Hopeful Signs for a Devastated Core Silicon Market
After seeing its revenue fall by nearly one-third over the past six months, the global core silicon market is showing some signs that the worst may be over, according to iSuppli Corp.
Historical factors, such as the normal semiconductor cycle length of five to six quarters, as well as the timing of government economic and fiscal policy, indicate a market bottom is coming sooner rather than later, with conditions hitting their low point in the second quarter of 2009.
Core silicon semiconductors are the key chips that implement the specific, individual functionality in an electronic system—that is, the Integrated Circuit (IC) that makes a DVD player a DVD player, and not some other type of system. iSuppli includes Application-Specific Integrated Circuits (ASICs), Application-Specific Standard Products (ASSPs) and Programmable Logic Devices (PLDs) in the core silicon category.
The current downturn is fundamentally different from any previous semiconductor cycle. This cycle is driven by forces external to the chip industry, primarily the global economy, that are impacting both business and consumer spending. It is unclear even to the economic experts and financial czars when the various bailouts and reductions in interest rates will turn the global economy around.
While the current forecast is for core silicon to begin to show sequential growth in the third quarter of 2009, a more important metric is “3/12” growth, comparing a quarter to the same quarter of the previous year, where improvement is not expected until the first quarter of 2010. The “12/12” growth, the most recent four quarters compared to the year before, is not expected until the middle of 2010. This recovery is likely to be fairly strong, however, with annual growth rates for core silicon occurring in the double digits both in 2010 and 2011. Nevertheless, absolute revenues will not surpass those of 2007 until 2012.
Positive Signs Ahead
One of the latest positive signs is the recent announcement that the China Purchasing Manager’s Index (PMI) has rebounded to about the 50 percent level, indicating that in that country at least, the purchasing managers believe that we are already headed back into a period of expansion. The PMI in other countries has not yet surpassed the 50 percent mark, but the data from China certainly adds another few lumens to the light at the end of the tunnel.
The strongest positive for core silicon, however, remains the increasing demand from some of the market’s largest application drivers. The core silicon market hinges on a few major applications for most of its revenue.
While some areas, most notably desktop PCs and 1G/2G mobile handsets, now are forecast to actually suffer
a decline in unit shipments from 2008 to 2009, others, such as 3G phones, mobile PCs and set-top boxes, are still expected to grow despite the crippled economy. These markets alone will be enough to keep the core silicon market moving down the tracks toward the expected expansion of 2010/2011.
It is possible that these recovery times could be pushed out even further if the current economy degrades beyond current expectations. Such a doomsday scenario has implications far beyond that of core silicon, or semiconductors altogether. This scenario seems unlikely, hopefully, and the current signs of optimism—at least optimistic in relation to the past six months—are lighting the way toward the end of what remains a very gloomy, dark tunnel.
Historical factors, such as the normal semiconductor cycle length of five to six quarters, as well as the timing of government economic and fiscal policy, indicate a market bottom is coming sooner rather than later, with conditions hitting their low point in the second quarter of 2009.
Core silicon semiconductors are the key chips that implement the specific, individual functionality in an electronic system—that is, the Integrated Circuit (IC) that makes a DVD player a DVD player, and not some other type of system. iSuppli includes Application-Specific Integrated Circuits (ASICs), Application-Specific Standard Products (ASSPs) and Programmable Logic Devices (PLDs) in the core silicon category.
The current downturn is fundamentally different from any previous semiconductor cycle. This cycle is driven by forces external to the chip industry, primarily the global economy, that are impacting both business and consumer spending. It is unclear even to the economic experts and financial czars when the various bailouts and reductions in interest rates will turn the global economy around.
While the current forecast is for core silicon to begin to show sequential growth in the third quarter of 2009, a more important metric is “3/12” growth, comparing a quarter to the same quarter of the previous year, where improvement is not expected until the first quarter of 2010. The “12/12” growth, the most recent four quarters compared to the year before, is not expected until the middle of 2010. This recovery is likely to be fairly strong, however, with annual growth rates for core silicon occurring in the double digits both in 2010 and 2011. Nevertheless, absolute revenues will not surpass those of 2007 until 2012.
Positive Signs Ahead
One of the latest positive signs is the recent announcement that the China Purchasing Manager’s Index (PMI) has rebounded to about the 50 percent level, indicating that in that country at least, the purchasing managers believe that we are already headed back into a period of expansion. The PMI in other countries has not yet surpassed the 50 percent mark, but the data from China certainly adds another few lumens to the light at the end of the tunnel.
The strongest positive for core silicon, however, remains the increasing demand from some of the market’s largest application drivers. The core silicon market hinges on a few major applications for most of its revenue.
While some areas, most notably desktop PCs and 1G/2G mobile handsets, now are forecast to actually suffer
a decline in unit shipments from 2008 to 2009, others, such as 3G phones, mobile PCs and set-top boxes, are still expected to grow despite the crippled economy. These markets alone will be enough to keep the core silicon market moving down the tracks toward the expected expansion of 2010/2011.
It is possible that these recovery times could be pushed out even further if the current economy degrades beyond current expectations. Such a doomsday scenario has implications far beyond that of core silicon, or semiconductors altogether. This scenario seems unlikely, hopefully, and the current signs of optimism—at least optimistic in relation to the past six months—are lighting the way toward the end of what remains a very gloomy, dark tunnel.
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