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VLSI ups IC forecast, but CEOs remain cautious
7/29/2010 4:44 PM EDT
SAN JOSE, Calif. – VLSI Research Inc. has raised its IC forecast, but the research firm sees more product shortages and a possible DRAM glut looming on the horizon.
At the same time, there are still economic issues in the market, leaving chip executives from Marvell, Silicon Image and others with the same sentiment: Most remain cautiously optimistic.
VLSI Research sees mixed signals in its new outlook. In its latest forecast, the IC market is expected to jump by 30 percent in 2010, but the business will only see 3.7 percent growth in 2011, according to VLSI Research Inc. In addition, IC-equipment sales are expected to grow 96 percent in 2010, according to VLSI Research.
In its previous forecast, the IC market was expected to jump by 28.1 percent in 2010. There were no changes in the other forecasts.
There is good and bad news. ''The earnings season is turning out to be a strong one for chip makers. Nearly all chip making companies that have reported so far have beat analysts’ estimates. Their guidance has also exceeded expectations,’’ according to the research firm.
Now for the bad news. ''At the same time, supply is catching up with demand as more capacity comes on line. This is evident in the DRAM market, where spot prices for main stream parts have been sliding for well over a month,’’ according to the firm.
''In fact, two-thirds of current (fab capacity) plans are centered on memories. The problem is dominantly in DRAMs, where as recently as May, everyone thought the consolidation would limit over-expansion. In less than one quarter, we have gone from a window of endless shortages to excess,’’ said G. Dan Hutcheson, CEO of VLSI Research, in a report.
''To us, the problem is clear: Taiwan and Korea are back at their memory war, each trying to bleed the other out of the business. No one wants to lose market share, which means you must match a competitor’s spending levels relative to your share,’’ he said.
It’s a different picture for NAND flash. ''NAND inventories remain very low thanks to strong demand from mobile products. In fact, the inventory to sales ratio for NAND suppliers slid to a six-year low in the second quarter. Moreover, the NAND market is likely to face shortages in the second half of the year amid seasonal strength,’’ according to the firm.
''Although shortages in other sectors are easing, they’re still a nagging issue for OEMs. Ericsson missed its sales forecast due to component shortages. A few weeks ago Nissan put two assembly plants in U.S. in idle because STMicroelectronics could only ship 80 percent of the required supply,’’ it said
Needless to say, 2009 was a bad year, but ''the world did not end,’’ said Sehat Sutardja, chairman, president and chief executive at Marvell Technology Group Ltd.
Sutardja said he anticipated a recovery going into 2010. The size and strength of the current IC upturn surprised the chip veteran. ''This was not anticipated,’’ he said.
The CEO said he is still worried about some of the economic indicators such as unemployment in the United States and the lack of funding for basic research in U.S. universities. Asked to provide a prediction or forecast about the IC market in terms of percentages, he was refreshingly honest and said: ''I don’t know.’’
''I feel better today than a year ago,’’ said Camillo Martino, chief executive of consumer chip maker Silicon Image Inc., ''but the economy has a long ways to go.’’
Despite the weakness in some economies, there is strong demand and product constraints in the consumer chip markets. ''The supply chain is tight,’’ he said.
Citing strong demand in Japan and share gains in the DTV segments, Silicon Image this week beat Wall Street’s estimates for the quarter. Wall Street was looking for earnings of $0.01 a share on sales of $43.45 million.
Silicon Image said revenue for the second quarter of 2010 was $44.6 million compared to $34.3 million for the first quarter of 2010 and $37.3 million for the second quarter of 2009. GAAP net income for the second quarter of 2010 was $1.8 million, or $0.02 per diluted share, compared to a net loss of $7.2 million, or $0.10 per diluted share, for the first quarter of 2010 and net loss of $13.3 million, or $0.18 per diluted share, for the second quarter of 2009. GAAP net loss for the second quarter of 2009 includes pre-tax restructuring expenses of $7.1 million.
In an interview with EE Times, Martino said the company gained share in the DTV market. It also benefited from Japan’s Eco Point program, a system in which consumers obtain eco-points that can be used as money to purchase green appliances. ''Japan was up 80 percent quarter-over-quarter,’’ he said.
For Q3, Silicon Image projects revenue to range from $48-to-$50 million.
At the same time, there are still economic issues in the market, leaving chip executives from Marvell, Silicon Image and others with the same sentiment: Most remain cautiously optimistic.
VLSI Research sees mixed signals in its new outlook. In its latest forecast, the IC market is expected to jump by 30 percent in 2010, but the business will only see 3.7 percent growth in 2011, according to VLSI Research Inc. In addition, IC-equipment sales are expected to grow 96 percent in 2010, according to VLSI Research.
In its previous forecast, the IC market was expected to jump by 28.1 percent in 2010. There were no changes in the other forecasts.
There is good and bad news. ''The earnings season is turning out to be a strong one for chip makers. Nearly all chip making companies that have reported so far have beat analysts’ estimates. Their guidance has also exceeded expectations,’’ according to the research firm.
Now for the bad news. ''At the same time, supply is catching up with demand as more capacity comes on line. This is evident in the DRAM market, where spot prices for main stream parts have been sliding for well over a month,’’ according to the firm.
''In fact, two-thirds of current (fab capacity) plans are centered on memories. The problem is dominantly in DRAMs, where as recently as May, everyone thought the consolidation would limit over-expansion. In less than one quarter, we have gone from a window of endless shortages to excess,’’ said G. Dan Hutcheson, CEO of VLSI Research, in a report.
''To us, the problem is clear: Taiwan and Korea are back at their memory war, each trying to bleed the other out of the business. No one wants to lose market share, which means you must match a competitor’s spending levels relative to your share,’’ he said.
It’s a different picture for NAND flash. ''NAND inventories remain very low thanks to strong demand from mobile products. In fact, the inventory to sales ratio for NAND suppliers slid to a six-year low in the second quarter. Moreover, the NAND market is likely to face shortages in the second half of the year amid seasonal strength,’’ according to the firm.
''Although shortages in other sectors are easing, they’re still a nagging issue for OEMs. Ericsson missed its sales forecast due to component shortages. A few weeks ago Nissan put two assembly plants in U.S. in idle because STMicroelectronics could only ship 80 percent of the required supply,’’ it said
Needless to say, 2009 was a bad year, but ''the world did not end,’’ said Sehat Sutardja, chairman, president and chief executive at Marvell Technology Group Ltd.
Sutardja said he anticipated a recovery going into 2010. The size and strength of the current IC upturn surprised the chip veteran. ''This was not anticipated,’’ he said.
The CEO said he is still worried about some of the economic indicators such as unemployment in the United States and the lack of funding for basic research in U.S. universities. Asked to provide a prediction or forecast about the IC market in terms of percentages, he was refreshingly honest and said: ''I don’t know.’’
''I feel better today than a year ago,’’ said Camillo Martino, chief executive of consumer chip maker Silicon Image Inc., ''but the economy has a long ways to go.’’
Despite the weakness in some economies, there is strong demand and product constraints in the consumer chip markets. ''The supply chain is tight,’’ he said.
Citing strong demand in Japan and share gains in the DTV segments, Silicon Image this week beat Wall Street’s estimates for the quarter. Wall Street was looking for earnings of $0.01 a share on sales of $43.45 million.
Silicon Image said revenue for the second quarter of 2010 was $44.6 million compared to $34.3 million for the first quarter of 2010 and $37.3 million for the second quarter of 2009. GAAP net income for the second quarter of 2010 was $1.8 million, or $0.02 per diluted share, compared to a net loss of $7.2 million, or $0.10 per diluted share, for the first quarter of 2010 and net loss of $13.3 million, or $0.18 per diluted share, for the second quarter of 2009. GAAP net loss for the second quarter of 2009 includes pre-tax restructuring expenses of $7.1 million.
In an interview with EE Times, Martino said the company gained share in the DTV market. It also benefited from Japan’s Eco Point program, a system in which consumers obtain eco-points that can be used as money to purchase green appliances. ''Japan was up 80 percent quarter-over-quarter,’’ he said.
For Q3, Silicon Image projects revenue to range from $48-to-$50 million.
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