Semiconductor Monthly Update Report

Last night, I looked over a recent Semiconductor Monthly Update Report from Future Horizon. The “summary” is 42 pages long and is full of good information. Below are some interesting findings:

  • IC units and ASPs (average selling prices) in Feburary 2006 were up 1.3% and 5.3% respectively from January, resulting in a 6.7% monthly revenue growth. Units grew by 29.3% over the same period last year, but average selling price was down by 17.3%.
  • Memory prices in February for NAND flash units and ASPs were down 15.4% and 10.7% respectively, resulting in a 27.7% decrease in month-on-month value from January. At the same time, DRAMs remained essentially flat in sales value, up 1.3% in ASP but down 1.6% in units.
  • Design – not technology – will play an increasing role in bringing differentiated products to market. This will force a move away from a bottom-up traditional transistor-level/process IC design approach to a top-down hologistic view, in which electronic system level (ESL) tools play an increasingly important role.
  • IC unit demand bounced back sharply in Q2-2005 once the 2004-05 inventory burn came to its inevitable end. At the same time, fab capacity has been steadily increasing since Q1-03.
  • Fab capacity has not kept pace with the fundamental underlying increase in demand, a fact that was partly obscured by the (now depleted) 2004 inventor build. Industry has collectively under-invested in 2005 and there is now no way to influence new capacity additions this year. If the global economy holds, 2006 will close against a backdrop of allocations and shortages.
  • An important shift is taking place in the global economy: Japan and Europe, until recently among the biggest drags on world growth, are moving into position to play crucial supporting roles. Companies and consumers in Japan and the eurozone, two of the world’s largest three economies after the US, have started spending again or appear poised to do so for the first time in years.
  • The ECB recently warned that Asian countries rapid and unprecedented accumulation of foreign reserves is heightening the dangers of inflation and asset bubbles. World foreign exchange reserves have tripled in the past decade to more than US$4,000 billion in 2005, with the rate of increase accelerating in the past few years. As a result, the ECB concluded, a series of risks and costs could materialize with implications for the global economy.
  • For the first time in its post-Soviet history – Russia in 2005 attracted more private capital than it exported. The capital inflow is a sign of the huge appetite for Russia among foreign investors and lenders, who are now pouring more money than ever into Russian loans, securities, acquisitions, and greenfield investments.
  • As a result of government deadlines, attractive products and advanced TV technology the overall iDTV market will be immense and one of the most attractive for the semiconductor majors. It will grow from a 19.6 million units in 2005 to 131 million units per annum in 2010, giving a CAGR of 88.7% over the 2005-2010 period. The most rapid growth will be iDTVs with small to medium screen sizes, i.e. 32-inches and below, where, from 2006 onwards, LCD manufacturing price reductions bring attractive prices to consumers, with the market still rising even during 2010.

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