Two years of plenty coming for chip industry, says analyst

September 11, 2014 // By Peter Clarke
Amid an abundance of market opportunities both in terms of applications and regions, the chip market is showing clear signs of a recovery, according to Malcolm Penn, CEO and principle analyst with market research firm Future Horizons Ltd.

Speaking at a briefing in London, Penn said that after reviewing World Semiconductor Trade Statistics for the first six months of 2014 he has decided to move his forecast for global chip market growth in 2014 up to 10.7 percent, equivalent to an annual market of $338 billion. This move is up from an 8 percent forecast for 2014 Penn gave in January.

At that time he said that the market was set to increase by between 4 and 14 percent. At the latest meeting Penn said he had kept his sequential quarterly growth forecasts for 3Q14 and 4Q14 at 8.8 and -1.5 percent, respectively although the "balance of risks remains more upside centric, especially given tight leading-edge fab capacity and ASP [average selling price] impact."

For 2015 Penn is predicting at least 15 percent growth resulting from sequential quarterly growth figures of -0.5, 5.5, 11.5 and 0.0 percent, in chronological order.

"The economy can still derail or delay things. There's lots of stuff occurring," he said referring to issues such as conflict in the Middle-East and around the Russian sphere of influence. But he advised that the industry should expect a sharp market recovery when economic confidence returns because there is no slack in the global semiconductor ecosystem. "The boom, when it happens, will take two years to unwind."

Penn has been a consistently bullish market prognosticator arguing that unit demand has maintained a relatively steady 10 to 11 percent average annual growth and that it is excursions in the average selling price of chips that cause the market booms and busts that characterize the semiconductor industry.

Penn said that capex investment and production cutbacks since 2008 are, at last, starting to take silicon supply below demand. This would have happened earlier, Penn said, but global events such as the 2011 tsunami that struck Japan served to suppress global demand.

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