Here is the whole article on the San Diego Conference:
Analysts Paint Grim Semiconductor Landscape
(10/20/98 7:39 a.m. ET)
By Brian Fuller, EE Times
SAN DIEGO -- Like witnesses to a terrible train wreck, industry leaders are gathering this week to get the latest casualty figures.
At the gloomiest Dataquest Semiconductor Conference in memory, held this year here in San Diego, presenter after presenter ticked off the list of woes that have afflicted the semiconductor industry and driven it into a recession for the second time in three years. In almost every presentation, earlier grim forecasts have been revised downward since their first presentation.
"Markets don't go up and up," said Donald Straszheim, president of the Milken Institute, in Santa Monica, Calif. "They go up and down. Some of us had forgotten that."
Joseph Grenier, vice president and director of the Semiconductor Device Group at Dataquest, in San Jose, Calif., said overcapacity, price pressure, and currency depreciation would push the industry down 6 percent to 8 percent this year, to $138 billion. By comparison, the industry reached a high in 1995 of $151 billion. (Not so long ago, industry pundits predicted a $300 billion semiconductor market by 2000).
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"Markets don't go up and up. They go up and down. Some of us had forgotten that."
-- Donald Straszheim
Milken Institute
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Through August, Grenier said, figures from the World Semiconductor Trade Statistics group show the industry is off by an annualized rate of 10 percent, but, he said, "We're expecting a good September, October, and November."
In the volatile DRAM market, revenue is expected to total $14 billion this year, down sharply from the 1995 high of $42 billion. In addition, many high-growth semiconductor segments are expected to slow down between now and 2002. While the total semiconductor market, for instance, is forecast to show 11.5 percent compound annual growth in the next five years, microprocessors are only expected to grow 10 percent -- the least of any of the seven product areas tracked by Dataquest. Cell-based ICs are expected to grow 20.5 percent.
Slicing the data by region, total electronic-equipment production this year will grow by modest amounts in every area except Japan and the Asia-Pacific region.
On a macroeconomic scale, Milken Institute's Straszheim painted a dire picture for every corner of the world except the United States. Financial markets have fallen less in the United States compared with eight other countries or regions, and the rate of decline is less than in the world overall.
Pushed to make a forecast, Straszheim said, "The [Wall] Street forecasts are still broadly too high. They'll be brought down kicking and screaming."
Straszheim had bleak outlooks for other areas. He was asked if Japan's best days are past. "The answer to that question is yes," he said.
On Russia, he said, "It's going to be a disaster. That economy has no chance for the foreseeable future."
On Malaysia's decision to put controls on its currency, Straszheim said, "It's too late for Malaysia to turn around."
Dataquest's outlook for the semiconductor-equipment sector was revised downward in a presentation by analyst Clark Fuhs. In July, he reported 1999 would be a year of marginal improvement for capital spending, increasing to $33 billion from this year's expected $31 billion. But Fuhs said Monday that he now thinks capital spending will fall by 8 percent to 10 percent next year.
Silicon wafer demand, which Fuhs said in July would improve 3 percent next year, is now forecast to be flat or down 2 percent in 1999.
"Overcapacity is still with us," he said.
Foundry overcapacity is also lingering -- between 30 percent to 35 percent this year, but falling to 20 percent to 25 percent overcapacity next year. Companies need to hold the line on capital spending for supply and demand to balance, Fuhs said. And half of all foundry capacity is for 0.35- and 0.25-micron design rules, Fuhs said, but demand in those areas is lagging.
Still, there is an upside in the distance, the Dataquest analysts said.
The overall semiconductor market should grow 11.8 percent in 1999, Grenier said. DRAM devices should beef up to $52 billion in revenue by 2001 before another overcapacity cycle kicks in, he added.
And there are plenty of growing application-specific markets, according to analyst Gregory Sheppard, for everything from DSL and cable modems to DVD players and automotive GPS.
Nevertheless, the sobering message of the first day of the three-day conference came from Grenier.
"In the past, the semiconductor market has been relatively immune from world economic cycles," he said. "No longer."
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