Semiconductor market could fall more than 30% this year
SEVENOAKS, England--One market analyst agrees with me that the current semiconductor recession will not be a "short, sharp shock," followed by a "rapid bounce back" as in the 1985/86 downturn. And he seems to be getting more pessimistic.
Malcolm Penn, CEO at Future Horizons, says the current slowdown is fundamentally different from the 1985/86 downturn. The current slowdown is not restricted to just PCs but virtually all OEM sectors, he points out, and secondly, overcapacity was not just DRAM-based, but covered a much broader base. In addition, he says, the U.S. economy was strong in the previous dip.
Penn's "most optimistic view" has been a fall of 27% in global revenues this year from 2000. But he now suspects "the final result could be even worse, possibly a fall of over 30%." If that happens, it will reduce his 2002 forecast from a growth of 11.6% to single digits, he says. His revised market forecast is predicated on the assumption that the fourth quarter will show the traditionally strong, seasonal end-user demand.
But the telecom market could pull down even this pessimistic outlook. While a balance between supply and demand has been achieved in the PC and mobile sectors, "the weak link" is the fixed telecom infrastructure market "where forward demand visibility is simply ghastly," he says. "If this sector really does double dip in the second half, it will pull everything else with it, and clearly delay the overall market recovery."
Penn does see one current parallel with the 1985 downturn. Faced with the excess capacity caused by the Japanese companies in 1985, "several western firms exited all, or parts of, the market," he notes. This time around, he sees the overcapacity caused primarily by the Taiwan chip makers forcing several big-name chip makers "to throw in the towel."
Excess capacity will be around for a while, Penn says. "There is a real danger that we will be plagued with excess capacity for the next 18 months," he says," with a traditionally devastating negative impact on average selling prices." He believes that ASP pressure will "probably be the single biggest dampening factor on the dollar growth magnitude for the 2002 recovery." The only solution to this problem, he maintains, is a return to real unit growth across the board. |
