Chip market squeezed, but long term looks good
2/5/2013 7:10 PM EST
SANTA CLARA, Calif. – The semiconductor industry will contract by 0.5 percent in 2013, but despite the squeeze and some consolidation the long-term outlook for growth remains strong, said Handel Jones, a veteran market watcher, speaking at the annual Common Platform event here Tuesday (Feb. 5).
Sluggish foundry revenues this quarter are a good indication of softness in the overall chip market through June, said Jones. “We think the third quarter will be stronger, then Q4 softens a bit, so we’re conservative this year. But things could change if the price of memory declines,” said Jones, chief executive of International Business Strategies (Los Gatos, Calif.).
“In general, companies we talk to are fairly cautious this year,” he said in an onstage conversation with Brian Fuller, Silicon Valley bureau chief for EE Times.
Among other factors, Jones blamed a sluggish global economy with growth slowing in China and Japan and Europe in a slump. On the positive side, he listed LTE, MEMS and the medical sector as long term growth drivers
“We don’t see any long term problem in semiconductors and electronics growing, but underneath that there is a lot of turmoil,” he said.
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Foundries continue solid growth amid a flat-liner chip market, Jones said.
As costs of developing process technology grow, fewer companies will move to advanced nodes, he predicted. For example, he estimated the cost of developing a 14-nm process at $1.5 billion, up from $1 billion for the 20-nm node.
Chip makers need to get more integrated, perhaps bringing in house technology from reticle makers to help keep cost per transistor low through 10-nm, he said. However, it doesn’t make sense for fabless companies to get into making chips until they hit $30-$50 billion in annual revenues, Jones added.
Capital equipment makers will see more consolidation along the lines of ASML and Cymer, he predicted. However, EDA companies have a strong position going forward with demand driven by multicore, FinFETs and other technologies, according to Jones.
Geographically, China needs to consolidate as many as 450 fabless companies down to between 30 and 40, Jones said. Taiwan “is coming up really fast,” he said, but Japan is hampered by its slow decision-making process. “They have not adapted to a very fast moving world,” he said.
Jones spoke after just returning from Beijing where he said the Ministry of Finance recently approved more spending on China’s chip industry. The lack of intellectual property is the country’s key weakness in chips, he said.
Brian Fuller of EE Times (left) interviewed Handel Jones at the Common Platform Tech Forum.