Ling, J. (2011), "IFS 2011 – Annual Semiconductor Industry Forecast, Crown Plaza Hotel, London Heathrow, 14 December 2010", Microelectronics International, Vol. 28 No. 2. https://doi.org/10.1108/mi.2011.21828bac.002
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IFS 2011 – Annual Semiconductor Industry Forecast, Crown Plaza Hotel, London Heathrow, 14 December 2010
Article Type: Conferences and exhibitions From: Microelectronics International, Volume 28, Issue 2
At a time when forecasters are predicting the coldest winter in the UK for 100 years, it was good to listen to the news that cash is now 8 per cent of GDP, which means that supplies of logs, coal and heating oil can be readily purchased. It also means that no one is spending any money in the semiconductor business.
Malcolm Penn, CEO of Future Horizons also informed us that on 4-6 May 2011 they will be holding their 20th International Electronics Forum in Marrakech, Morocco, by which time we might be thawed out enough to attend.
How is life on the world economic stage? Well, there is good news and bad news. About 4.8 per cent economic growth this year is the good news. This is way above average, which is 3.4 per cent worldwide. Manufacturing is seeing stronger activity, in all three of the UK, China and the USA economies. However, there are still major economic setbacks, which are having a negative impact. The slow down will continue into 2011, and some growth in some advanced economies will be just 2.7 per cent in 2010. Now, the USA has the same high unemployment as Europe, and is running a currency war with China. Within our lifetime, we will see the transition in the balance of power, with China becoming the world’s largest economy by 2025. The US trade deficit with China has set a new record at US$28 billion, and rising. Between 2008 and 2009, there was a major disruption, but we emerged from this at the same point as we went into it. In effect, you lost nine months of your life!
The gap between advanced and emerging economies is widening rapidly, bearing in mind it is the emerging countries that have 85 per cent of the world’s population, who have their own demands, they have huge emotive power, and it is their first time buyers who have an edge.
Japan has problems; they have deflation, and interest rates are practically zero, the Yen remains high against the dollar, and they have had 20 years of bad times. Stagnation continues. China and India continue their success stories, China’s GDP will be up 9.6 per cent by 2011, and India’s 8.4 per cent in 2011. In India, manufacturing remains strong bolstered by local demand, which in turn is supported by growing employment, although inflation is still a problem.
The Eurozone is hardly cheering. The GDP forecast is for 1.5 per cent by 2011 with 10.1 per cent of the workforce unemployed, a 12-year high. Portugal, Spain and Ireland may require EU bail out money, which will impact all Member States regardless of currency.
Turning to semiconductors, Malcolm Penn proudly announced that against all the predictions of others, he had got it right, but had misjudged the timing of the rebound.
What he said at IFS 2010 has proved to be true. FH had correctly seen the economic trends as an interruption, not a crash, and it was the industry who had read the situation incorrectly; they were too quick to cut back and too slow to resume manufacturing. Nothing has changed structurally; the industry has been maxed out in capacity, and has been for the last three years. We are now building capacity that will not meet demand. If the prediction is for 4 per cent growth, assuming present interest rates, then an increase in corresponding capacity will be needed. However, if interest rates do rise, and it would seem that they will have to, inevitably, then a real economic recession might be just around the corner.
FH have 35 years of data, and base their forecasts of unit demand, not on short to medium term, which is highly erratic, but on the long-term view which shows 11 per cent increase in demand yearly. Market data are poor. Invest to-day and it will be 12 months before anything come out at the other end. But who will you be making for? Right now the market is tight, and looks likely to remain so. Selling prices are flattening out, but they have not been falling for the last six quarters. ASPs are declining, the growth days are over, and Malcolm presented the reasons for this; one being a two- to three-year price war, and another excess capacity.
Malcolm wants to see some passion coming into the industry, there are opportunities being missed. Structurally, we are in good shape, but the concern is that whilst capital expenditure is up, it will prove to be too little too late, and when the demand comes, as it will, it will not be met.
Forecasts for 2011?+6 per cent, said Malcolm, given that we have a fab-tight situation for 2010, the upside for 2011-2012 is huge, but the wild card will be memory. Key market drivers come from three sectors – lifestyle, i.e. smart home appliances, personal healthcare, home energy management and DIY power tools. In the e-factory world, it will be industrial communications, drives, sensors and control. Smart energy will include lighting, metering, micro-power generation and energy-efficient pumps.
Industry issues – the cycles are not over, they are with us forever. Malcolm dispelled a few myths; fabs have no strategic value, was one, and the recent shortages have proved this not to be the case. He recommends that companies build products that the market wants to buy at a price that the customer is willing to pay, and then provide blindingly good service. Start wafer fabbing again, as manufacturing does matter. Plan 12 months ahead, and think four to five years ahead.
Mike Bryant is the Chief Technical Officer at Future Horizons, and brought us up to speed with the applications, present and future, for semiconductors. Growth is equally divided between developed and developing countries and supply and demand is roughly matched. Many of the industry sectors have changed; automotive is up, mobile phones and TV are still growth areas. LED televisions have been the star products for 2010. For 2011, 3D is growing fast, driven by Blu-ray and gaming. It is now Taiwan vs Korea for this equipment, as the Japanese are losing ground.
Media-oriented systems transport (MOST) is a new standard for multimedia and infotainment networking. This provides an efficient means for transmitting audio, video and data and control information between any devices attached to the car.
Near field communication (NFC) used for payment, security and other contactless communication. Unit production has increased to a point where by 2014, 400 million units will be in production, split between mobile phones and consumer items, compared to 200 million now.
Smart metering is becoming popular due to potential and real shortages of electricity, gas and water, with the USA at the forefront. In the medical world, the cost of healthcare is rising, and here IeMRC is active through their university programmes with good government support, with the competition coming from China who regards this as a field they can dominate in design and in manufacture.
Mobile phones – smart phones are the fashion must-have, worldwide, and customers buy on appearance, not on functionality; they do not buy chipsets, they buy looks! But the huge market for low-cost phones in China and India never materialised, the users there want the same products as we in the West. In a phrase that will alarm many, Mike said that we need to get rid of pcbs in mobile phones.
Smart phone sales – estimated sales for 2010 are: Blackberry – 40 million, Nokia – 95 million and Apple iPhone will grow their market with the only competition coming from the Google Android. On the semiconductor front, it is expected that thinner products enabled by the use of silicon interposers will be appearing shortly, there will be faster graphics, but one problem area is RFI and users are now complaining about lack of reception, which is very relevant to smart meters, as well.
Mike then proceeded to summarise the key market sectors including PCs, laptops (250 million devices per annum), the rise of iPad, expressed his doubts over tablet computers which do not match the hype for business or consumer use, before we reached the ultimate stage of this excellent conference with a round up and summary by Malcolm Penn.
Longer term business trends are much more stable than they were, whereas short-term market conditions can change very rapidly, either up or down. But the fundamental market characteristics have not changed in 35 years, so companies are encouraged to have a long-term vision and plan, and not a series of knee-jerk reactions. It might be said that much of this could all be avoided if industry listened to those who have the wisdom and the experience, and had not recruited younger, less sagacious, staff whose sole aim appears to be the re-invention of the wheel.
For those who are planning ahead, bear in mind that it is India that will be the world power house for the second quarter of this century.
John LingAssociate EditorMicroelectronics International