Chip market outlook: Back to normal abnormality? — Malcolm Penn @ IEF2009, Geneva

Future Horizons has revised its 2009 global semiconductor industry forecast to -14 percent growth (+/- 2 percentage points).

This was revealed by Malcolm Penn, Chairman & CEO, Future Horizons, while delivering the company’s forecast at the ongoing 18th International Electronics Forum (IEF) 2009 in Geneva, Switzerland, which ends here tomorrow. ”He said, “It’s all about good management … only the bad times tell!”

Some of Penn’s other forecast summaries include:

* Economic recovery is said to have already started from 2H-2009.
* Further ‘50 percent’ cap ex reduction.
* Memory price recovery 2H-2009.
* Still lots of blood on the road near-term.
* Strong will get stronger as weak go to the wall.
* Watch for tight capacity starting 2H-2009.
* Crisis is the time to implement change (brings out the best and worst).
* R&D/new products/sound marketing will win (not counting pencils and scrapping the free coffee).

Outlook for 2010 and beyond
Penn also presented the company’s outlook for the global semiconductor industry for 2010 and beyond. These include:

* 2010: +19 percent based on: continuing recovery momentum (NB … this could be a lot, lot higher).
* 2011: +28 percent based on: peak of the structural cyclical boom (NB … this could stretch into 2012).
* 2012: +18 percent based on: normal cyclical market correction starting 2H-2012 (1H-2013?).
* 2013: +3 percent based on: market correction in full flow (NB … this could be negative).

The year 2014 could well see the start of the next cyclical recovery! Given the impending 2010 fab shortage, the upside for 2010-12 is said to be huge.

The 2009 forecast – how did we do so far?
First, let’s look at the 2008 forecasts:

Q4-08 Forecast (Jan): -22.5 percent, making overall Year -2.3 percent

* Q4 (Dec) Guidance: (Intel -20 percent, Nvidia -40/-50 percent, Broadcom -20percent/-23 percent. TSMC -30 percent, Others –20/-50 percent-ish

* Q4-08 Actual: -24.2 percent, making 2008 YoY -2.8 percent (both slightly worse).

Now, on to the 2009 forecasts:
* 2009 forecast (Jan): -28 percent.
* Q1 -20 percent (continuing Q4’s decline, but at a slower rate).
* Q2 -2 percent (market settling down and decline bottoming out).
* Q3 +12 percent (normal, but slightly subdued seasonal and structural growth).
* Q4 +3 percent (normal 4th quarter seasonal slowdown).
* Q1-09 Actual: -15.3 percent (better than Jan. forecast). Jan., not March, saw start of correction to Q4-08’s over-reaction.
* Q2-09 Actual: +16.9 percent (Much better than Jan. forecast). Also, Q1 (not Q2) was the trough with a strong April-June rebound.
* Q3-09 Outlook: +12 percent (No change In Jan. or Jul. forecast). The Q2 inventory correction spurt over with ‘normal’ seasonal growth.
* Q4-09 Outlook: +3 percent (No change in Jan. or Jul. forecast). The normal 4th quarter seasonal slowdown.

2009 Forecast (Jul): -14 percent (Much better than Jan. forecast/no change from Jul.). Minor downside risks (Q3 +8 percent and Q4 +2 percent. making year -16 percent). There is a significant upside potential (Q3 +16 percent and Q4 +4 percent, making year -12 percent).

What’s changed since January’s IFS2009?

According to Malcolm Penn, Future Horizons’ ‘Rose Glass’ scenario came true! He said: “We correctly forecast the pattern of the recovery. The rebound came one quarter earlier than expected.” Given below is a snapshot of what’s happened since the IFS2009 in January.

In January, the world was reeling from Q4’s unprecedented collapse with December peppered with last minute Q4 downward guidance warnings. Everyone was affected – from Intel downward, the collapse was a total meltdown and completely across the board – covering all markets and regions.

Next, there was absolutely zero visibility into the first quarter guidance. Many firms refused to even comment. Some said, “We Simply Have No Idea!” Others offered such a wide range of options that the guidance was meaningless.

The December’s WSTS results (released early Feb.) showed December (and hence, Q4) slightly worse than the Oct/Nov momentum at -24.2 percent (vs. –22.5 percent). The March’s WSTS results (released early May) showed March (and hence, Q1) slightly better than the Jan/Feb momentum.

In brief — from meltdown (Q4-08) to stabilisation (Q1-09) and rebound (Q2-09) in three quarters — even for the chip industry dynamics, this was unprecedented, said Penn.

I will be adding more here, a bit later… stay tuned!