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Electronics Production | January 27, 2011

Semico's analysts predict that 2011 will be....

Semico's analysts have gazed into their crystal ball (or, in some cases, their "Magic 8 Ball" App on their iPad), and have shared with you here their expectations for 2011.

Economic Outlook for 2011 Promising Despite what we hear from cable news networks, the world economy is performing better than most people perceive. China, India and other developing countries have strong growing economies. The U.S. economy will also see improved growth, with GDP approaching 3% in 2011. Japan and the EU continue to be sluggish but will improve in 2011. From a technology standpoint, affordable, portable electronic devices continue to drive the next wave of consumer products. Corporate IT spending to upgrade existing infrastructure, data centers and personal systems will also propel electronics sales. While 2010 posted a record-breaking year for semiconductors we continue to see sustained momentum to create positive demand in both dollars and units for 2011. One dampening effect to the overall economic growth is the recent rise in oil prices driven mainly by speculators trading oil futures with no intent in taking delivery; they are only pursuing short-term trading profits. The result is that we will likely see gasoline prices in the four dollar per gallon range in the U.S. market by midyear 2011. This will be one of the main reasons for U.S. GDP to be below 3% in 2011. From the corporate side, companies are sitting on record cash levels with profits also at record levels. Semico believes companies will begin investing in earnest in 2011, energizing both employment and electronics sales.--Jim Feldhan, President Consumer Outlook for 2011 Consumer products, especially mobile tech, will continue to lead innovation in 2011. Two of the more interesting design trends we'll see include color digital paper and Near Field Communication chips. Mobile consumer will also see a shift towards a younger target market as new tablets focus on tots and innovating eBooks. Throughout the year Semico will provide Executive Briefs discussing these trends and over 30+ markets in the Consumer, Communications, and Computing industries to give a quick overview of how these products are innovating in 2011 and beyond. Also, look for Semico's market update on MP3 Players & Portable Media Players in April.--Michell Prunty, Senior Consumer Analyst 2011 Memory Forecast What does NAND Flash do for an encore in 2011? After a huge year in 2010, many fear NAND Flash will be unable to sustain another year of growth. The Flash segment revenues will be up 46% year over year in 2010 causing some to speculate that these highs, driven by healthy ASPs, are bound to drop. Typically, unit volume growth of 31%, as seen in 2010, is met by manufacturers bringing on more capacity to meet demand. Historically, this cyclical scenario creates an oversupply situation and plummeting ASPs. However, Semico projects a stable pricing environment in 2011 as unit demand continues to grow from the emergence of more tablet PCs, more smartphones, and increased SSD penetration. Consequently, Semico projects 2011 revenues to be up 6% to $23B on increased unit demand and relatively stable ASPs. Unfortunately, we do not expect the same encore from the DRAM segment. The DRAM pricing environment has already begun eroding in the fourth quarter of 2010. Bit demand growth for 2010 did not reach expectations and as a consequence, prices dropped like a rock in the fourth quarter. Overall, bit demand is still strong and the supply is there, the demand just couldn't meet the high expectations in order to finish out the year strong. DRAM ASPs were bound to fall after a 76% revenue increase in 2010. We expect the pricing trend to continue into 2011, with prices dropping another 5% in the first quarter. Semico expects revenues on the year will be down for the DRAM segment, 12.5% year over year. While not what the commodity memory manufacturers might have wanted, it's not all that bad given the 76% increase in 2010.--Sam Caldwell, Memory Analyst Foundries: Back to the "Good Ol' Days" ...Almost Foundry suppliers logged in a record breaking year in 2010. The two largest dedicated foundries, TSMC and UMC each recorded more than 40% revenue growth over 2009. Capacity utilization was in the high 90's for most of the year. Capital expenditures were well over $10 billion with TSMC spending half of that amount. But what's in store for 2011? In 2011, overall semiconductor units and wafer demand are expected to increase 14% and 11% respectively. It'll come as no surprise, the foundries will continue to grow at a faster rate than the overall industry. The largest foundries will continue to invest heavily in the first half of the year but it should taper off in the second half. If not, we will be in for a harder fall in 2012.--Joanne Itow, Managing Director Capex and Fabs Outlook for 2011 Capital expenditures were up over 80% in 2010. It's reasonable to expect that spending will slow from that rate in 2011, and that appears to be exactly what will happen. The question is: by how much? The pattern splits in 2011 roughly by segment: DRAM companies like Powerchip and Rexchip will spend much less in 2011, some companies are predicting a flat spend compared to 2010, and still other companies, like Samsung and TSMC, expect to increase their spending year-over-year. Spending for NAND, LED, and MEMS capacity will also continue to be a bright spot in 2010. Bottom line, fabs will continue to be built, capacity will increase, and companies will need to migrate to smaller technology nodes. Apple will require more chips than ever, and other tablet PCs will need NAND and other semiconductors as well. Everything will just happen at a more moderate level in 2011.--Adrienne Downey,Director of Technology Research Micro Logic 2011 Preview Micro Logic finished out 2010 strong with 26% sales growth. However, this is because 2009 had fallen so low. A relatively more stable sales environment is expected in 2011 with 12% sales growth. This will vary among the key product areas. DSP will limp along. The cell phone market is maturing, but more significant is the growth products from Qualcomm, Broadcom and others that are not reported as DSP. MCUs will see healthy growth across all markets in 2011, especially automotive and industrial control. The 32-bit or greater MCUs will be the driving force. ML is dominated by MPU sales. There will be more technical advancements with MPUs in 2011, at both ends of the computing spectrum. Yes, the low-cost tablet and netbooks will continue to grow. Intel and AMD will have new MPUs on the market in 2011 to address these markets. But there is still demand for higher performance systems. Intel and AMD will be rolling out next generation MPUs with innovative CPU and GPU integration - Sandy Bridge and Llano respectively. The growth of low-cost portable devices will continue to drive demand for connectivity. Therefore, MPU sales will also be driven by high-performance products for data centers and cloud computing.--Tony Massimini, Chief of Technology Semico Outlook for 2011 from the ASIC / SIP Market Point of View In Semico's view, the overall market in 2011 will continue to exhibit growth, albeit at a somewhat slower rate than in the market recovery year of 2010. • The traditional ASIC market (Gate Array, Standard Cell and Programmable Logic) will see a growth rate of 11.5% to reach a combined total of $14.4B. • The 3rd Party SIP market will grow 15.2% to reach $2.7B. • The first IP Subsystems products from major IP vendors will enter the commercial market for the first time and produce an 85.4% growth rate, although starting from a small base. • The SoC market will also grow 15.2% to reach $54.7B in 2011. • First effort ASIC Design starts will increase over 2010 by 6.8%, signaling a return to growth from the downturn of 2008 - 2009. Overall, the ASIC market will continue the rebound started in the latter half of 2009 and all of 2010 to return to pre-2008 levels. However, complex SoC design costs will continue to increase making the SoC design landscape more difficult for SoC designers. The introduction of system-level IP Subsystems will start to relieve some of the pressure from SoC designs regarding complexity levels and cost issues.--Rich Wawrzyniak, Sr. Market Analyst: ASIC & SoC
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