Talk of recovery pervades SEMI Taiwan
By Mike Clendenin, EE Times
Silicon Strategies
09/15/2003, 10:10 AM ET
TAIPEI -- After surviving the fallout of a major earthquake and a typhoon in recent years, SEMI Taiwan is riding out exposure to another volatile phenomenon of nature: a recovery in the semiconductor industry.
And like other unpredictable forces, few are able to say how long it will last or to what extent it will grow in intensity. Some aren't even sure if it's really here, dubbing it an "invisible recovery" -- a sort of omnipresent yet intangible thing.
Whatever it may be, on the opening day of SEMI Taiwan, a lot of people had a "feeling" that better times lie ahead. "The pervasiveness of semiconductors makes it increasingly difficult to identify one or two areas that will drive this cycle. It won't be one or two sectors; it will be small parts of all of them," said Dan Heyler, a Hong Kong-based semiconductor analyst for Merrill Lynch.
That's to say that the usual suspects that pull up to the semi trough, such as PCs and related peripherals, color TVs, VCRs and CD players, need to make a little room for a range of new and growing applications, like digital video recorders, game consoles, DVD players, LCD monitors and TVs, digital cameras and so on.
The simultaneous growth of this diverse application range may make this the recovery that no one sees because it is happening everywhere, unlike the obvious spike in PC sales, the run on telecom chips and the dotcom bubble that ended out the last century.
Bandwagon effect
Six months ago, no one was willing to say a recovery was underway. Now it seems everyone wants to be on record. "We are starting to see the light of day," said Stan Meyers, president of SEMI, during an opening forum on the future of semiconductors.
The forecasts -- another interesting, ever-changing phenomena of nature -- seem to back him up. GDP growth for 2003 in the largest end-market, the US, is nearly 3 percent this year, and it is around 8 percent in one of the world's fastest growing emerging markets, China.
That will lead to a pickup in PC sales, which in turn will spur fab utilization and boost semiconductor equipment spending. "We can smell the turnaround," said Gary Smith, senior vice president of Credence, an equipment maker. "We just can't taste it yet."
But if the table is set, there is still the question of how many have been invited to the buffet. Some analysts argue that if you look at the top 150 or so publicly traded semiconductor companies, there will be a duality based on the haves and have nots at the end of the third quarter earnings season.
For the overall group, revenues are expected to increase $2.1 billion quarter-on-quarter, while earnings increase a surprising $2.8 billion. With many businesses associated with the electronics supply chain already cut down to the bone, and inventories at their lowest since the bust, it doesn't take much to boost earnings over the next few quarters, especially if business spending kicks in.
Yet according to one study by Briefing.com, if some of the top companies are taken out of the revenue/earnings equation, such as Intel Corp., Texas Instruments, STMicroelectronics, Applied Materials and Taiwan Semiconductor Manufacturing Co., then revenue increases by less than $800 million and earnings are on the order of about $300 million to $400 million.
A dose of caution
In Taiwan, where they are more romantic about characterizing up and down cycles, TSMC senior vice president Kenneth Kin turns to a Tang Dynasty poem for inspiration. "Jinnian huashi qunian hao," meaning "This year the flower seems to blossom better than last year."
In laymen terms that means we're not quite there yet. Although Kin sees encouraging signs of a recovery, he notes that average selling prices have only stabilized, not shown significant growth.
A shaky world economy and geopolitical uncertainty, such as the Iraq war, also temper Kin's optimism for a broad-based strong rebound. "The recovery is likely to be slower and milder than previous cycles," he said.
That doesn't mean there won't be opportunity. The tradeshow floors were teeming with tool makers looking to cash in the 20 percent to 30 percent growth for the tool industry in 2004 and 2005. And even though semiconductor industry growth will slow to a relative crawl of 7 percent to 10 percent over the next decade, foundry growth should hit 20 percent, Kin said.
Outsourcing to Asia will also increase, as will consumer and business consumption in China and India, laying the groundwork for higher IC unit sales, if not always higher ASPs. |
