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To: marc ultra who wrote (48416)	7/5/2010 4:00:58 PM
From: marc ultra	3 Recommendations Respond to of 95411

Malcolm Penn on chip pricing. Also note he is now on record as calling for another boom year of 28% in 2011: Penn puzzled as chip ASPs fall during boom Peter Clarke (07/05/2010 9:45 AM EDT) URL: eetimes.com LONDON — Malcolm Penn, founder and principal analyst with market research company Future Horizons Ltd., sees the second quarter as being a "blockbuster" but is puzzled by the "madness" shown by chip companies that continue to allow chip prices to sink even as lead times lengthen. Some chip companies are so busy pursuing market share and demonstrating loyalty to key customers that they are forgetting that the semiconductor industry has huge infrastructure costs that have to be financed by rebuilding ASPs and company profitability, said Penn. And 2010 is the perfect opportunity as market growth, measured in units and value, continues to exceed analysts' expectations. "Our 3 percent Q2 growth forecast looks increasingly timid, with 6 to 8 percent more likely," said Penn in the introduction to his June semiconductor newsletter. This is likely to push the annual semiconductor market growth even higher. Penn has been consistently at the upper end of the spectrum of analysts and so expressed a satisfaction that most have now joined him in predicting growth in excess of 30 percent. "Whether the final number is 28 or 38 percent really makes no odds," Penn said. With the results for 2010 more or less now "baked in" attention is turning to 2011. In May, at the International Electronics Forum, Penn predicted another boom year in 2011, of 28 percent. "We are clearly now in a boom and the next phase is bust, but when, how deep and how fast will it collapse," Penn asked? Most other analysts see a return to more normal growth figures with single-digit percentages in 2011. For now the industry is enjoying an almost classic market boom. "Order books are full, customers are building stocks, double ordering is rife, capacity is strained, lead times increasing and deliveries are stretched. Yet, memory aside, all other segment ASPs are still falling!" Penn express puzzlement saying: "This is chip industry nonsense at its worst. It's time to increase semiconductor prices everywhere. It is absolute business, economic and industry madness to keep decreasing prices in a tight supply market." Double and triple ordering started in the first half of 2010 due to supply shortages, Penn asserted. "Double ordering is not double shipping, yet. For that to happen, supply needs to catch up with demand," he said. With the exception of the memory market ASPs for ICs are lower than they were pre-recession and continuing to fall. For memories APS are back to their pre-recession values and continuing to rise. Penn cited World Semiconductor Trade Statisitics as his source and the data shows that ASPs have been falling for the total semiconductor and IC sectors since the industry achieved "sold out" status in November 2009. Penn said that loyalty to key customers was no reason to keep dropping ASPs which puts the long-term viability of the semiconductor industry at risk. Penn proposed the adoption of five-year rolling contracts with cast-iron non-cancellable commitments. " That way industry will finally have long-term order commitments, capacity planning can be improved and investment risks shared." Penn said the chip industry "desperately" needs to rebuild its cash, profit and investment position if it is to recover and survive. That cash will be needed to cover the exponentially increasing costs of miniaturization and the costs of introducing EUV lithography and 450-mm diameter wafers. Related links and articles: