Semi industry is on the up and up

Earlier this week the WSTS released its Spring market forecast and that confirms every other semiconductor indicator – underlined by semi company results – the market is on the up and up.

The WSTS, an organisation representing the majority of the world semi industry, now projects that the market will increase by 28.6 percent this year, 5.6 percent in 2011 and 4.2 percent in 2012.

That means the market will be worth $291 billion this year – a very swift rebound from last year, where the market declined by nine percent.

The WSTS said that the industry is recovering because enterprises and consumers are starting to spend.

Two things aren’t going to go away barring Armageddon – chips and the internet, but the semiconductor industry has come under some justifiable criticism for being way too risk averse.

Capacity at fabs is already at full stretch – when we were at Computex in Taiwan last week, one industry insider estimated that Number One Foundry, TSMC, was at 120 percent capacity.  While that’s obviously good news for the foundries in the short term, it’s not necessarily such good news unless the industry can get its act together.

Overcapacity has another effect – it gives the foundries the ability to dictate terms to the fabless design companies that rely on foundries to make their chips. That leads to allocation – while a glut is bad news for fabless design companies, a drought is bad news too.

Last year, as we reported from the Dresden IEF, semiconductor capacity actually decreased with some fabs being shut down. The industry now faces a situation where there simply won’t be enough capacity for future sustained growth.

On another front, yesterday Samsung said that it will spend $3.6 billion to expand its fab capacity in Austin, Texas. What’s interesting about this is that Samsung will produce logic chips there, not DRAM or other memory types. Samsung makes the Apple A4 chip and is coming perilously close to stepping on the tail of the tiger. The tiger, of course, is Intel. Effectively, Samsung is devoting the expansion to foundry business, which will pit it against TSMC and GloFo (GlobalFoundries).

The WSTS is predicting a three year compound annual growth rate of 12.3 percent between 2009 and 2012. Here are its figures – table courtesy WSTS.

WSTS figures May 2010