The semiconductor industry enjoyed a very good year in 2000. The final numbers from SIA/WSTS [wsts.org] placed the industry at $204 billion-a 36 percent increase from 1999. But, the industry's fortunes-along with the general U.S. economy-have taken a decided downturn over the last few months. Now the debate is on: Is this a two- quarter inventory correction, a slightly longer correction or something worse? To cast a vote for one of the above scenarios, we believe that it is instructive to understand what got us here. Y2K Rollover First, the Internet and preparations for the Y2K rollover led to a tremendous acceleration in IT equipment investment in 1999. This upsurge carried the industry through the first two quarters of 2000. At about that point, a year's worth of interest rate hikes by the U.S. Federal Reserve Bank, and a realization in the investment community that a lot of Internet-related companies had unsustainable business models, began slowing IT investment. This up-and-down cycle was worsened considerably by poor supply-chain management throughout much of the worldwide electronics industry. Supply-Chain Issues The primary indicator of supply-chain issues is the fact that IC unit shipments experienced unprecedented growth over the past two years. Total IC unit shipments in 2000 were 43 percent higher than in 1998. Figure 1. Worldwide IC shipments 1992-2000 Analog ICs Led Growth Off-the-shelf, standard analog ICs led this growth, with unit shipments in 2000 that were almost 70 percent higher than they were in 1998. This two-year unit growth is higher than in any two-year period over at least the last 16 years. As shown in the figure, in the post-1991 economic expansion, IC unit growth held pretty close to a 10.5 percent annual growth curve-until 2000. For 2000, the curve predicts shipments of 74 billion units. In fact, IC shipments leaped to 86 billion units in 2000. Unfortunately, the underlying growth in the overall electronics industry did not support this level of increased IC shipments, for the growth in the total electronics industry has averaged only 10-12 percent over the last decade. The growth in ICs was accompanied by tremendous growth in shipments of discrete semiconductors (diodes and transistors) and passive components (resistors, capacitors, etc.) as well. Stocking Up OEMs, contract assemblers, and component distributors can stock up on inexpensive components-just in case the parts are needed-without taking a major hit to their inventory performance. But this ultimately leads to major cuts in orders when it becomes obvious that these components are overstocked. While the size, product breadth, and maturity of the electronics industry vis-a-vis 20 years ago should act to dampen the industry's cycles, the addition of extra layers to the supply chain over the last decade tends to aggravate the cycles. Twenty years ago there were OEMs and component manufacturers. Today's typical electronics supply chain includes OEMs, contract assemblers, component distributors, and component manufacturers. The potential for trouble with this many vertical players is tremendous, because each does a bit of forecasting on its own. (Since many companies recognize this problem, IT vendors and consultants selling supply-chain management software are experiencing robust business. But given the difficulties of forecasting and the desire for each player in the chain to support its customers instantly, the odds of improving the industry's cycles seem poor.)
Significant Decline Overall, we believe that IC unit shipments will decline significantly in 2001-probably more than 5 percent. This will represent the first unit decline since 1985-a year that has some parallels to the current situation. IC revenue will decline as well, probably more than 10 percent. IC average selling price (ASP) increases were a rather modest 7 percent in 2000, which contrasts sharply with the 20+ percent increases during the 1994-1995 boom. The modest increase last year indicates that industry capacity was not as tight as was touted. And with semiconductor process equipment being shipped at an astounding rate in 2000, the table is once again set for another pricing downturn-now that unit demand has softened. If the Federal Reserve takes timely action (and IT investment picks up by the end of 2001), then the semiconductor industry should be back on track with double-digit increases in units and revenue in 2002. This renewed expansion should continue for a few years, although we believe that excess capacity will loom over pricing throughout the coming years. Table 1 presents a rough idea of the unit shipments by package family from 1999-2003. Notice the huge increase from 1999 to 2000 in SO packages. This is another indicator that unit growth was unbalanced in 2000. Higher-end packages, such as BGAs, grew at excellent rates-but no higher than predicted.
Based on pricing information provided to ETP by contract IC packaging foundries, the total value of IC package assembly was about $20.1 billion in 2000. This figure represents a 16.6 percent increase from 1999, an increase that was quite below the overall industry unit increase of 27 percent. Increase in Low-End ICs Since so much of the industry's unit increase was in low-end devices, the increase in packaging revenues did not equal the unit increase. This revenue is predicted to expand to $27.2 billion by 2003. IC Packaging foundries continue to assume a larger percentage of the world packaging market. A total of 19.6 billion ICs were assembled by packaging contractors in 2000, and this number will grow to 29.2 billion packages in 2003. In 2000, contractors assembled 22.7 percent of the world IC total. By 2003, this will be over 29 percent. Contractor package assembly revenue will grow from $8.7 billion in 2000 to $13.2 billion in 2003. * World Semiconductor Trade Statistics is a non-profit organization whose semiconductor company members provide data.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Copyright © 2001