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Semiconductor market optimism

Sunday 22nd January 2012
Malcolm Penn, CEO, Future Horizons opts for 8% growth

Future Horizons which last year settled for seeing 2011 as essentially a flat year with 1% growth compared with 2010 for the global chip market is now expecting an 8% growth in the semiconductor industry this year. And If the economy bounces back, it could be as much as 20%. In the III-Vs arena, IQE, Cardiff expect a full year revenues for 2011 to exceed £75m, up from £73m the previous year. EBITDA is also expected to increase to not less than £13.7 million. Net debt is expected at less than £4m.

"I believe what you’re going to see is a weak first half, particularly Q1, and then a bounce-back that could be 1% worst case and as much as 20% best case," said Malcolm Penn, CEO of Future Horizons at IFS 2012 "Our prediction is for 8% growth this year."

"But it’s not impossible that we could have a 20% growth year this year and a 25% growth year in 2013," said Penn. The industry has been under-investing in capacity, added Penn, prices are trending up, a boost to world GDP could have dramatic effects to the upside.

Some predictions of negative growth in 2012 are simply "impossible", said Penn. An indicator is TSMC’s strong Q1 order situation. "TSMC’s Q1 is everyone else’s Q2 so, if TSMC sees a strong Q1 then everyone else is expecting growth in Q2."

Another indicator is Analog Signal Processor growth. "ASPs increased last year," said Penn, "no one knows that; no one believes it. But ASPs are back on track they’re going up. There’s going to be quarterly ASP growth."But, Penn pointed out: "But the conventional wisdom of the industry leaders is that ASPs will keep on declining forever."

III-Vs material growth for IQE
Sales grew rapidly in the first half, driven by strong double-digit growth in the Group’s wireless and optoelectronics divisions.  Growth in wireless sales reflected the increasing adoption and sophistication of portable devices such as smartphones and tablets using Gallium Arsenide (“GaAs”) technology, and by the increasing adoption of advanced Gallium Nitride (“GaN”) in high power wireless applications such as radar and infrastructure. 

Growth in optoelectronic sales was driven by a wide variety of applications including consumer, industrial and advanced high efficiency solar power applications. 
 
Second half sales as announced October were adversely affected by inventory corrections in the supply chain related to market share swings amongst a couple of IQE’s key customers.  These unwound as expected, and should be fully resolved by the end of the first quarter of 2012. 
 
The Group’s long standing strategy to qualify multiple products with multiple customers across the entire supply chain went some way to offsetting the impact of the market share shifts. As further qualifications complete the future impact of market share shifts will continue to diminish.
 
New product qualifications have progressed well, with significant milestones now achieved.   The Group successfully qualified its leading edge BiHEMT product with one of the top three Japanese mobile chip manufacturers, which has recently announced a major expansion programme in the smartphone market.  Sales under this qualification have started to ramp, and this customer is expected to move into IQE’s “top 10” during the second half.
 
IQE is also in the final stages of qualification of BiHEMT products with two of the leading wireless chip manufacturers globally and expects to ramp into production during the second quarter. In addition, the Group is qualifying a number of next-generation wireless products with a significant number of customers.
 
IQE’s business is also being driven by increasing demand across the Group’s other core markets including advanced semiconductor materials for optoelectronic products which continued to enjoy strong growth driven by a range of existing and emerging end market applications which are expected to account for an increased proportion of the Group’s 2012 full-year revenues.

 “We have added to our manufacturing capacity during the year and expect to benefit strongly from some significant operational achievements including best in class quality improvements to our productsm"  said CEO Dr Drew Nelson. "This will enable improved customer output and increased throughput from our own production tools and lead to continued improvements in operational and financial metrics."  
 
 

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