U.S. chip makers worry about keeping up with demand in 2001
By Mark LaPedus
Semiconductor Business News
(11/02/00, 07:40:45 PM EDT)
SAN JOSE -- For chip and equipment makers, there was good and bad news at the annual Semiconductor Industry Association (SIA) forecast meeting here on Wednesday.
The good news for chip companies was that semiconductor revenues are expected to jump 37% in 2000, followed by 22% growth in 2001 (see Nov. 1 story). Moreover, demand for PCs, communications equipment, consumer items, and other products remains strong, but a lack of wafer fab capacity, pricing pressures, and otherunforeseen events could impact the overall growth of the chip industry in 2001, according to top semiconductor executives at a press event on hosted by the SIA.
But still, the signs are positive for 2001, said Jerry Sanders, chairman and chief executive officer of Advanced Micro Devices Inc. "We believe that the PC industry will grow in the mid-teens [in terms of percentages] next year," Sanders said in an interview with SBN after the press event on Wednesday evening. "We believe that we will grow faster than the industry average."
But not surprisingly, the hottest market for Sunnyvale, Calif.-based AMD and other chip makers is communications. In the cellular phone arena, for example, flash memory continues to be a hot commodity, Sanders said. "The bit count per phone is going up at a dramatic rate," he said. "But we think that the flash market will be limited by supply next year."
Sanders also agreed with Dataquest Inc.'s projections for the cell phone market. The San Jose-based market research house projects that cell phone shipments will grow from 290 million units in 1999, to 434 million in 2000, and to 567 million in 2001.
"We buy into the 567 million level," Sanders said. "We could see it go up to 600 million units."
Others were a little less optimistic. "We might see 400 million cell-phone shipments this year," said Dwight Decker, president and chief executive of Conexant Systems Inc. of Newport Beach, Calif.
"We're also seeing that the cellular-phone market could reach 550 million units next year," Decker said in an interview after the press conference. "That's still 30% to 35% growth. Next year, it will be a strong year, but it won't be hyper growth in the market for cell phones."
Decker added that other communications-equipment sectors remain strong, such as routers, switches, Digital Subscriber Line (DSL) systems, and related products. "If we don't grow 50% in our network-access business next year, I will be very disappointed," he added.
Even the commodity DRAM makers are looking for the communications market for growth. While PC-oriented DRAM demand is sluggish, "the market for DRAMs in communications equipment is very strong," said Steve Appleton, chairman, CEO, and president of Boise, Idaho-based Micron Technology Inc.
During the SIA forecast press conference, executives said they were not immediately concerned about an oversupply of ICs because demand remained strong and it is still difficult to set up new production lines due to delays in fab equipment. "There are few signs of over capacity," said Wilfred J. Corrigan, chairman and CEO of LSI Logic Corp. "Stepper leadtimes, for example, are approximately 15 months. Bookings are strong and leadtimes are long."
Ironically, the lack of capacity will prevent revenues from growing even higher in 2001, according to the executives during the SIA press conference on Wednesday. "Demand [sales volumes] can never outstrip supply," said Appleton, referring to the inability to ship products that cannot be made. The Micron executive noted that idle capacity was available at the start of 2000 and that made it easy to respond to a sharp growth in demand this year.
"There isn't a lot of idle capacity now, which means next year demand will be held back by the supply side," added Appleton.
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Executives say SIA is right in forecasting no downturn in next three years
By J. Robert Lineback
Semiconductor Business News
(11/02/00, 09:41:11 AM EDT)
SAN JOSE -- Top semiconductor executives here at press conference on Wednesday evening said they were completely comfortable and satisfied with a new industry consensus forecast that shows no real downturn in chip sales during the next three years and only a modest slowdown in revenue growth in the 2002 timeframe.
"I think the industry is going to have a wind at its back for the next several years," assessed Jerry Sanders, chairman and CEO of Advanced Micro Devices Inc. During the press conference to release the annual forecast from the Semiconductor Industry Association, Sanders also blasted the "jerks" and "idiots" who he says have confused slowing growth rates with the peaking of revenues.
The AMD chief executive chided the press, Wall Street investors, and a number of industry observers for confusing growth rates with chip revenue totals, and he said the real problem has been managing expectations in the current boom cycle. "I think the semiconductor industry is about a year-and-a-half into what should be a four-year cycle," added Sanders, refuting some warnings that growth and revenues will hit a slump in 2001 or 2002 due to an over buildup of production capacity.
The SIA's new U.S. industry consensus forecast sets expectations for worldwide semiconductor growth at 37% in 2000, 22% in 2001, 10% in 2002, and 16% in 2003. Released on Wednesday, the SIA forecast shows chip sales growing from $205 billion this year to $319 billion in 2003 (see Nov. 1 story).
The new SIA forecast shows flash memories being the fastest growing segment in 2000, jumping 130% to $10 billion, and continuing its climb in 2001 with a 44% increase to $15 billion. (See table below for breakout of segments.) AMD's Sanders jumped on other industry forecasts that show flash fizzling out.
"As recently as May, the [SIA] forecast for flash memories--four years out--was $14.5 billion," Sanders said, referring to the 1999 mid-year update released in June. The new SIA forecast ups the flash projection to $23 billion in 2003.
"We have seen the flash demand explode... but right now classic wisdom, or what I call 'conventional wisdom,' is that flash is trash," Sanders complained. "So any one in the flash business is getting their stocks hammered." AMD claims to be the world's largest flash memory supplier with 31% share, followed by Intel with 26%.
"We think the flash market is going to be limited by supply," Sanders told the press conference. "The question is at what rate are we going to grow. I figure anyone in the flash business is going to be in pretty good shape for the next several years."
Other Silicon Valley executives also said they are also confident that the chip industry will not suffer a repeat of a recession similar to the three-year slump in the late 1990s. The buildup of new communications infrastructures for broadband Internet access, data and voice convergence and wireless systems were all cited as being a key factor in filling in potential potholes in the next several years.
"What is really changing the amplitude of cyclicality is the fact communications is the driver today, which will tend to mute any slowdowns," said Wilf Corrigan, president and chief executive officer of LSI Logic Corp. "There will still be cycles. But it is just that the amplitude of the cycles will be muted somewhat," he added during the SIA forecast press conference.
"We expect that [muted slowdown] to happen somewhere around 2002--it might be a little later than that but until 2002, I don't think we see that [overall growth rates] substantial slowing," said the LSI Logic chief executive.
Pricing of products is another factor that will determine how quickly the industry grows in the 2002-2003 timeframe, noted executives during the press conference. DRAM prices recently have been driven lower in recent weeks, eroding revenue growth in that segment. The problem there has been expectations for stronger PC sales in the final months of 2000, and system makers are adjusting their inventories, said Steve Appleton, chairman, CEO and president of Micron Technology Inc.
Appleton said the industry has not seen the level of capacity build up that was underway in 1995 and 1996, which created a major glut of DRAMs and other products in the late 1990s. "What we are experiencing today is some moderating of some growth rates in various sectors, but in general the supply base has just not seen the kind of growth that has typically created the kind of downturns that we have witnessed in the past," said Appleton.
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