Capacity crunch coming

“There will be a capacity shortage in 2009,” he claimed, “there will be allocation and there will be price rises. People will have to fight for wafers.” In his recent mid term review of the semiconductor industry’s performance, Penn noted that, to keep pace with the underlying growth rate in the industry, capacity needs to grow by 3% a quarter. “But it’s only 1% at the moment,” he claimed. This lack of investment is highlighted by the amount of revenues being ploughed back into capital equipment. “The 15% capital expenditure,” he continued, “is the lowest it’s ever been.” The reason, at least in Penn’s opinion, is the rise in power of the ‘bean counter’. “The focus now is on profitability,” he noted. Industry legend Gordon Moore once advised companies to invest when the market’s down. Penn’s solution? “Bring back the chip savvy ceos,” he said. “Decisions being made today are being made on emotion, not on where the market is going to be in the future.” He sees a radical change in the industry’s dynamics. “Foundries will be in control and there will be a shift in power from the customer to wafer manufacturers. The result will be that several big companies will drop away.” Meanwhile, Penn believes sales of semiconductors will grow by about 10% this year. “It’s optimistic, but achievable,” he concluded.