Wednesday, December 14, 2005
We're Leaning the Same Way
We're Leaning the Same Way Earlier today I posted a bit about the Semiconductor International forecasting webcast that will be released tomorrow. Here's a bit of follow-up on that session. There were eight analysts on the call today. The format was a roundtable discussion with the first question asking for our semiconductor industry forecast for next year (certainly not a surprise question in a forecasting session!). As most of you know, I don't release or calculate an *exact* percentage growth rate when I do these things because I consider doing so an exercise in futility. Of course, a number of the forecasters do this and from time to time they have hit the nail squarely on the head. I really respect their ability to do this - just as long as they hit the nail consistently. As for me, I prefer to focus on the trends that drive profits to the bottom line. Whether or not I have the exact forecast figure for the whole industry during one particular calendar year is really meaningless. Have to say, this was a pretty general talk. We touched on the "maturing" industry theme (something I talk about all the time). We discussed wafer size transitions - will we move to 450mm? We touched on scaling limitations and the collision between silicon technology and nanotechnology. We talked about end market drivers. We talked about the weakness in ASPs. We haggled a bit about the big players and the cost of getting a device to market. In 45 minutes or so we covered a lot of ground. We really could have used more time. As I see it the run-rate of the chip industry is in pretty good shape. That does not necessarily mean that profits are flowing freely it means that business is good, not too low, not excessive. The industry still has issues but overall business conditions are not too bad. We should enter next year in pretty good shape. Part of the reason for this is that there's lots of caution out there. Hand-to-mouth is probably the best way to describe how companies are managing device inventories and fabrication capacity. It's not a universal state but as part of a big picture it's very good news. It would be silly not to say that there are pretty severe excesses in some of the commodity arenas. Not everyone is singing the same tune. Not everyone is enjoying pricing power and not everyone has their business strategy in order (and who knows if they will ever get one together!). No doubt, it's a very challenging environment. My answer to the first question (I shouldn't put these things in print!) was pretty basic: Barring the possibility of economic dislocations that could disrupt consumer spending next year will be an up year for both semiconductor sales and capital equipment. Being purposely vague I stated that percentage growth in the high single digits was in the cards. I realize that's not saying much for the equipment industry because this year was a down year. Even though popularly quoted utilization rates show fabs running pretty hard capital investments are being pursued on an as-needed or, incremental pace. Then there's the cost of playing the game. Paying for a state-of-the-art fab these days is something very few can afford. In a follow-up call to a friend I mentioned something that I found most notable about the call: We are all leaning the same way. Not a down forecast in the bunch. Oh sure, everyone is aware of the possibilities (slower consumer spending, housing bubbles, higher interest rates, etc....) but no one has a down forecast for next year. That's bothersome because typically when we all lean the same way we are wrong. I remember a forecasting session I moderated in August '00 all too well. Similar scenario.... And you know what happened.