SMECS Considers Recovery Prospects, Silicon Shortages

-- Semiconductor International, 10/1/1999

Participants in the annual industry overview spo nsored by SEMI and the Sales and Marketing Executive Council of SEMI (SMECS) indicated cautious optimism, pointing to visible signs of recovery while also warning that an economic dislocation anywhere in the worldwide semiconductor industry might push the joystick forward, initiating another dive. They also cautioned that the expected boost from communications sectors may not be as powerful as some semiconductor industry observers have predicted.

Fig. 1 shows data presented for the IC market that were smoothed out by taking a three-month average, with an index created to put both axes on the same scale. IC revenue trends were fairly flat over the first half of 1999, although outperforming 1998 for the same period. Over the first six months of the current year, IC revenues totaled $58.5B, which was 11% higher than during the first six months of 1998 and 3.5% higher than the second half of 1998. Since the beginning of the year, the trend for the total number of IC units shows a slight upward direction. The number of IC units totaled 31.2B in the first two quarters of 1999, or about 6% above the first half of 1998 and 3% higher than the second half of that year. The greater the divergence between the graph's two lines, the greater the softness in IC pricing.

Fig 1 IC market data. Revenues reached $58.5B in 1999, for a total of 31.2B units. A wide divergence between the two axes indicates softness in IC pricing.

Fig 2 The first quarter of 1999 marked a rebound in orders and sales. For the first half of 1999, orders equaled $12.6B, with the second half decreasing. Equipment sales tracked for 1999 reached $10.3B for the period tracked. The rest of 1999 is viewed as remaining fairly flat. (Source: SEMI)

Fig 3 In 1997 Asia, excluding Japan, accounted for 31% of total equipment shipments. Despite the 'Asian flu', during 1999 this share has grown to about 36%. (Source: SEMI)

Trends for capital equipment (wafer process, test assembly, packaging and fab facility equipment) were also shown as three-month averaged data (Fig. 2), with the first quarter of the current year showing a dramatic rebound in orders and sales. There was some leveling off of orders and sales over the last two months tracked. For the first half of the year, orders totaled $12.6B, more than 20% higher than the $10.2B registered during the first half of 1998. The second half of the year was worse in terms of orders. Figures for the first half of 1999 are almost double those of 1998's second half. When considering shipments, equipment sales this year totaled $10.3B, 24% below the $13.5B of the first half of 1998 but also about 24% above figures for the second half of 1998. If this trend continues, this year will be almost flat for semiconductor equipment in total.

A difference this year is the strength of the Asian market (Fig. 3). In 1997 Asia, excluding Japan, accounted for about 31% of total equipment shipments. In 1998 it was almost the same percentage, 30.5%, despite the Asian financial crisis. In 1999, that share has grown to about 36%, making Asia the strongest area, a condition expected to continue through the rest of the year.

So far the data appear to indicate a recovery is underway in the device and equipment market, but not exactly at boom levels.

Also discussed was a possible wafer shortage. This had been forecast by Allied Business Intelligence for 2000, and there have been reports of 200 mm wafer supply concerns, as well as shortages in smaller-diameter wafers. It was concluded that demand might be driven by fears of shortages for the smaller diameters, which might be leading users to stockpile extra supplies, possibly also stimulated by Y2K concerns. Die sizes were another driver cited, as well as the introduction of new products and processes, which might lead to more use of dummy wafers and lower yields on the new processes.