Sunday, July 24, 2011

Dr. Wally Rhines on global semicon industry

Thanks to my friend, Veeresh Shetty at Mentor Graphics, I was able to meet up with Dr. Walden (Wally) C. Rhines, chairman and CEO, Mentor Graphics, as well as with Hanns Windele, VP Mentor Graphics (Europe & India), for a short conversation regarding the global semiconductor industry.

Growth of global semicon industry
First, I sought Dr. Rhines' views on the growth of the global semiconductor industry. Dr. Rhines said: "Capital investment in the foundries has been quite high. TSMC, GlobalFoundries, Samsung, etc., have invested double. In 2012, some of the foundries will run at a lower percentage of capacity. If that happens, foundry wafer prices might fall. However, equipment prices would not decrease."

So, what has the industry learned from the previous recession? He said: "Capacity in the semicon industry was relatively tight in Q408. In 2009, we called it as inventory correction. If we had not had a recession, there would have been a capacity shortage.

"Now, companies seem to have caught up. There was large investment in the manufacturing capacity in 2010, and that has continued into 2011. There is more new capacity coming into foundries by 2012. Investment in memory has been modest. However, fabless companies should find more capacity in 2012."

Hanns Windele added: "The automotive industry was contributing to all of this as well. As of now, 45 percent is consumed by the computer industry, 20 percent by the communications industry, and consumer electronics and automotive account for 5-10 percent, approximately."

It appears that everything that one buys today, communications seems to be attached to it. Dr. Rhines also reckoned that PC shipments were holding up well, for now.

He noted that one thing no one wants to do is to give up on the PC. "The only reason to have an iPad with 64K memory is because the price of NAND flash has come down," he added. "In future, people will find ways to develop better iPads, cell phones, etc. There will be a lot of iPad variations in the future. On the other hand, Apple will innovate, as well."

Wendele noted: "More connectivity would be required in the future. Also, last year, Apple paid approximately $3 billion to applications suppliers."

So, what about social networks? Dr. Rhines said: "Social networking is more of a bubble. However, applications are not. They help companies generate revenues." He added, "The network infrastructure is not good yet. However, it will improve."

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