A Receding Economic Tide Lowers Expectations for Crucial System-Level Chips
Revenue from global shipments of core silicon Integrated Circuits (ICs)—i.e., Application Specific Standard Products (ASSPs), Application Specific ICs (ASICs) and Programmable Logic Devices (PLDs)—is set to suffer a weak finish to 2008, and decline by nearly a double-digit percentage in 2009, according to iSuppli Corp.
Global core silicon revenue will rise to $101.3 billion in 2008, up a scant 1.8 percent from $99.5 billion in 2007. iSuppli previously forecasted revenue would rise by 6.7 percent for the year. Revenue will decline by a sharp 9.9 percent in 2009 to reach $91.2 billion.
“The ancient rubric, ‘He who lives by the sword, dies by the sword,’ remains true in today's core silicon industry,” said Jordan Selburn, principal analyst, semiconductor design for iSuppli. “Such application-specific semiconductors—whose sales grow in concert with high-volume applications—shrink with those applications when the tide turns. And any look at current headlines shows that the tide is rushing out.”
Core silicon ICs bring critical system functionality to electronic systems, from Personal Media Players (PMPs) to satellites, but it is really just a handful of devices that consume the lion's share of these chips. The explosive growth in mobile handsets, PCs, storage devices and video game consoles has propelled the core silicon segment to consistent, above-market growth rates for the past few years.
“When these key system areas catch the proverbial cold, however, core silicon can catch a nasty case of the flu,” Selburn said. “For example, PCs represent roughly one-quarter of all logic ASSPs, and mobile handsets another 20 percent, so these two categories collectively account for almost half of total ASSP shipments.”
Feeling sick
iSuppli now expects unit shipments of 1G and 2G mobile handsets to drop more substantially in 2009 than previously thought. Shipments will fall by approximately 14 percent compared to an earlier forecast of a 1 percent decline. Desktop PC shipments now are expected to decline by about 5 percent in 2009 compared to 2 percent growth expected before. Mobile PCs remain somewhat of a bright spot, although the forecast increase of 15 percent has been pulled back from prior expectations of a 25 percent jump.
When these declines are taken into account, ASSP revenues cannot help but suffer. iSuppli still expects the market to grow, however, aided by the aforementioned mobile PC expansion as well as by other major system drivers, particularly Set-Top Boxes (STBs), whose shipments also will rise compared to 2008. The iSuppli forecast of a 10.6 percent ASSP revenue decline may appear bleak from the segment's historical perspective, but is certainly not exceptional in the context of the overall semiconductor market.
Feeling dependent
ASIC shipments are equally dependent on a handful of systems. Video game consoles, for example, consume almost 30 percent of all logic ASICs, somewhat less when analog and DSP ASICs are aggregated, although still a very large percentage. Hard Disk Drives (HDDs) account for more than 18 percent. Together, these two systems represent almost one-half of all logic ASIC usage.
Preliminary iSuppli forecasts show unit shipments of rigid disk drives in 2009 falling by approximately 11 million units compared to 2008. HDDs are subject to severe price pressure. As HDD street prices fall to a level where storage is becoming virtually unlimited and essentially free, this translates into lower ASIC prices, compounding the falling unit volumes.
Falling video game console shipments and the continuing shift in the mix—from the highest-priced and largest ASIC-consuming boxes from the Microsoft Corp. Xbox 360 to the Sony Corp. PS3 to the lower-priced Nintendo Wii—will cause the ASIC market to drop by several percentage points compared to previous forecasts.
As a result of the declines in the ASIC “big dog” drivers, iSuppli now expects 2009 ASIC revenue to fall slightly, representing a second consecutive year of decline. The current forecast is for shrinkage of approximately 8.5 percent, certainly not an outstanding performance—but again—in the context of the overall semiconductor market, not necessarily a bad year by any means.
Global core silicon revenue will rise to $101.3 billion in 2008, up a scant 1.8 percent from $99.5 billion in 2007. iSuppli previously forecasted revenue would rise by 6.7 percent for the year. Revenue will decline by a sharp 9.9 percent in 2009 to reach $91.2 billion.
“The ancient rubric, ‘He who lives by the sword, dies by the sword,’ remains true in today's core silicon industry,” said Jordan Selburn, principal analyst, semiconductor design for iSuppli. “Such application-specific semiconductors—whose sales grow in concert with high-volume applications—shrink with those applications when the tide turns. And any look at current headlines shows that the tide is rushing out.”
Core silicon ICs bring critical system functionality to electronic systems, from Personal Media Players (PMPs) to satellites, but it is really just a handful of devices that consume the lion's share of these chips. The explosive growth in mobile handsets, PCs, storage devices and video game consoles has propelled the core silicon segment to consistent, above-market growth rates for the past few years.
“When these key system areas catch the proverbial cold, however, core silicon can catch a nasty case of the flu,” Selburn said. “For example, PCs represent roughly one-quarter of all logic ASSPs, and mobile handsets another 20 percent, so these two categories collectively account for almost half of total ASSP shipments.”
Feeling sick
iSuppli now expects unit shipments of 1G and 2G mobile handsets to drop more substantially in 2009 than previously thought. Shipments will fall by approximately 14 percent compared to an earlier forecast of a 1 percent decline. Desktop PC shipments now are expected to decline by about 5 percent in 2009 compared to 2 percent growth expected before. Mobile PCs remain somewhat of a bright spot, although the forecast increase of 15 percent has been pulled back from prior expectations of a 25 percent jump.
When these declines are taken into account, ASSP revenues cannot help but suffer. iSuppli still expects the market to grow, however, aided by the aforementioned mobile PC expansion as well as by other major system drivers, particularly Set-Top Boxes (STBs), whose shipments also will rise compared to 2008. The iSuppli forecast of a 10.6 percent ASSP revenue decline may appear bleak from the segment's historical perspective, but is certainly not exceptional in the context of the overall semiconductor market.
Feeling dependent
ASIC shipments are equally dependent on a handful of systems. Video game consoles, for example, consume almost 30 percent of all logic ASICs, somewhat less when analog and DSP ASICs are aggregated, although still a very large percentage. Hard Disk Drives (HDDs) account for more than 18 percent. Together, these two systems represent almost one-half of all logic ASIC usage.
Preliminary iSuppli forecasts show unit shipments of rigid disk drives in 2009 falling by approximately 11 million units compared to 2008. HDDs are subject to severe price pressure. As HDD street prices fall to a level where storage is becoming virtually unlimited and essentially free, this translates into lower ASIC prices, compounding the falling unit volumes.
Falling video game console shipments and the continuing shift in the mix—from the highest-priced and largest ASIC-consuming boxes from the Microsoft Corp. Xbox 360 to the Sony Corp. PS3 to the lower-priced Nintendo Wii—will cause the ASIC market to drop by several percentage points compared to previous forecasts.
As a result of the declines in the ASIC “big dog” drivers, iSuppli now expects 2009 ASIC revenue to fall slightly, representing a second consecutive year of decline. The current forecast is for shrinkage of approximately 8.5 percent, certainly not an outstanding performance—but again—in the context of the overall semiconductor market, not necessarily a bad year by any means.
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