Bust and Boom Or a Pause? A Different Take On The Semiconductor Market

So, it wasn’t a recession, more a pause, a market interruption. That at least is the view of Malcolm Penn, the semiconductor pundit who heads up market research outfit, Future Horizons.

He pinpoints the collapse of Lehman Brothers and its aftermath as the cause. And he likens the result to a motorway pile-up. Everything stops while the wreckage is cleared away.

And says Penn, “The semiconductor industry did a lousy job of managing the experience – it was too quick to cut back, and now it’s too slow to resume investment.”

Those thoughts prompt Penn to describe 2009 as a pause, not a bust and 2010’s meteoric growth as a restart not a boom.

Penn is forecasting a whopping 36 per cent growth in the semiconductor market this year, and that is abnormal. If it comes about the semiconductor industry market will break through the $300bn mark this year.

“Even a second half of 2010 meltdown would still leave us with 30 per cent plus growth,” Penn remarks.

Next year brings a return to more normal (for the semiconductor industry) growth. Penn’s forecast right now is for a 14 per cent upswing with a downside of 10.9 per cent.

The obvious caveat is the continued growth of the world economy. Last week’s disappointing GDP numbers from the US indicate the recovery has hit a road bump at the least. And as Penn observes, “The economy can still derail the market.”

The worrying news for distributors is the shortage of capacity. Investment fell 46 per cent in 2009, and capacity according to Penn is now 14 per cent lower, and he sees allocation and shortages in the market. The upsurge in distribution bookings suggests double ordering is with us as companies fear shortages on the production line.

Comments

[mick]

I do think the events of 2008/9 were exceptional. We didn't see the usual slower decline in the semiconductor cycle. Fact is the market fell off a cliff, and that was followed by a complete uncertainty about the fate of the world economy, so customers just pulled down the shutters. So I agree with Malcolm Penn that this was a pause. His argument is endorsed by the rapidity of the recovery. And
Therefore I agree with you Tamza that the present upturn is driven by inventory adjustment, though it may now have gone beyond that with indications of double ordering.
Thanks for your comment.

[Tamza]

Whatever happened to the silicon cycle. Talking about the ups and downs of the semiconductor industry growth cycles without the silicon cycle is like talking about the increased complexity of circuits without talking about the Moore's Law or scaling. Not mentionng that the growth in 2010 is so far largely an adjustment of inventories to somewhat normal levels. I recall years ago that someone said: I just took and order with a leadtime of 2 years. The reply from a colleague: That is nothing, I just took an order with a leadtime of 52 weeks!"