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CJV3
Most analysts have very fluid predictions which go with the flow, as it were. ...
Mark Ma
Sure, even I don't know when the downturn comes, as purchaser, we ask for goods ...
Analyst: All signs point to IC downturn
Dylan McGrath
8/18/2010 3:14 PM EDT
SAN FRANCISCO — Semiconductor industry capacity utilization will peak during the third quarter at 96 percent, then decline to 90 percent in the fourth quarter, according to a Wall Street analyst who believes that the chip industry is headed for a downturn.
"All signs point to another semiconductor downturn as there have now been signs of softening demand from approximately 65 percent of total semiconductor demand," wrote Christopher Danely, an analyst at J.P. Morgan, in a report circulated Wednesday (Aug. 18).
Danely said the PC end market, which accounts for 40 percent of semiconductor sales, appears weak. The communications end market, which accounts for 25 percent of chip sales, is also showing signs of weakness, Danely said, pointing to Cisco Systems Inc.'s second quarter results, which disappointed analysts.
Last week, Danely issued a report saying checks in the Taiwan PC supply chain indicated that order rates from the PC end market deteriorated sharply during the last part of July.
On Tuesday, the Semiconductor International Capacity Statistics organization reported that worldwide wafer fab capacity utilization hit 95.6 percent in the second quarter, up from 93.5 percent in the first quarter.
Danely said J.P. Morgan expects utilization rates to increase to 96 percent in the third quarter due to a 2 percent sequential increase in capacity and a 2 percent increase in wafer demand. But he said the firm expects utilization rates to decline to 90 percent in fourth quarter due to an inventory correction. Danely expects capacity to increase another 2 percent sequentially in the fourth quarter, higher than seasonally normal, while he expects demand to drop by 5 percent sequentially.
Danely said utilization rates and semiconductor stock values have followed the same pattern as they did in 2004, but with a one quarter lag. In 2004, semiconductor stocks peaked in the first quarter and utilization rates peaked in the second quarter, he said. "Similarly, we believe semiconductor stocks peaked in 2Q10 and expect utilization rates to peak in 3Q10," he wrote.
Other analysts disagree with Danely's assessment. Bill Jewell, principal at consulting firm Semiconductor Intelligence LLC, said he believes capacity utilization will continue to increase through the rest of the year, hitting 96 percent in the fourth quarter. Jewell said he believes end demand will hold up at least through the end of this year. "I think capacity got cut so far back last year and just has such a long way to come back," Jewell said in an interview.
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Charles.Desassure
8/19/2010 2:14 PM EDT
Thanks for your article. Well, I have to agree that the Semiconductor industry has not been a very good place to work over last few years. In the area where I live, there is a semiconductor facility that has layoff employees and the semiconductor program at the local community college ended a few years ago because of low student enrollment. This is firsthand knowledge. It was very painful to end the semiconductor program at the community college because it was very successful during the early years and the students had no problem finding a job. A lot of money was invested into the program. With the closing of the semiconductor program, we started using the semiconductor labs and equipments as part of a summer camp program for elementary and high school students for a few years ago. The students really loved trying on the white suite and going into the clean room. Now, the clean room and all the semiconductor equipments have been removed from the campus. So this article really touches home. Good luck to other semiconductor facilities and employees around the Country. We do need you and you are during a great job.
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Rick Merritt
8/19/2010 2:51 PM EDT
I wonder if there is a pull back going on in PCs and, if so, how much of it may be due to just skittishness about the macroeconomic slowdown attributed to lackluster consumer spending. Sometimes these things seem to be rooted in self-perpetuating moods.
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goafrit
8/19/2010 4:18 PM EDT
Sure, I certainly agree. The present momentum is not supported by the industry and I do not see any way this can be supported. The analyst will be correct.
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Frank Eory
8/19/2010 4:57 PM EDT
Let's see, today is Thursday? Oh, then all signs point to a downturn in semis. If it had been Tuesday, all signs would be pointing to an upturn and we would be discussing what can be done about ridiculously long lead times.
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sindbad
8/20/2010 4:55 AM EDT
The company is seeking an accountant. There comes a guy. They ask him: How much is two plus two? He says four. They say he does not fit. The next candidate is asked the same question, he gives the same answer, and he does not take the job either. Comes the next contender. He is also asked: How much is two plus two? He asks: How much do you need? The company gives him the job.
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Neo1
8/20/2010 12:51 AM EDT
One says that the semicondutor revenues are looking up and another comes up and says that the IC forecast is to take a hit. Somebody is surely wrong and the trouble with these so called analysts is that there will be one predicting growth and another predicting downturn so someone ends up being correct. So they deserve to be ignored.
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Mark Ma
8/20/2010 5:09 AM EDT
Sure, even I don't know when the downturn comes, as purchaser, we ask for goods from two or three distributors when there is shortages since the mid of last year, so the quantity reflected in manufacturer will be double even more, now we still try to set up safe stock to avoid later shortage, like a Chinese saying “Birds startled by the mere twang of a bowstring”, when consumer market decline, the semiconductor market will be show in later two or three quarters.
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CJV3
8/20/2010 9:39 PM EDT
Most analysts have very fluid predictions which go with the flow, as it were. They appear to be always correct. However, they are often off the mark because they are like the accountant that was finally hired in the comment above. In early 2009, in Asia, we saw assembly facilities being put in the dark due to no volume. But analysts in the U. S. and some industry associations kept saying things were not that bad. My eyes said one thing. There words, from afar, something else. They need to get on the ground and see what the troops are seeing.
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