Chip industry still suffering from economic crunch

snail-8296a552f7bd1064368205306ff8a3c7c7bdc7c4-s900-c85The chip industry is still in the doldrums and that isn’t going to change anytime soon.

That’s the verdict of Malcolm Penn, CEO and chairman of UK semiconductor analysts Future Horizons.

At a semiconductor conference in London, Penn said that the chip industry is driven by four factors: the economy, fab capacity, unit demand and average selling prices (ASPs).

Penn said: “The economy is in a mess and it’s not getting any better. It’s the ‘wait one more quarter’ syndrome. Nobody reacts when the data is good because they don’t believe it.”

He said that 2016 seemed to be an almost exact replay of 2015. Nobody believes in the numbers any more, he said.

“No-one is spending money. There are no new killer products on the horizon. There is nothing, nothing at all.”

Killer apps can’t be predicted and have always been a surprise, Penn said. The outlook is somewhat grim.

“No one knows how to restart the engines.

Regionally, he said, the picture is also pessimistic. “Japan is a complete disaster. China is on a downward trend. Russia has shot itself in the foot,” he said. “Newly industrialised Asian countries have run out of steam. The overall trend is decidedly bad.”

So what of the future?

Historically, integrated circuits (ICs) have shown a 10 percent growth but, he said, the current trend is low with only a six percent figure in 2016. He said: “PC and smartphone IC shipments are still relatively very small. Unit demand is driven by the economy, and the PC market is as dead as a dodo.”

The figures over the last four years show a steady decline, 9.5 percent growth in 2013, 8.3 percent in 2014, 5.1 percent in 2015 and six percent this year.

He said: “Fab capacity is in the hands of the few. No there is no excess capacity. It takes a year to add new capacity and the lead time has never changed.”

As far as capital expenditure (CapEx) goes, Intel, Samsung and TSMC rule, he said at 60 percent CapEx. That’s not true for Global Foundries (GloFo) which is only nine percent.

He said: “A capacity shortage is waiting to happen. At some point of time there will be a shortage and it will catch everyone by surprise.” And most of the bigger fabs are in earthquake zones.

He’s gloomy about next year too. In 2017 he expects a weak PC and smartphone market.

“The economy is still horrid. There’s no life in the semiconductor business.”