LONDON – The global chip market will grow by 8 percent in 2013, as long as the major economic regions can avoid recession and other negative shocks, Malcolm Penn, CEO of market analysis firm Future Horizons Ltd. told a gathering of industry executives here.
However, Penn conceded that he had predicted the same growth figure for the chip market in 2012 at the beginning of the year and the market had ended up contracting by 2.4 percent.
"We got killed by the economy. First the euro crisis, then the U.S. election, finally the fiscal cliff," said Penn. The boring nature of the PC upgrades such as Windows 8 operating system and over-frequent Apple mobile phone upgrades had not helped, he added.
Penn said the same semiconductor market fundamentals existed now as at the beginning of 2012 so if economic gloom continues or a crisis develops, it could be a flat or low-growth year. However, lengthy underinvestment in chip manufacturing equipment would eventually start to manifest itself as chip shortages and escalating average selling prices for chips, he said.
Penn pointed out that the book-to-bill ratio for front-end chip-making equipment has been below unity for 21 out of the 24 months of 2011 and 2012. "The indications are that memory prices are starting to get some traction but Windows 8 isn't going to revitalize the PC market," he said.
"But if 2013 is a market turn then 2014 will go ballistic because it's already starved of capacity," said Penn. He added that the market boom would take a couple of years to play out once it starts and indicated that 2014 could be a 25 percent growth year followed by an 18 percent growth year in 2015.
Penn said that near-term confidence is still wretched 2012 as the year of unresolved crises and that industry is still cutting back. "From investment to inventories it is still management by numbers," he said.
Penn said the chip market will recover dramatically once confidence returns but annual forecasts were highly sensitive to when in the year such recoveries begin to take place.
Forever the optimist, Mr. Penn. Semiconductors are becoming increasingly a commodity and prices are going down faster than demand is going up. A good forecast should take into account the expected economic situation. There was no dramatic growth forecast for the economy last year and this year is not likely to be much different - a long slow haul.
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