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From Demand-Sparse to Supply-Sparse: The momentum forecast is positive

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Analyses have been hitting the industry news for a few weeks but now building steam, since various Y09 and 1Q10 revenues and sales numbers are coming in (cf. WSJ.com here, DigiTimes 3/30/2010 for a summary of the Gartner report, see also Citi Investment Research & Analysis 4/13/2010 2010 Supply Chain Playbook and 1Q Preview).  Now that we are approaching the magical 2H10 forecasting point, visibility remains very good and forecasts continue to be positive, now extending growth through 2011, comfortably (from low to high double digits for most semiconductor and electronics industry sectors and markets).

This is great news, certainly, and the semiconductor industry is experiencing one of the more robust, positive rebounds in the global marketplace.  However, we are simultaneously also realizing that the shortages that we have been reporting on and forecasting (including here in this Smith MarketWatch Commentary section) are also valid.

On the supply front, we are seeing a strong hold at the low 2009 inventory levels, despite the healthy demand that's been holding for well over a quarter now.  This demand is NOT seen to diminish, rather to maintain course.  Supply, however, remains and will continue to be increasingly tight.

Why?  Simply put, while many fabs are operating at full or near maximum capacity and increasing their CAPEX spends, and most component manufacturers are increasing their CAPEX spending too (cf. here), the supply chain is set to remain lean because of the risk-averse feeling that many still hold after the recent global recession (cf. here for iSuppli's summary).

What's it mean?  ASPs are forecasted to rise and inventory control and market competition are key strategic plays for companies right now.  We've seen NAND ASPs do very well (cf. here), now DRAM, MOSFETs and ICs of various types are set to rise as well (cf. here, and DigiTimes 2/11/2010 report on top 5 IC distributors in Taiwan).  Similarly, if the trend to home entertainment continues, watch for the strong set-top box components to also see rising ASPs (cf. iSuppli's forecast here).

Not ready to believe all this?  Just check into all the 1Q10 revenue reports that have begun streaming in.  Start with Foxconn, who is sourcing the iPad among other well consumed devices, and then proceed to Intel, just off of a great 1Q10 (cf. iSuppli's review here, DigiTimes 4/14/2010, and WSJ.com here and here), the list goes on from there.  

 


Lisa Ann Cairns, Ph.D.
Written on Wednesday, 14 April 2010 00:00 by Lisa Ann Cairns, Ph.D.

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