Moving into the final months of 2013, it is, naturally, the time for retrospection and a new reading of the tea leaves: what is plausible for 2014 after five (5) years of economic recovery? The global perspective is best based on International Monetary Fund (IMF) data. The economic indicators for global health seem to be holding relatively steady year-over-year for 2014, with modest growth continuing particularly for the mature markets and a stabilizing growth for the emerging markets. The IMF data are important in that they underscore continued forward momentum while providing a conservative perspective in which growth is resolutely expected, barring unforeseen major events such as defaults, or other negative market events in major, mature economies that directly impact the global macro-economic arena.
Semi's converging variables amidst global positives
While global market changes rarely spike upward quickly, the potential for more significant change in specific industries is more plausible. For the semiconductor and electronics industry, the 2013 data and forecasted 2014 data are showing very positive signs of a new growth phase. In addition to the important positive global economic conditions, the grounds for semi's optimism lie in a combination of two variables:
- 1.The increased consumer and enterprise confidence noted in regional economies and from within the tech industry itself, as evidenced by spending increases on technology (as discussed last week); and
- 2.The realization of improved production and supply fundamentals that have improved ASPs for the DRAM and NAND memory sectors, in particular, but also permeate the wider manufacturing semi supply chain due to improved inventory management strategies.
Memory plays important role
As SEMI Industry Research & Statistics Group offered recently:
Next year could be a golden year for the industry. While GDP in 2013 is generally about the same as in 2012, it is expected to rise in 2014, to 3.8 percent from 3.1 percent. Semiconductor revenue has improved in 2013 compared to 2012 and early forecasts for 2014 project revenue growth averaging about 8 percent. Semiconductor companies have adjusted their capital expenditure accordingly, and the SEMI World Fab Forecast data now indicates fab equipment spending for 2014 will reach historic highs.
As the memory sector and the wider semiconductor and electronics industry are now settled into the newly consolidated and now gelled supply chain and utilization strategies, growth is forecasted by SEMI:
DRAM equipment spending dropped by double digits in 2011 and 2012 (-35 percent and -25 percent respectively). SEMI’s data show that this will change dramatically, with DRAM fab equipment spending surging by 17 percent in 2013 and at least 30 percent in 2014. Driven by increased average selling prices (ASPs), up by about 40 percent in 2013, companies will begin to see profit on DRAM and slowly invest in new capacity […].
Semiconductor companies appear to have mastered the art of fast adaptation to chip prices and business developments. With improving prices for DRAM, similar changes steer various sectors of the industry into unprecedented growth. With GDP predictions around 3 to 4 percent, revenue expectations in upper single digits, and historic numbers for equipment spending, next year could be a golden year for many semiconductor companies and equipment manufacturers.
Semi supplier rankings shift
Further underscoring the supply chain changes that have been underway and now support the future growth for semi, are the significant changes to the ranking of leading semiconductor suppliers, according to IC Insights. Considering the major events for memory, one ought not be surprised that among the semiconductor suppliers, events related to the memory sector directly impact the ranking of companies. As IC Insights notes:
[…] there is expected to be a 60-percentage-point range of growth rates among the worldwide top 20 semiconductor suppliers in 2013 (from +44% for SK Hynix to -16% for Sony). The continued success of the fabless/foundry business model and the strong growth of the memory market (especially the 29% DRAM market surge) this year is evident when examining the nine top-20 semiconductor suppliers that are forecast to log higher growth than the total worldwide semiconductor market (5%). […] the top nine performers in 2013 are forecast to include three memory companies (SK Hynix, Micron, and Toshiba), two fabless companies (MediaTek and Qualcomm), and two pure-play foundries (TSMC and GlobalFoundries).
Growth sectors broaden
Overall semiconductor growth is positive as well, as recently reported by SIA. The overall industry growth is essential to provide a solid basis for continued movement out of the lingering "wait-and-see" sentiment.
MEMS and Bluetooth Smart ICs have very robust growth forecasts, complimenting the memory sector growth that has bolstered the forecasts for the wider semiconductor industry. Respectively, MEMS chips are forecasted to experience a 13% CAGR between 2012 and 2018, according to the MEMS Industry Group (MIG), as reported by EETimes from the recent meeting. The 13% CAGR represents an increase in the MEMS market from roughly US $12 billion to just over US $22 billion by 2018. Even more pronounced is IHS' expected growth for Bluetooth Smart ICs, "Worldwide annual shipments of Bluetooth Smart ICs will surge to almost 300 million units in 2018, up from just over 30 million projected at the close of 2013, for a five-year compound annual growth rate of more than 55 percent."
These strong growth forecasts are directly tied to the increased spending by consumers on portable and wearable devices and the increase in smart home and smart car applications. Connectivity and sensor-based interaction with devices is the undeniable driver for 2014 and likely well into the future.