LONDON – Here are six "myths of the semiconductor industry," according to Malcolm Penn, founder and principal analyst with Future Horizons (Sevenoaks, England).
By "myth" Penn positions these six items to be widely believed tenets of the industry that he asserts are not true. If you think he is wrong, right, or you have other "myths" to add to the list you are welcome to have your say in the forum below.
Myth #1 - The cycles are over
Many people will say that as electronics comes to address ever broader application, region and market diversity, the boom-bust cyclicality becomes evened out. Penn looks to the historical record and to the fact that semiconductor manufacturing decisions have to be made on longer time scales than the design and much longer time scales than the whims of the market and says "nuts!"
Myth #2 – The market is mature
Many people see a decline in average annual growth and say the semiconductor market is maturing and the industry's growth days are behind it. Penn asks: "If that is so why bother with long-term research projects?" He sees erratic short- to medium-term demand and stable long-term demand at 11 percent unit growth per annum. It then becomes just a question of who makes money servicing that demand and how they will do it.
Myth #3 – ASPs will keep declining
Average selling prices (ASPs) cannot keep falling forever, says Penn, otherwise there would come a point where vendors would be paying customers to be allowed to supply them with chips. Individual IC prices decline as volumes increase but ASPs are pushed back up as companies introduce higher capacity or higher performing chips, with a price premium. Penn acknowledges that from 2002 until 2009 ASPs were under pressure for a number of reasons.
"There is NO historic precedent or economic justification for the assumption [that ASPs will keep on falling]. The markets self-correct," asserts Penn. He reckons that the tide turned in 3Q09 and has been rising for six quarters.