now on the Nokia approved supplier list, but the main reason could be a change in the wireless market which sees people less buying a chunk of silicon from the likes of TI, and more looking for SOCs/ASICs with IP and software included and Broadcom does this rather well across a range of wireless technologies.
Hi David,
I really appreciate your blog. It seems that you have a broad overview of what's going on in the Semiconductor industry. I saw several articles on the internet about the top 50 player list that may deeply be shaked up without further indications.
Therefore, It would be interesting to see a post on your blog about this subject with bids (from you and maybe the readers ) on the ones that may disappear and the ones that will emerge as stronger players.
Thanks.
Thanks Captain Clark, your comments are much appreciated. Forecasting winners and losers is the trickiest task in the industry. But I'll give it some thought
David, I don't really know about the likes of ASML or about DRAM/NAND (the latter case is made more complex by the lack of capacity expansion and the extreme importance of ASPs rather than volume) but when it comes to logic I think it's fair to say this is just a one-time inventory bounce.
Inventory got depleted at every level of the supply chain starting in Q4, and now in some parts we are at the minimum that can be sustained without substantial risk of lost sales. Both PC and handheld guys are saying this. So production and sales are ramping up again - but the catch is consumer demand isn't actually improving, and revenue can't recover to anywhere near its original level until it does. Sorry for breaking the mood but I fear we're not out of the woods yet - ah well!
Arun, I'm sure you're right. But when you get TSMC announcing renewed demand both from Chinese OEMs and also for AMD's new GPU; ASML quoting the 45nm logic transition as a driver of increased stepper demand; the SEMI book-to-bill trending upwards for the first time in six months; the Philadelphia SOX up over 30 points in a month; Intel calling the bottom of the PC market; Apple placing huge NAND orders, big expectations for the second half netbook market, not to mention President Obama's optimism that the macro-economy is past its worst, it's permissible to allow oneself a glimmer of optimism that this is more than just an inventory correction.
Another area seeing growth for the first time since October/November (after catastrophic decline) is certain sections of the quartz crystal industry, a key supplier to Telecommunications Infrastructure. Lead times for some of the basic raw materials required (especially HTC ceramics) have suddenly extended by 50-100%. Now, this is partly because the suppliers sacked half their work forces when the crunch arrived, and so any increase has caught them on the hop; but some of it is definitely real. There is a genuine feel of recovery in the air, and it's not just CEOs "talking it up" - it is real and probably sustainable
Thanks Dr D, that's interesting