Consumers still driving semiconductor sales
SAN FRANCISCO, CA-Thanks to the never-ending and ever-shortening cycle of new gadget introductions to the consumer market, sales of semiconductor equipment remain healthy.
SAN FRANCISCO, CA-Thanks to the never-ending and ever-shortening cycle of new gadget introductions to the consumer market, sales of semiconductor equipment remain healthy. While the latest forecast from SEMI indicates that the market will grow only 1% this year-compared to 23% growth in 2006-stronger growth is expected to return in 2008. According to the mid-year edition of the SEMI Capital Equipment Consensus Forecast, the semiconductor equipment market is expected to reach $40.9 billion in 2007, compared to $41 billion in 2006. However, survey respondents see about 7% growth in 2008 and 4% the following year, reaching $45.5 billion in 2009.
The problem is not in unit sales but in pricing, according to an executive panel at the recent SEMICON West conference. In fact, leading manufacturers of semiconductor equipment expect 2007 to be the second largest year ever for sales of new semiconductor equipment.
George Scalise, president of the Semiconductor Industry Association, noted that in terms of revenues, device sales are expected to grow only 2% in 2007-not the 10% originally predicted by an earlier SIA forecast. However, unit growth continues to be strong. While unit demand is still there, pricing has been aggressive, which in turn has depressed average selling prices (ASPs), according to Scalise.
“It’s not like we have to find something to stimulate demand,” he said.
Ed Grady, president and CEO of Brooks Automation, agreed.
“My take is that the big unit volume growth continues,” he said. “Dollar measure indicators can be false indicators. We are being impacted by ASPs, but the real key is the number of units out. If the ASPs could improve, it would increase cash for investing in new technologies.”
The panelists also agreed that the current slowdown should last only one to three quarters and should not have as big an impact on equipment sales as has been in the case in the past. The main driver in all of this is the consumer sector, which Aart de Geus, chairman and CEO of Synopsis, noted has become the driver for electronics in the last five years. According to Scalise, the consumer market now accounts for 53% of semiconductor demand.
“We are not talking just about Ipods but cell phones and computers for personal use (vs. traditional enterprise drivers), which makes gaming one of the biggest drivers,” he said.
As a result, chip manufacturers and semiconductor equipment manufacturers are no longer looking at two- to three-year product cycles but one-year product cycles. In addition, as the end products become more demand, the chips become more complex, which increases the number of fab-process steps-good news for companies providing fab equipment, according to Grady, because it means more equipment will be required. And these trends are not expected to slow any time soon, according to de Geus.
“In 10 years, we are looking at a doubling of the number of consumers (in developing countries) but not the same socioeconomic levels as today,” he said. “So this puts even more pressure on chip prices and manufacturing productivity.”
The next generation
The future of photovoltaics was again a “hot topic” at this year’s SEMICON West, with several market and technology presentations.
“We are going to turn Silicon Valley into Energy Valley,” said T.J. Rodgers, founder and CEO of Cypress Semiconductor and chairman of Sunpower. “Photovoltaics is just another way of using silicon.”
The global solar market will experience a compound annual growth rate of 36% over the next four years, but the U.S. growth rate will be faster at 83% CAGR, according to the SEIA. Driven by tax credits and lower retail costs, the U.S. market will install 8000 megawatts of capacity over the next decade. That compares with only 145 megawatts installed in the U.S. in 2006.
By 2015 solar technology will be cheaper than electricity, but that will only happen with continued R&D from the semiconductor sector in order to improve PV efficiencies. Rodgers puts the cost crossover even earlier, saying that by 2010 solar-generated power would be $2.11 per watt, enabling it to compete “head to head” with electricity suppliers without the benefit of current subsidies.
A shortage of polysilicon for wafers is pushing the PV industry to produce thinner wafers; Sunpower started making wafers that were 250 µm thick and now has them down to 166 µm. Last year marked the first time that the solar industry overtook integrated circuits as the largest consumer of polysilicon, according to Rhone Resch, president of the Solar Energy Industry Association (SEIA). By 2010, solar will be twice as big as the IC sector in terms of consumption of polysilicon.