Stress in Forecast for IC Supply Chain

December’s World Semiconductor Trade Statistics results were as boring as they were predictable, with no serious data revisions (thankfully) and the results right where we expected.

December’s year-on-year IC unit growth was 8.9 percent that, with the 3.5 percent growth in average selling prices (ASPs), yielded a respectable double-digit value growth of 12.8 percent.

This was on the back of a weak fourth quarter memory market that saw ASPs fall 13.1 percent from the previous quarter. The yearly growth compared with 2009 weighed in at 31.8 percent, hitting $298.3 billion, just shy of the elusive $300 billion threshold. The market is right where we said it would be at our recent 2011 Forecast seminar and we reiterate our position that 2011 will be a good year for the industry. Choppy first-half waters for sure, but watch out for a whopping second half ricochet.

Already the early warning signs are there: {complink 2376|Hewlett-Packard Co.} has warned of slipped first quarter PC shipment due to component shortages, from sensors to CPUs; {complink 5388|Taiwan Semiconductor Manufacturing Co. (TSMC)} and {complink 5826|United Microelectronics Corp. (UMC)} are curtailing their Chinese New Year annual maintenance programs due to serious capacity shortages; there is no excess inventory in the pipeline and capacity is maxed out; the front-end book-to-bill has now dropped back below unity; and memory prices have rebounded sharply in the pre-Chinese holiday period.

The whole industry food chain is now an overstretched taut spring with no easy roll back option.

4 comments on “Stress in Forecast for IC Supply Chain

  1. mfbertozzi
    February 2, 2011

    Taking a look at manufacturing and focusing on lap/netbook, empirical forecast till 2Q-2011, it seems the trend 4Q'10-1Q'11 fits very well western attitude to concentrate at the end of the year remaining budget for technological park renewal and gifts for seasonal fests. Is there something to adjust inside stocks' provisional model adopted by vendors or stress picture could happen once again at the beginning of 2012?

  2. DataCrunch
    February 2, 2011

    Hmmm….shortages…    Do you think this is good news and there is a larger than expected consumer demand for these products or bad news due to simply unreliable forecasting and planning?   Or both?

  3. mfbertozzi
    February 3, 2011

    Dave, honestly I believe a mix: consumers' demand (for residential and business needs) was larger than expected and it was (is still) finalized in buying laptop/netbook instead of other devices that have still to gain rank in the market; for those reason forecast done from vendors maybe required tuning in fitting better consumers' behaviour that is seems changing randomly…or strong impacted by massive daily marketing actions in lauching products.

    Few years ago there is not that flooding, isn't it?

  4. DataCrunch
    February 3, 2011

    Fair enough.  Demand exceeding supply in this industry is welcome news.    Also, I don’t believe the higher than expected demand had an impact on higher consumer pricing.

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