Semico warns of shortage by early next year
By Crista Souza
EBN
(09/06/02 03:57 p.m. EST)
An agonizingly slow pickup in semiconductor demand on tap for next year shouldn't lull OEMs into a false belief that chip supplies are infinite and prices will continue to fall.
Having spent the better part of two years burning off excess inventories, the industry is faced with the possibility of sudden, catastrophic supply shortages by early 2003, according to Semico Research Corp.
The Phoenix-based research firm last week forecast that semiconductor revenue will jump 30%, to $197 billion, in 2003, and unit shipments will rise 17%, though Semico analysts were quick to admit the numbers appear overly optimistic after the devastation that occurred in the wake of a massive inventory avalanche in 2001.
Even Semico's “gloom” scenario calls for 10% revenue growth next year.
“The recovery won't feel as good as it looks on paper because we're coming off such a low point in 2002,” Semico's Jim Feldhan said. “If prices hold up, as we anticipate, we'll get good revenue growth.”
Restored semiconductor demand will push revenue to almost $250 billion in 2004 before a wave of 300mm-wafer fabs brings a brief period of oversupply in 2005, Semico projected.
Component suppliers, on the other hand, may have to wait longer for good news. A report last week by the Electronic Components, Assemblies & Materials Association (ECA) indicated that the distribution channel is still struggling with a surplus of passive components, arrays, and assemblies.
“The economy and electronic component sales are both waiting on optimists to outnumber the pessimists, while most linger somewhere in between,” said Bob Willis, president of the ECA, Arlington, Va.
Shortages loom
While Semico analysts couldn't pinpoint any single application or market segment that will drive semiconductor demand next year, they said OEMs simply have no more chip reserves from which to fill continuing orders.
For example, despite sluggish corporate IT spending and waning consumption of PCs in the consumer sector, Semico forecast 21% growth in DRAM unit shipments, attributed largely to after- market sales of memory modules and an inevitable computer upgrade cycle.
Similarly, flash memory is dangerously close to falling into a severe shortage, even though the eventual ramp of 3G wireless infrastructure remains elusive.
“There are no killer applications, just a lot of applications,” Semico analyst Jim Handy said. “Flash inventories are lower than we've seen since 1994. There's going to be a very sudden snap.”
Handy couldn't quantify the shortfall, but said it will be painful.
Unlike DRAM makers, he said, flash suppliers didn't overbuild capacity and therefore will have the upper hand next year in price negotiations with customers. Handy predicted that, having had poor visibility for so long, it will take suppliers several months to align product mixes with demand.
Shortages will be more pronounced in higher NOR densities, while NAND flash will likely remain in oversupply until next year, he said.
Foundry wafer demand is expected to grow nearly 30% next year after rising 31% in 2002, putting further pressure on capacity in process technologies at or below 0.13-micron, according to Semico analyst Joanne Itow.
“In the next two years there may be some perceived shortages, because some companies out there are just not looking at all the [supply] options,” Itow said. “It's in everybody's best interest to have a variety of foundry sources.”
Cautious outlook
Semiconductor industry executives showed little near-term enthusiasm. A spokesman for Micron Technology Inc., Boise, Idaho, said there is no clear indication of an imminent return to robust IT spending to drive memory sales.
“We do see some potential positive indicators going into the holiday season, but aside from that, we're not seeing significant growth in IT spending yet,” the spokesman said, reiterating comments made earlier in the week by Mike Sadler, Micron's director of sales, speaking at an electronics conference in China.
National Semiconductor Corp. was similarly cautious in its outlook, saying the overall economy is still sluggish. In a statement that accompanied its fiscal first-quarter earnings announcement, National said it is seeing early signs of weak consumer demand for the holiday season. In its 2002 fiscal fourth quarter, the Santa Clara, Calif., chipmaker earned 1 cent per share on revenue of $420 million, which was flat from the previous quarter.
Semico's semiconductor forecast calls for 11.6% sequential growth, to $43 billion, in the fourth quarter of this year, a flat first quarter of 2003, then accelerating single-digit quarterly growth throughout next year. |
