Only slight growth in 2012 semiconductor market
The world semiconductor market declined 2.2% in 1Q 2012 from 4Q 2011, according to WSTS. The market ended 2011 on a down slide, with 4Q 2011 down 7.7% from 3Q 2011. The year 2011 semiconductor market was up only 0.4%.
Three major events contributed to the weakness in 2011:
- March 2011 earthquake and tsunami in Japan disrupted electronics and semiconductor production.
- Floods in Thailand in 3Q and 4Q 2011 severely impacted electronics production, especially hard disk drives (HDD).
- The European financial crisis resulted in weak demand in 4Q 2011.
2012 will not likely see significantly different growth than 2011. Of the three major crises in 2011, Japan and Thailand have mostly recovered. However the European financial crisis continues. The affected nations have adopted a plan to overcome debt problems, but the austerity measures put in place will result in weakness in the European economy through at least 2012.
The table below shows the available revenue guidance from the top semiconductor suppliers for 2Q 2012 versus 1Q 2012. The guidance is generally strong, with the top end of guidance for Intel, TI, ST and Broadcom around 10%. Qualcomm expects a decline, in line with its typical seasonal trends. Samsung expects a recovery in PC DRAM and increased demand for embedded flash memory. Our forecast at Semiconductor Intelligence is for 2Q 2012 semiconductor market growth of 6% over 1Q 2012.
Semiconductor Intelligence’s forecast for the year 2012 is 2% growth. Our prior forecast in February was a 1% decline, however 1Q 2012 was not as weak as we expected. Growth of 6% in 2Q 2012 followed by growth averaging 6% in 3Q and 4Q drives the 2% forecast for the year. The chart below shows forecasts from the last two months. Most industry analyst firms see growth in the 4% to 7% range. Mike Cowan’s model based on historical WSTS data predicts a 1.7% decline.
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SICAS is dead (and WSTS isn’t feeling too good)
The SICAS (Semiconductor Industry Capacity Statistics) program has been discontinued after the release of the 4Q 2011 data, available through the SIA at http://www.sia-online.org/industry-statistics/semiconductor-capacity-utilization-sicas-reports/
The latest report stated: “Due to significant changes in the SICAS program participation base in 2011, the quarterly SICAS capacity and utilization report will be discontinued, effective Quarter 1 2012.” SICAS lost the Taiwanese companies Nanya Technology, Taiwan Semiconductor Manufacturing Company Ltd. (TSMC) and United Microelectronics Corporation (UMC) beginning in 2Q 2011. SICAS members likely questioned the value of continued participation without the two largest wafer foundry companies.
The end of SICAS is a major disappointment. The semiconductor industry has lost the definitive source of capacity and utilization data, a key component in determining current and near term industry conditions. It is especially disappointing to me since I served on the founding executive committee of SICAS in 1995.
The death of SICAS follows the withdrawal of Intel and Advanced Micro Devices (AMD) from World Semiconductor Trade Statistics (WSTS) as originally reported in the Wall Street Journal: http://www.djnewsplus.com/rssarticle/SB133045771410082239.html
Without Intel and AMD, it will be extremely difficult for WSTS to report accurate statistics for microprocessors. Intel and AMD account for over 90% of the microprocessor market and microprocessors account for about 15% of the semiconductor market. WSTS may need to drop microprocessors from its product coverage, which would result in WSTS no longer being a reliable source of data on the overall semiconductor market.
As with the loss of SICAS, the loss of Intel and AMD in WSTS is a significant disappointment. I was Texas Instrument’s representative to WSTS for 14 years and served a term as WSTS chairperson. However I believe WSTS will adapt and survive. The organization provides detail on numerous product and application markets which provide vital information to member companies and industry analysts.
Final SICAS data
The chart below shows SICAS data for total IC capacity in thousands of eight-inch equivalent wafers per week. Capacity for TSMC and UMC was added to the SICAS capacity beginning with 2Q 2011 for comparison with prior quarters. 4Q 2011 IC capacity (including TSMC and UMC) was 2,205 thousand wafers, up 2.5% from 2,151 thousand in 3Q 2011 and the seventh consecutive quarterly increase. IC capacity in 4Q 2011 was just 1% below the record capacity of 2,223 thousand wafers in 3Q 2008 and was up 14% from the cyclical low of 1,927 thousand wafers in 3Q 2009.
The trend for MOS IC capacity utilization is shown in the chart below. The SICAS data on capacity utilization for MOS ICs excluding foundry wafers was used through 1Q 2011. This data series is fairly comparable to the 2Q-4Q 2011 SICAS total MOS IC capacity utilization which does not included TSMC and UMC. For the current cycle, utilization peaked at 94.9% in 2Q 2010. 4Q 2011 utilization dropped to 88.9%, the lowest level since 88.8% in 4Q 2009. The 4Q 2011 drop in utilization was expected due to the weak semiconductor market – primarily caused by floods in Thailand disrupting HDD production and economic weakness in Europe.
Capacity utilization will likely recover by 2Q 2012. Digitimes say industry sources expect TSMC’s 2Q 2012 utilization to be around 95% due to strong orders. Capacity growth in 1Q 2012 should be relatively flat. Combined data on semiconductor manufacturing equipment bookings and billings from SEMI and SEAJ shows billings have declined in each of the last three quarters, with 4Q 2011 down 24% from 1Q 2011. Bookings began to pick up in 4Q 2011, indicating capacity growth should resume by the second half of 2012. Year 2012 billings were $34 billion, up 8.8% from 2011. SEMI forecasts 18% growth in fab equipment spending in 2013.
2012 semiconductor market could decline 1% or more
The world semiconductor market grew a slight 0.4% in 2011, according to WSTS. In early 2011, expectations were for growth in the 6% to 10% range. Various natural and man-made disasters led to weaker than expected growth. The March 2011 earthquake and tsunami in Japan disrupted semiconductor and electronics production. Floods in Thailand in 3Q and 4Q 2011 severely impacted hard disk drive manufacturing. The European financial crisis resulted in weak demand in 4Q 2011.
Recent forecasts for the 2012 semiconductor market are primarily in the range of 2% to 3%. Always optimistic Future Horizons predicted 8% growth. IC Insights projected 7% growth for the IC market. We at Semiconductor Intelligence believe the 2012 semiconductor market will see a slight decline of about 1%. The decline is expected due to the overall economic outlook in 2012 and the quarterly pattern of the semiconductor market.
The International Monetary Fund’s (IMF) January 2012 forecast was for World GDP growth of 3.3% in 2012, half a point slower than estimated 3.8% growth in 2011. The U.S. is expected to maintain moderate 1.8% growth in 2012, the same as in 2011. The Euro Area is projected to see a 0.5% drop in GDP in 2011 due to the financial crisis. Japan’s GDP should rebound from a 0.9% decline in 2011 to 1.7% growth in 2012 as it recovers and rebuilds from the 2011 disasters. China remains a major growth driver with expected 8.2% growth in 2012, one point lower than in 2011. Hong Kong, South Korea, Singapore and Taiwan collectively should see 3.3% growth in 2012, slowing from 4.2% in 2011.
The semiconductor market declined 7.7% in 4Q 2011 from 3Q 2011, due largely to the floods in Thailand and weakness in Europe. The largest semiconductor companies providing guidance generally expect significant revenue declines in 1Q 2012 from 4Q 2011. Intel, Texas Instruments, ST Microelectronics and AMD all gave similar revenue guidance: worst case declines of 10% to 12%, best case declines of 4% to 5%, and midpoint declines of 7% to 8%. Renesas and Broadcom also expect declines in 1Q 2012. Samsung did not give specific guidance, but expects a weak DRAM market in 1Q 2012. A couple of companies expect increases. Toshiba expects a recovery to 15.5% revenue growth for its semiconductor business after a 19% decline in 4Q 2011. The midpoint of Qualcomm’s guidance is for 2.5% growth.
We at Semiconductor Intelligence are forecasting a 5% decline in the semiconductor market in 1Q 2012. With a 5% 1Q 2012 decline following the 7.7% decline in 4Q 2011, it will be difficult for the industry to achieve positive growth for the year 2012. The average quarter-to-quarter growth rate in 2Q through 4Q 2012 would need to be 6.5% just to achieve 0% for the year. Our forecast of a 1% decline in 2012 is based on average growth of about 5% for the last three quarters. Further deterioration in the world economic situation from current expectations could result in a more significant decline in the 2012 semiconductor market of 5% or more.