Electronics Production | September 30, 2008
Part 2: IC Insights lowers 2008 IC market forecast by 3 points
The market researcher IC Insight has lowered their IC market forecast - in their September Update of the McClean Report - by 3 points. Part 2 of 4.
Monthly/Quarterly IC Markets The next chart depicts the monthly 2008/2007 year-over-year comparisons for the IC market using actual sales, not three-month averages. As shown, the July results indicate that the IC industry lost the momentum that was built throughout 2Q/08. It should be noted that the seasonal increase in the 3Q/07 IC market last year was one of the highest on record. Thus, 2008/2007 comparisons of the July, August, and September IC markets are not expected to be favorable. As shown in the chart below, and as will be discussed further later in this update, the seasonal upturn in the 3Q/08 IC market is expected to be good but not great this year at 9%. Some recent market “feedback” includes: Samsung talking about its expectations for only a modest increase in seasonal sales in 3Q/08, MEMC stating that it is seeing some softness in its 3Q/08 semiconductor silicon orders (though solar remains strong), Qualcomm’s talk of a slowdown in replacement phone sales (discussed later in this update), and talk of a slowdown in orders at a few of the major IC foundries. NOTE: As this update was being written, IC Insights received word that a few of the large pure-play IC foundries had book-to-bill ratios of less than 0.80. Historically, fabless IC suppliers, which represent about two-thirds of pure-play foundry sales, have been some of the worst offenders with regard to inventory builds. It currently appears that demand from fabless IC suppliers has recently dropped in almost all end-use segments except for high-end cell phones. There is a possibility that 4Q/08 pure-play foundry sales may be down as much as 20% from 3Q/08 (IC Insights’ initial forecast was for flat 4Q/08-3Q/08 sales for pure-play foundries). If a 20% sequential sales decline occurs in the pure-play foundry market in 4Q/08, the total pure-play foundry market increase for 2008 would drop to 8%, down from IC Insights’ earlier expectations for 13% growth. Overall, IC Insights believes that total worldwide IC market growth will realistically be between 1-5% in 2008. IC users are now being very cautious with regard to their orders and are planning to enter 2009 with conservative inventory levels. IC Insights believes that the guidance from MagnaChip is indicative of the current environment when it recently stated: “We have updated our guidance to reflect lower than expected demand, as our customers continue to tighten their inventory control due to the to the uncertain economic environment.” It should be noted that MagnaChip still expects its 4Q/08 sales to be up about 14% from its 3Q/08 sales. 2008 IC Market Forecast Revision Shown below is IC Insights’ revised forecast for 2008. As shown, the worldwide market forecast has been lowered by $6.0 billion as compared to the 2008 forecast published in the Mid-Year Update. It should be noted that the logic and NAND flash memory markets account for $5.2 billion of the total IC market reduction. These large adjustments to the logic and NAND flash markets are primarily due to current and expected price erosion and not from a significant decline in unit volume shipments. In contrast to the IC market reduction forecast for 2008, IC Insights has raised its IC unit volume forecast for this year. As shown above, IC unit volumes are now expected to increase 9% in 2008, up one point from our forecast in the Mid-Year Update. Moreover, there is a good chance that IC unit volumes could increase 10% this year, which would make 2008 a record seventh year in a row of double-digit unit volume growth. Although the 2008 IC market forecast was revised down this year, IC Insights believes that its 2009 and beyond IC market growth rate forecasts are still intact (i.e., 8% growth in 2009, 11% in 2010, 13% in 2011, and 16% in 2012). As mentioned above, the adjustment to the 2008 growth rate forecast was primarily due to price degradation. While lower worldwide GDP growth in 2009 as compared to 2008 might serve to reduce IC unit volume growth to only 7-8% next year, the large capital spending cutbacks for IC production this year are forecast to stabilize IC average selling prices (ASPs) in 2009. Chart Source: IC Insights
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