VIEWFROMTHE US


too exciteD


The chip market is growing, says editor of Electronics Sourcing North America,


Barbara Jorgensen, but what does that really mean?


The predictions for semiconductor industry growth this year are rosy: IDC, Gartner and iSuppli have all predicted a 27 to 35 per cent increase in chip revenue for 2010.Most recently, iSuppli used the terms 'record level' and 'awesome dimensions' for the year. But in reporting these estimates,market analysts often bury the real story. Toward the end ofmost of these reports, analysts finally note that these growth expectations account formaking up ground lost in 2009 (-11 per cent, according to iSuppli; -9 per cent from IDC).


In other words don’t get too excited—unless you are a


semiconductormanufacturer. Yes, there’s growth and yes, it reaches record levels. But note


thatmost analysts’ chipmarket growth projectionsmeasure the revenue of the semiconductormarket. Revenue can grow in several ways: by sellingmore chips or increasing the price of those that are sold. In this case it’s the latter: prices are going up because supply is notmeeting demand. This is likely to continue. So if you are a buyer of semiconductors, your job just got harder. Prices are going up and any time demand outstrips supply, shortages begin to occur. This can drive prices up even higher andmake the grey market look very appealing.


Moreover,most chipmakers are cautious about bringing new


fabs on line, especially in the US where the economy is still lacklustre and companies are not re-hiring laid off workers.Much of the 2010 chip growth is being driven by equipment sales,meaning businesses are finally upgrading their IT systems. This still doesn’t create jobs however, sincemachines increase efficiency and alleviate the need for hands-on work. So it’s likely consumers are going to remain leery about spending on new LCD TVs, cell phones and laptops, all of which are other endmarkets for semiconductors.


There are a couple of ways the chip market could play out. One


is, cautious spending will allow semiconductor supply to catch up with demand. The other is a double-dip—the forecast


demand doesn’t materialise and sales drop again. ISuppli doesn’t think this will be the case. Growth will begin to normalise during the second half of the year and moderate growth will continue. Another unlikely scenario is a glut like 2001, in which overcapacity was the culprit. Any ramp-up in fab capacity, analysts say, will be dedicated to newer technologies and re- claiming ground lost during the 2009 recession.


Editor ofElectronicsSourcingNorth America, Barbara Jorgensen


One promisingmarket, renewable energy, doesn’t seemto be


taking off in the US yet. Again, part of the reason is consumer spending. The BP oil spill is prompting US consumers to re-think the urgency for environmentally friendly power such as wind and solar, but nobody wants to paymore for energy generated by these technologies, which have not gained a lot of traction in the US.


In themeantime, these technologies are taking off in China.


Chinese government policies intended to promote the adoption of green technologies are having the desired effect, with the country enjoying a boomin wind power capacity and photovoltaic (PV) installations that is fuelling the establishment of a new generation of global green energy suppliers, according to iSuppli.


Senior analyst for China research at iSuppli, IsaacWang, said:


“China has indicated willingness to reduce reliance on noxious coal sources while also bolstering its fledgling renewable energy industries in order to produce cleaner power.”


Clean power and job creation. Sounds like a good idea. www.electronics-sourcing.com


September 2010 | 35


Don’t get


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