“This is what we said in January – 8.5% growth for a $364 billion market,” said Penn. What he’s saying now is that the best we can hope for is 2% growth for a $343 billion market and that “growth could even be down at 1% if Q3 is low, said Penn.”
As the year unfolded, the 8.5% January forecast was quickly quashed. “Q1 was almost down 5% with most of the hit taken in March,” said Penn, “March should have bee a strong month but turned out to be very poor.”
Q1 was down 4.9% at $83 billion; Q2 was up 1% at $84 billion; Q3 could be 5% up at $88 billion and Q4 could be down 1% at $87.3 billion.
What hasn’t changed is the unit growth which has grown for 14 successive quarters. For 29 years, unit growth in the semiconductor industry has been 10% CAGR, so the current downside driver for $ market growth is the level of ASPs.
What is lagging behind the historical trend is capex. Penn pointed out ghat the industry is spending half the historic ratio of capex vs sales. Currently front end capex is running at 7% of sales – half the historical level.
Capacity is now added only to order. It is not added speculatively – only if a customer has given a commitment to use it will foundries add capacity.
In the last five years the US has increased its market by 2%, the European market has decreased 3%, China has increased its market by 8% and Japan’s market has fallen 7%.
“The EU’s policies for the industry are not working,” said Penn, “the ELG (European Leaders Group) have done a fantastic mob of making sure we continue our decline.”