Planning for the Rebound?

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Planning for the Rebound?

By Jonathan Davis, president, SEMI North America

Industry analysts and forecasting experts at the recent Industry Strategy Symposium (ISS) agreed that the market is looking up for 2010. The experts gave a decidedly improved outlook from the difficult year that we faced in 2009.

Each year, industry executives convene at ISS to get a strategic outlook on the coming year. For those that didn’t attend, this was one of those years where each analyst forecast seemingly tried to top the other. Handel Jones from International Business Strategies (IBS) expects the IC market will grow 12.3 percent in 2010. VLSI Research predicted that the IC market will grow 14 percent in 2010. Bill McClean of IC Insights said the IC market is expected to hit $270.7 billion in 2010, up 15 percent over 2009, but this was ''a conservative forecast…this could go over 20 percent.'' Semico Research predicts the sector will grow by 22 percent in 2010.

All these predictions are good for semiconductor and materials companies. VLSI estimated the equipment market will grow 35.5 percent in 2010. Gartner issued forecasts for the chip equipment market to grow in excess of 50 percent in 2010, and last week iSuppli Corp. issued its forecast for a 46 growth in equipment. The SEMI Consensus Forecast expects the market to grow approximately 53 percent to $24.5 billion and to further increase about 28 percent in 2011 to $31.2 billion.

These forecasts correspond to most of the macro economic expectations projected at both the ISS and the Strategic Materials Conference (SMC). “The recession is over,'' declared Robert Fry, senior economist for DuPont. “(We’re seeing) the end of decline, then a long, slow recovery in investment,'' said Duncan Meldrum, an economist for the Center for Forecasting & Modeling at IHS Global Insight.

But the real insights from ISS and SMC were shared among the conference attendees, in heated conversations in the hallways and around tables at lunch. It was at these times that executives added specificity, insight and nuance to the formal, public presentations during the conference. We were fortunate this year to have numerous chipmaker executives, CEOs from leading semiconductor equipment manufacturers, and senior executives from many companies in the supply chain all in attendance. Attendees shared ideas and debated many issues: the new realities of the industry: what impacts customer consolidations were having; expectations for supply chain consolidation; the outlook for growth markets in energy and environment, and the new role of government investment in the industry.

Most of the executives I spoke with were clear in their expectation that this recovery will not be like former ones. There remains uncertainty about who can execute on technology, who can ship to meet immediate demand, where EUV, 3DIC and 450 mm is going, and whether Moore’s Law will continue to 2020. But what was also clear from ISS is that this industry will be ingenious in coping with the technical, political and business challenges of the coming era. This is an industry that has made innovation its foundation, and innovation — plus collaboration — will continue to be the way this industry will move forward.

With the industry recovering from the historic recession and on the verge of a 1 to 2 year recovery, these themes emerged from ISS and SMC:

1. We are at the beginning of a recovery. This is a long, slow recovery in production in most regions and industries. We're seeing the end of decline, then a long, slow recovery in investment.

2. Panic is now in the past. Production and consumer declines reached lows in mid-2009. The financial crisis revealed excess physical capital for underlying demand. Now we're in a long adjustment period, to repair and rebalance the global economic system.

3. There are several recovery drivers: monetary policy, low interest rates, bank rescue packages, massive fiscal stimulus packages, relatively low commodity prices, inventory correction cycle over, and a slow build up of pent-up demand.

4. Worldwide GDP is expected to hit 2.7 percent in 2010, compared to minus 2.1 in 2009. The worldwide industrial production index is expected to hit 3.5 percent in 2010, compared to minus 10 in 2009.

5. Regional recovery differences may be sharp. Asia grows, led by China, India; Japan lags North America modest gains on relatively weaker consumer spending. In Europe, expect protracted weakness.

6. We should expect slow recovery in U.S. computer growth. PC spending momentum turned positive in October 2009. (2009 growth: minus 11.1 percent; 2010: plus 1.6 percent; 2011: plus 6.3 percent).

7. Semiconductors will recover sooner than other industries, up sharply in 2010 and regaining 2008 levels of activity in 2011. In 2010, expect full recovery for semiconductors.

Thank you to all the speakers and attendees for making this year’s ISS and SMC such a successful event. We look forward to seeing you again next year, same time, same place.

February 2, 2010