EMS Industry Documents - Service level agreements, factory audit templates, supplier checklists, term sheets ...

View all

EMS Industry Documents - Service level agreements, factory audit templates, supplier checklists, term sheets ...

View all
 
25 Years solving global, regional and local priorities.

Menu


False start for semiconductor recovery?

Spending aimed at technologies to support competitive positioning, rather than capacity expansion. Semiconductor suppliers raising prices to meeting profits goals. Most categories will decline 2% sequentially first half 2010.

Even though conditions in the global semiconductor industry in 2010 are set to improve dramatically compared to a dismal 2009, the reality is that this year is likely to deliver only a modest recovery when viewed from a longer-term perspective, according to iSuppli Corp.

Global semiconductor revenue in 2010 is set to amount to $279.7 billion, iSuppli predicts.

While this represents a striking 21.5% rise from $230 million in 2009, it amounts to only an 8% increase from $258.9 billion in 2008, and a scant 2.3% expansion compared to $273.4 billion in 2007.

With market conditions in 2009 dictated by macroeconomic factors that were independent of the technology business, comparisons with 2007 and 2008 provide a more accurate depiction of 2010 semiconductor market conditions, iSuppli believes.

“Amid double-digit growth in revenue, rising prices, supply constraints and soaring capital equipment purchases, enthusiasm over the semiconductor industry’s 2010 outlook has hit a fever pitch,” said Dale Ford, senior vide president, market intelligence services, for iSuppli. “However, conditions in 2010 appear so fantastic only in comparison of 2009. In reality, 2010 is likely to simply be a year when semiconductor industry growth on a sequential quarterly basis returns to a more normal pattern.”

False jump for semiconductors?

For semiconductor suppliers, it’s hard not to get caught up in the current optimism. When viewed as a 12-month rolling average, monthly semiconductor revenue in 2010 is set to recover at the strongest rate in history, according to iSuppli. Below represents historical and forecasted monthly semiconductor revenue growth based on a 12-month average.

Monthly semiconductor revenue growth based on 12-month average

Global monthly semiconductor revenue growth: 12-Month moving average

However, this growth comes only in comparison to the depressed levels of 2009, a year when semiconductor market conditions faced an unprecedented type of downturn.

“Downturns in the semiconductor business historically have been driven by supply and demand dynamics within the technology market,” Ford observed.

“For example, the downturn of 2001 was spurred by factors such as the dot-com bust, a strong drop in PC sales and semiconductor manufacturing excess capacity. However, 2009 marked the first time a downturn in the semiconductor industry was driven primarily by the macroeconomic environment. Seen in this context, the 21.5% annual rise in semiconductor revenue expected in 2010 actually represents a return to demand levels of 2007 rather than a dramatic growth surge”, added Ford.

Reality check
Other positive indicators for the semiconductor industry in 2010 also should be viewed with some caution.

Mobile phone makers have reported some supply constraints for key semiconductor components.

However, these shortfalls reflect supply bottlenecks spurred by production constraints, rather than an extraordinary increase in sales, iSuppli believes.

Semiconductor suppliers in 2009 cut production capacity and halted purchases of manufacturing equipment in order to adjust to weak market conditions. As demand has returned to normal seasonal levels, supplies have been constrained in some cases.

In another positive sign, semiconductor suppliers at present are striving to raise prices to recapture margins to make as profit as possible.

However, pricing trends actually have returned to historical norms in 2010. iSuppli’s Procurement Pricing Index predicts average prices for electronic components, including most categories of semiconductors, will decline at about a 2% sequential rate in the first and second quarters of 2010. Such a rate of decline is a typical for the semiconductor industry and certainly doesn’t reflect a surge in pricing.

Another positive sign for the global semiconductor industry is the resumption of capital spending among chipmakers on chip production equipment. Global spending on semiconductor manufacturing equipment is expected to rise by 46.8% in 2010 compared in 2009, bringing an end to three consecutive years of decline.

However, capital spending in 2010 will remain at very depressed levels, at less than half of what they were in 2007 and 2008. Furthermore, the planned spending by semiconductor manufacturers is primarily oriented at implementing advanced technologies to support competitive positioning, rather than at investments in expansion of capacity to meet growing market demand.

Source: iSuppli, VentureOutsource.com, March 2010

 

Get list of EMS manufacturers for your requirements (Its free)

Save time and money. Find quality EMS manufacturers. Fast. Venture Outsource has a massive, global database of contract electronic design and manufacturing capabilities. Speak with a Provider Advisor.

“Was able to very quickly find details on the important elements of setting up EMS and ODM partnerships, talked with an advisor for personalized info on quality providers matching our requirements while getting up to speed quickly about the industry and connect with key staff from like-minded companies and potential partners. Great resource.”

— Jeff Treuhaft, Sr. Vice President, Fusion-IO

Advisors tell you matches we find for your needs, answer your questions and, can share EMS industry knowledge specific to your industries and markets.

Talk to an Advisor


Private message OEM peers. Access all content.

For electronic OEM professionals working in OEM companies. Connect with OEM peers and access exclusive content.

https://ventureoutsource.com/contract-manufacturing/trends-observations/false-start-for-semiconductor-recovery

Provider spotlight

About Venture Outsource, LLC

Venture Outsource, LLC site content and our consulting services help electronic manufacturers plan and execute global, regional and local priorities. Our chief assets are knowledge and interactions. The business is divided into two divisions: an operating division which includes education and training, and consulting and research.



Copyright Venture Outsource, LLC. All Rights Reserved
The material on this site is for informational purposes only and is not a substitute for legal, financial or professional advice. Distribution and use of this material are governed by our User Terms Agreement and by copyright law. By using our Website you agree to site Terms and Privacy policies. For questions email insight@ventureoutsource.com or visit www.ventureoutsource.com