It's shaping up to be a great year for semiconductor foundries, says market research firm iSuppli, which predicts that revenue will reach $29.8 billion by the end of 2010. If it does, that will represent a 42.3 percent increase from last year, when revenue settled in at $22.1 billion.
Semiconductor foundries are adjusting to the growing demand for consumer products, following a rough recession in which spending slowed way down starting in 2008. The landscape is decidedly different now, however, and iSuppli says foundries will likely spend 123 percent more on capital equipment this year than they did in 2009.
China, which hasn't expanded aggressively as it should have and hasn't come up with many technological advancements, has forfeited its role as a leader in contract manufacturing, a position which now belongs to Taiwan, iSuppli added.
It wasn't a monumental leap, but global semiconductor sales went up 4.5 percent from April to May, settling in at $24.7 billion, says the Semiconductor Industry Association (SIA). The rise in sales was helped by steady demand for PCs, mobile phones, IT upgrades, industrial applications, and even automobiles.
"Growing concerns about issues such as government debt, declining consumer confidence, and pressures on government spending do not appear to have affected worldwide semiconductor sales to date," SIA President George Scalise said.
Peering into its crystal ball, SIA predicts PCs to grow by 20 percent this year, though it's unclear if the emerging tablet market falls into this category. Likewise, SIA said mobile phones will grow somewhere between 10 and 12 percent this year.
Despite reports to the contrary, market research firm iSuppli warns that semiconductor inventories are too low to sustain demand, The Wall Street Journal reports.
"When measured in terms of [days of inventory], chip supplier stockpiles for the 10 semiconductor product categories tracked by iSuppli appear to be within the range of normal seasonal equilibrium," said analyst Carlo Ciriello. "However, iSuppli believes these numbers are misleading and that the supply chain is actually leaner than current levels indicate."
iSuppli's bean counters determined that global semiconductor inventory amounted to $25.73 billion in the first quarter of 2010, up just 1 percent from $25.48 billion in the previous quarter, and barely rising to the tune of 0.2 percent from the first quarter of 2009.
The numbers are somewhat deceiving, says iSuppli. During the 69 days in the first quarter, days of inventory rose 3.2 percent from the fourth quarter and appear to be strong. But that isn't the case when factoring in both reported revenue and inventory value, as well as adjusting cost of goods. When all is said and done, the metric drops 20 percent below the seasonal average, iSuppli said.
While the tech industry might like to forget that 2009 ever happened, things are shaping up much more nicely in recent times. So much so that market research firm Gartner predicts worldwide semiconductor capital equipment spending to shoot past $35.4 billion by the end of 2010, which would represent a 113.2 percent increase from one year ago.
"The drive to new technology nodes will drive semiconductor equipment growth in 2010," said Klaus Rinnen, managing vice president at Gartner. "The demand for 40nm and 45nm devices is now ramping up, resulting in heavy foundry-based capital spending. Investment at the 3x node by Intel, an increase in spending by NAND memory producers, and the transition to the next generation DDR3 DRAM memory are the key investment growth drivers."
At the same time, Rinnen warns that the growth will start to taper off in 2011 as orders start to slow down. Rinnen predicts the market will still see an upwards trend, but only to the tune of 6.6 percent.
""We could see a slight slowing in orders as 2010 ends, and the industry focuses on macroeconomic conditions. We expect capital equipment growth to continue through 2011, but at a reduced rate, as spending responds to slower growth in the semiconductor markets," Rinnen said.
Another sign that the tech recession is finally subsiding, worldwide semiconductor sales continue to grow and have never been higher than they were in April, according to the Semiconductor Industry Association (SIA).
SIA's numbers have global chip sales checking in at $23.6 billion in April 2010, a 2.2 percent increase from one month prior when sales hovered around $23.1 billion.
"Global sales of semiconductors grew at a healthy rate in April, surpassing the previous monthly record level of November 2007," said SIA president George Scalise. "As expected, both the year-on-year and sequential growth rates moderated slightly. The unusually high year-on-year comparison is a reflection of the trough of the recession in early 2009 compared to strong demand today."
According to Scalise, the worldwide adoption of 3G wireless communication played a big in the industry's growth, as did the consequent investment in infrastructure and recovery of demand from the enterprise, automotive, and industrial sectors.
According to reports, the board of directors of Taiwan Semiconductor Manufacturing Company (TSMC) has green lighted the company's request to allocate $1.65 billion to expand capacity in 2010.
Some $210 million of that budget will be used to construct a new chip plant, while $385 million will go towards expanding and upgrading eight-inch wafer fab capacity. The rest will be used to expand advanced process capacity at Fab 12 and Fab 14, TSMC says.
TSMC is the world's largest dedicated semiconductor foundry and operates a 150mm wafer fab, five 200mm wafer fabs, and two 300mm wafer "gigafabs," which produce 130nm and smaller chips. With the massive budget approval, TSMC is obviously confident about the semiconductor market and economic outlook.
In a report issued on Thursday, market research firm iSuppli said the semiconductor industry is on track to generate $300.3 billion in revenue this year, which would be a 30.6 percent boost from the $229.9 billion generated in 2009.
If iSuppli ends up being right, 2010 will be a record year for the worldwide chip industry, toppling the previous record of $275 billion set in 2007. It would also be the second time in 10 years that the industry noted a more than 30 percent increase in revenue. The first time was back in 2000 when chip makers saw a 36.7 percent increase, which was largely attributable to the rise of the Internet.
"Building on the continuing expansion in sales that followed the downturn in late 2008 and early 2009, the semiconductor industry is set to achieve remarkable revenue growth and record size in 2010," said Dale Ford, an analyst with iSuppli. "Chip sales growth this year will be fueled by a number of key factors, including continued strong consumer demand for hot electronic products, diligent inventory and capacity management efforts among chip makers, and the arrival of innovative technologies at both the component and end-system levels."
Even with the positive outlook, Ford warns that the economy remains "the biggest wild card," with a number of financial and economic trouble spots that could ultimately stunt growth.
Samsung said it plans to pony up for independent reviews following reports that toxic materials used in to make chips might have caused some its employees to get cancer. Even though government investigations conducted in 2007 and 2008 found no problems at the Samsung plants, the chip maker said this week that 22 of its employees who worked at its plants had been diagnosed with leukemia or lymphoma. Ten of them died of cancer between 1998 and 2010.
"We are deeply sorry about the loss of love ones... and we've actively cooperated on epidemiologic investigations, which concluded there were no leaks of radiation," Cho Soo-in, president of Samsung's memory division, told reporters. "But I feel we should have done this (communicated with the public) in the first place to stop speculation from growing."
The chip production lines in which the 22 workers served and later developed illnesses have since been converted into chip test lines and LED production lines. These lines occasionally receive visitors, including those from high-profile politicians, all of which must wear full-body dust-proof attire.
The Semiconductor Industry Association (SIA) reported some promising news on Monday. According to SIA, worldwide semiconductor sales in February 2010 came out to $22 billion. That's a slight decrease of 1.3 percent from January, but a monstrous 56.2 percent increase from February 2009 when sales were an anemic $14.1 billion.
"The February sales numbers reflect continued recovery of sales of semiconductors, with demand principally driven by growth in sales of electronic products in emerging economies,” said SIA President George Scalise. "Unit sales of the two leading demand drivers for semiconductors -- personal computers and cell phones -- are now projected to grow in the low- to mid-teens in 2010."
Somewhat tempering enthusiasm over the positive figures, SIA points out that January and February of 2009 marked the lowest points for the semiconductor industry during the global recession.
"There are encouraging signs that the global economic recovery will continue, and we remain cautiously optimistic that there is upside potential for growth beyond our November forecast for 2010," Scalise said.
IBM last week said it would begin collaborating with industry leaders and universities scattered throughout the European Union to improve several facets of modern chip design, including the productivity and reliability of semiconductor and electronic systems.
"Designing a microelectronic chip is very expensive and the design costs are the greatest threat to continuation of the semiconductor industry's phenomenal growth," noted Dr. Jaan Raik, senior researcher at Tallinna Tehnikaulikool and coordinator of the DIAMOND project. "The increasing gap between the complexity of new systems and the productivity of system design methods can only be mitigated by developing new and more competent design methods and tools."
The goal of the new integrated approach is to localize and stomp out bugs on all abstraction levels. IBM points out that about 70 percent of today's design efforts are placed on verification and debugging, while soft errors -- like transient errors caused by cosmic radiation -- ranks as a rapidly growing threat.
The DIAMOND consortium will use a holistic approach to develop new tools and methods to help track all of these errors.