Short- and long-term changes afoot for semiconductor market
by Staff -- Manufacturing Business Technology, 11/1/2004 7:00:00 AM
The current boom in semiconductor manufacturing is threatened due to out-of-balance growth in the Asia-Pacific sector. Long-term, analysts say, a sizeable contraction of suppliers is likely.
Cupertino, Calif.-based Advanced Forecasting, which tracks the industry, reported in September that the revenue growth rate in the Asia-Pacific region was reason for alarm, in that, at 43 percent, it was nearly double what it was for the rest of the world (22 percent to 25 percent). In April, the forecasting group predicted stability as long as growth remained consistent on a global basis. The overheated Asia-Pacific sector portends a correction.
"Using a 12-month moving average, year-over-year calculation, and comparing the current regional growth rates to those of 2000, suggests that the worldwide growth rate [30 percent] is being heavily influenced by the Asia-Pacific region, mainly due to China," says Dr. Moshe Handelsman, president of Advanced Forecasting. "Because the extraordinary growth appears to be localized in that region, it will negatively impact the industry, but not as significantly as was experienced in 2000, as all regions at the time were abnormally high."
Looking out 10 years, Stamford, Conn.-based Gartner predicts the likelihood that 40 percent of today's semiconductor vendors will leave the industry due to the impact of five major emerging trends: increased device integration as well as the scale and size of manufacturing, the shift from business to consumer markets, the increased role of service providers, and new and disruptive technologies.
"The number of semiconductor vendors has risen steadily from about 120 vendors in the mid-1980s to roughly 550 in 2003," says Jim Tully, Gartner's chief of research for emerging technologies and semiconductor group. "Within 10 years, the industry will experience significant consolidation."
Of the five major trends, increased device integration is the most fundamental in terms of pending impact. It provides tremendous returns in terms of increased chip speed, lower power dissipation, greater functionality per chip, lower system cost, and physically smaller end equipment.
"Increasing cost and complexity of design, increased system content, and greater flexibility mean fewer vendors will have the capacity to supply chips in the future," Tully says.
