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Q2 revenue grew 16% or more, researchers say
By Suzanne Deffree, Managing Editor, News -- Electronic News, 7/13/2009
It's a rare occurrence to see double-digit semiconductor industry revenue growth above the 15% mark in the second quarter of a year, but the now closed June 2009 quarter beat the odds, as well as the economic turmoil, to show strong Q2 growth.
That's according to two separate market research companies which have reported Q2 growth of 16% and 18%.
According to IC Insights, "after the worst two quarters in the history of the IC industry," Q4 2008 and Q1 2009, Q2 sales rebounded more than 16% and "signaled that the healing process is under way." IC Insights noted that in the past 25 years, only the 18% quarterly IC market increases in Q2 1984 and Q2 2006, and the 17% surge in Q4 1999 topped Q2's results.
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"Although the IC inventory replenishment surge in Q2 2009 is expected to take away some of the momentum of Q3 2009, the second half of the year still looks strong," IC Insights President Bill McClean said in the company's statement issued Thursday. "IC Insights is advising its clients to not be caught looking backwards! Now that the worst is over, this is the time to prepare for the growth that lies ahead."
Future Horizons also cautioned the semiconductor industry against a "wait and see" attitude and said that ironically such a mode would only serve to make the market dynamics worse, as companies are then faced with a massive catch-up problem.
“Never forget market trends are not based just on rational decisions, but emotional ones as well, it is this that makes the outcome sometimes so difficult to predict,” Malcolm Penn, chairman and CEO of the market research company, said.
Future Horizons estimated that Q2 revenue grew 18% and that June was on track to break through the $20 billion barrier for the first time since the chip market collapsed last September.
“Psychologically this will give everyone a shot in the arm,” Penn said in the company's statement issued this morning. “Second-quarter growth is usually pretty pathetic. … There have been only three historical precedents when such a spurt has happened."
According to Penn, this is both the start of the chip market recovery as well as "a blip on the statistics radar screen.
"The forth quarter market collapse was far too steep -- a severe over-reaction to last year’s gross financial uncertainty -- culminating with the Lehman Brothers collapse in September," he said. "The first quarter saw this stabilize with the second quarter restocking, but there are other positive factors also in play.”
Future Horizons laid out the normal dynamics following any market collapse as Phase 1, over-reaction and severe cutting back of production and inventories; Phase 2, a correction phase to rebalance over-depleted inventories; and Phase 3, a resumption of demand-driven built.
“Whilst in Phase 1 chip sales equals OEM requirement minus inventory burn, hence understating real demand, Phase 2 results in sales equal to OEM demand plus inventory rebuild, thus overstating the actual demand. We are currently in Phase 2 of the recovery cycle,” Penn said.
Future Horizons said the recovery will continue into Q3 on seasonal demand increases as the sales decline caused by inventory build ends. The company also said it expects capacity will to start to come into play shortly, given the "unprecedented three years of fab under-investment." Traditionally, tight availability positively impacted IC ASPs, but is that impact is usually delayed by 12 months as existing contracts run their course, Future Horizons noted. The company pointing out that this time around things, however, the positive impact could come faster, given the extend of the cutbacks, as already witnessed in the 2009 memory market.
“This (under-investment) eagle is one day coming home to roost” Penn said. “We are already seeing the first signs of shortages at UMC affecting Xilinx and other firm’s second-quarter sales. And for shortages read ASP increases, it’s inevitable, it’s just a matter of time, the fabs will be looking to maximize the return on their costly and precious resources, especially now more and more firms are seeking their share of the foundry pie. Better to pay 5x the price and get the parts you need.”
