What a total shambles the chip industry has got itself into. Its short term-ism is now way beyond any measure of sanity and common sense and its lack of visibility little short of pure stupidity.
With investment lead-times, whether they be fab capacity or design, measured in years and production cycles in months, how is it the industry has no forward visibility into shipment and demand? Some firms blame consignment stocking; other blame the lack of orders statistics from the WSTS. Both of these are excuses; the bottom line is industry has allowed itself to lose control of its customer's orders.
When you then read comments from the SIA and financial analysts claiming "stronger than anticipated tablet sales" etc., one's heart and mind are filled with anger and despair. I can't wait to listen to similar superficial statements in the quarterly conference calls and reports. The industry and the WSTS/SIA should hang its head in shame.
The truth of the matter is there is NO forward visibility. At our recent October Forum, I presented Future Horizons' Q3 forecast. All I had to go on was the WSTS data for July and August. I say "all" as if this was a bad situation; in reality the only missing data point was September! Various extrapolation techniques gave me several possible scenarios, from a minus 2 percent worse case to a plus 3 percent best case. Consensus industry wisdom was more in the high negative end of the scale.
When I presented the analyses, several executives told me privately after my talk "this time you have seriously misread the tea-leaves." Well I hadn't but the industry seriously had – even though September was over and they knew exactly what their result was. The actual [quarterly sequential growth] result was plus 3.5 percent. I suspect lots of chip firms came in much lower than this, but that's their fault NOT the market's fault; they lost market share.
Come on industry; little wonder things are in such bad shape. You are now running the business completely out of control. Time to throw away the spreadsheets and get back to industry basics; profits and revenues are the result of forward looking vision delivering good products and strategies, not massaging the monthly/quarterly P&L.
Malcolm Penn Chairman & CEO Future Horizons Sevenoaks England
What an arrogant ass. You pat yourself on the back for drawing a straight line from July to August to arrive at September, and you excoriate businesses -- naturally reticent in an environment of uncertainty -- for not having all the answers. Sorry to break it to you, but we manufacturers have no magic crystal ball; we can only sell what our customers order and do our best to keep our supply chains aligned with demand. To tell you the truth, we are all scared to death with our customers hemming and hawing and not giving any straight answers to forecast inquiries. We are driving in the fog, and you criticize us for not telling you what curves lie ahead. It is the ANALYSTS' jobs to get the lay of the land, research the various actors in the supply chain, and provide estimates of overall market demand. Don't tell us to do your work for you.
I tend to agree with you bltarng. When supplies get tight, customers start double booking. This causes the manufacturers to increase the run rates and build inventory. When things slow back down, all of a sudden there is too much inventory and the mix is always wrong. You just can't win.
I believe today's business reality is that electronics demand is largely consumer driven. And consumers are notoriously fickle. Todays must have cell phone model ramps from zero to millions of handsets back to very modest levels within a six months time frame. The other reality is that with margins so small and capital requirements so large for most seimconductor businesses they cannot afford to err on the side of too much capacity.
Back when PCs were the main drivers and corporate PC buying was at least somewhat predictable companies did have a bit more forward visibility. But in the post PC world where mobile computing is the fastest growth segment that's all history.