Mentor's Rhines sees 'modest growth' in 2013

BANGALORE, India -- Global economic uncertainty is contributing to a down year for the global semiconductor industry, but 2013 could bring “modest growth, according to Mentor Graphics CEO Wally Rhines

Rhines, here last week for a developers’ conference, said in an interview that 2012 industry revenues should approach $300 billion, a decline from the previous year, but foresees “modest growth [as] the most likely scenario next year after negative growth this year.”

“Though analysts are forecasting some growth next year, most executives in the semiconductor industry are nervous about growth ahead,” Rhines added. “There is too much uncertainty in too many places. There are some parts of the electronics industry that are doing quite well, like wireless. But there is lots of turmoil too.”

He cited the decline of smartphone makers like Nokia and chip maker Texas Instruments, which is facing stiff competition from Qualcomm. “So [there are] lots of leadership changes, and these changes are causing disruption.”

The uncertainty is being offset by consumer enthusiasm for low-cost electronics. “The demand for the advanced semiconductor technology, 28 nanometers and below has been very strong, and this would be good for the semiconductor industry on the whole next year. The foundries have made a big bet on the 28 and 20 nanometer [process technology], and they have more than doubled their normal capital investment,’’ Rhines stressed.

Inventory plays a big role in the semiconductor industry. Companies stock inventory in proportion to their expectations of either growing or declining demand. But Rhines said market uncertainty is making it difficult for supply chain managers to gauge inventory requirements. “Semiconductors are like fish,” he said. “If you keep them around a bit too long, they start to smell. So the value of the inventory decreases if you hold it too long. Semiconductor prices don’t go up, they always go down.”