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EDN Europe's Editor Graham Prophet posts a selection of comments and insights prompted by the many items of industry news and rumour that cross the editorial desk or are gathered on his frequent travels to interviews, press conferences and events around Europe - and further afield - and somehow never find their way to the magazine or the web site, recovering some of the information otherwise lost in the noise level...

Thursday, January 31, 2008

Keep away from the edge

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The Future Horizons organisation, the chip-industry analyst group headed by Malcolm Penn, the other day released its forecasts for the semiconductor business for the coming year. Malcolm believes that the intrinsic attributes of the semiconductor business have set it up for a reasonably good year – by intrinsic I mean its own, internal factors such as capacity, inventory, pricing trends and so on. Unsurprisingly, he sets aside the over-riding external factor that isn’t amenable to analysis, at least not a semiconductor man’s analysis, “if the global economy slips into recession, it will take the chip industry with it.” – no surprises there.
If – and it’s a big if – you take the last five years, the semiconductor industry has grown at around 12% per year. It’s a big ‘if’ because you need the explosive growth figures of the 2004 in the mix to get the average up that far. Malcolm also sees the potential for around 12% growth in 2008: of that, about 10% is the long-term rise in numbers of chips demanded by the economy in general, while a couple of percentage points of increase in value comes from some recovery in selling prices. Those price figures, in turn, have been distorted by the price war that has been raging in (PC-type) microprocessors, and in commodity memory – a scenario that might be playing itself out for this particular cycle.
Making memory, Malcolm entertainingly asserts, is not like making anything else. “If you have a memory fab, there’s only one way to run it – flat out. You make everything you can, send it out, and accept whatever money you can get in exchange,” he says, in a cheerful instant-summary of the economics of the whole sector. Hence, he says, the appearance on the retail market of desktops and laptops heavily loaded with memory – 2 GB is almost standard, now – “It [the memory] is costing them [the PC builders] next-to-nothing.”
Basically, then, one more year of living with the economics of the madhouse – just as the chip business has been doing for 40 years.

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