Last year saw device sales growing by 22% to $413billion and sales of equipment rising by 31%, compared to the previous year.
Future Horizon’s chairman and CEO, Malcolm Penn, voiced his surprise that the IMF’s GDP forecast for 2017 not only held its unit growth projection, but also increased it to 3.5% and then 3.6%. “For the first time in eight years, we actually saw that the economy was really starting to accelerate – and sustainably,” explained Penn. The 2018 GDP outlook has now been revised from 3.6% to 3.7%.
The yearly long-term average unit growth rate, which has remained at a steady 10% for some 30 years, had dipped to 5%, before growing unexpectedly by 14 to 15% last year, presenting supply issues.
Penn said: “The problem with the industry is the assumption that unit growth will remain at 5%, meaning manufacturers are unable to cope with the amount they’re expected to supply because they are only prepared for this particular growth rate and not the increased sales we have seen.”
Presently, there is more demand than supply, which Penn does not think will change any time soon.
Brexit is also creating some hesitation within the industry. “The brinkmanship that’s going on on both sides is unbelievably uncertain,” Penn said. “The last thing business wants is uncertainty, so they’re starting to plan for the worst case.”
Neither does Penn think the merger and acquisition frenzy is over, as the only option now for big companies is to grow horizontally. Names such as Intel, Micron and Samsung could be involved in such deals.
According to Penn, substrate suppliers are also struggling to meet demand for 200mm and 300mm wafers, while more mask steps are increasing production times and reducing capacity. There has not been a capacity shortage in a long time and, for many industry executives, this is a new experience. There is a reluctance to add new capacity because average selling prices and margins don’t justify return, Penn explained.
Although 300mm wafers have grown in popularity, demand for 200mm is starting to rise. “The new products we see today didn’t exist 15 years ago and their volumes aren’t large enough to support the 300mm wafers. Every time you make a bigger wafer, the capacity of that factory effectively doubles. Unless you can fill it, you can’t run the factory very efficiently.”
Despite supply concerns, Future Horizon’s forecast for this year looks bright, with Penn stating unit growth is back on track. Although there has been discussion that memory has been the main cause of this growth, Penn states that currently, ‘all sectors are boasting strong levels of unit growth’.
Last year, semiconductor growth hit $413bn and Penn says it may hit £500bn this year. While Penn is optimistic about long-term average unit sales, Gartner forecasts 2018’s worldwide semiconductor revenue at $451bn.
“It annoys me that organisations are saying it’s going to be less than 10%,” Penn commented. “They are effectively saying there’s going to be a disaster.”
While Penn has a positive outlook on 2019, he believes that 20% will be a difficult growth to maintain.
Gartner’s principal research analyst Ben Lee believes that semiconductor revenues in 2018 will revert back to single-figure growth, while a correction in the memory market will see sales decline in 2019.
Given the current economy climate and tight supply, he recommended the industry to look long-term and grasp opportunities now. “In the short term, growth and driving factors are very positive. But the industry also has a mind bogglingly range of new opportunities,” he concluded. “In some respects, the industry is showing signs of maturity; in others, it is still very young and full of growth.”
