Japan Quake
March 11 The Japanese earthquake raised concerns about supply of silicon wafers, batteries, crystal oscillators, substrates material and other specialized materials.
However, the supply shortage has had minimal impact on markets seen.
Performance of 2nd Quarter
2nd quarter the supply of semiconductors is only slightly below the norm; 3rd quarter is less certain.
Semiconductor related inventory levels are rising.
The Commodity price inflation has started to influence consumer behavior. China has had a 6.7% inflation rate and the high fliers have tried to cool down the real estate price throughout 100 cities in China by imposing regulation on purchases. It is hoped that such regulation would result in lowering the inflation rate. The other side of China promises an annual growth as much as 8% for 2011!
IC ASP
IC ASPs elevated in 2H 2010 due to limited supplies. However in 1H 11, ASPs should revert back toward normal long-term trends. The units will come under some pressure in 4Q11 to 2Q12 to get back to current elevated inventory levels.
IC Packaging
ASSP sales dropped by $2.2B and accounted for About 50% of the Downside (2Q11 versus 1Q11 Forecasts).
In 2011 DRAM sales are expected to drop by 7% compared to 2010. However, NAND Flash Rams are expected to rise by 30% and will resist trends from 2010.
Smart Phone and Tablet
PC Mobile Phone sales have dropped by 3B $ in 2Q11 comparing with 1Q11.
2011 production unit growth for 2Q11 will not reach its forecast of 10.2%, as it has decreased slightly to 9.5%. Mobile phone 2Q11 production unit growth increased slightly to 12.9% compared to its forecasted growth of 12.6% in 1Q11. The percentage growth for Smartphone’s keeps on increasing. Media tablet production forecasted to increase to 71.6M in 2011, with production exceeding 320M in 2015.
Automotive production is predicted to be lower, but will have little impact on total semiconductor growth as automotive accounts for 3.45% of total semiconductor business in terms of revenue.
Chip Price
Foundry overcapacity is expected to hit 4Q11 and most of 2012 which will ultimately lead to chip price drops.
The Fear of chip shortages has not translated to increase in ASPs at this point.
Apple as Market Driver
It is expected that Smart phones will gain market a greater market share by 2015 with 30% CAGR.
Apple product Prices have not dropped as fast as we expected, which will affect the type of products purchased.
The Percentage of tablets shipped with WiFi only is higher than expected compared to WiFi+3G.
There is a significant opportunity for application processors, baseband processors, RF and wireless connectivity.
The iPad2 and iPhone, iPad 2 introduction & the prices of its rivals leaves Apple ahead of competitors.
OS and hardware evolution will turn Media Tablets into a more viable PC alternative in most of the cases.
Apple Sales in 2Q11
Apple sold 3.76 million Macs during the 2nd quarter, a 28 percent unit increase compared to last year’s quarter. The Company sold 18.65 million iPhones in the quarter, representing 113% unit growth compared to last year’s quarter. Apple sold 9.02 million iPods during this quarter, representing a 17% unit decline from last year’s quarter. The Company also sold 4.69 million iPads during the quarter.
Apple Beneficiates
Iphone and Ipad component suppliers: TI, Skyworks, Broadcom, Analog Device, TriQuint, Intel, Qualcom, Samsung, will be having growth because of Apple products, by evolving designs based around the application processor. Remove cellular baseband, Transceiver, RF in WiFi-only products.
Smart Phone OS
Android – Outperforming the market, strong OEM and carrier support, expect aggressive pricing for penetration.(market share 14%).
Apple iOS- End to end control, superb usability and developer-friendly ecosystem. (market Share 80%)
RIM - End to end control gives security, growing ecosystem initiatives, major challenge from Android and iOS
Symbian – is losing share rapidly, and Nokia shifting to Windows base Phone.
Windows Phone – Nokia partnership a boost as WP7 vies to be a competitive consumer OS.
Nokia is losing business, typicall some of our Customers like Amkor and ST in affected!
US Consumers
In the 2H11 Consumer confidence level is low and purchases are slow.
The US economic growth is also poor, with short term weakness predicted. The mature PC market is also weak, and the upside index unclear. Consumer PC remains below expectations through 2011, with enterprise replacement growth expected to be healthy.
Smartphones and media tablets represent the majority of semiconductor revenue growth over the next three years. It is expected that entry-level smart phones will be the second wave of growth in the smartphone market.
Market share and strategy shifts amongst the smartphone and tablet ecosystems and vendors will have a significant impact on semiconductor suppliers.
Capitals spending
By 2011 spending is expected to be up by12% driven by Intel, foundry, and NAND spending
2012 will stall a little as production re-aligns with demand
Out-of-phase segment cycles create stop-start patterns in cap-ex profile.
Foundry Shipment, Capacity, UtilizationInvestment Race Leads To Oversupply since 1Q11 to 4Q11.
Positive sign of seeing foundry capital is up from 2011-2015
On said their Q3 and after business will slow down.
Conclusion
Our greatest risk remains in 3rd quarter.
ASPs are under pressure and Japan has not reversed the current trend and stock will remain elevated until supply chain feel more settled about Japan impact.
It is most-likely semiconductor growth for 2011 will be 5.1%, and 2012 forecasts reduced to 8.6%
The will be a brief respite in 2012, before DRAM and foundry overcapacity causes renewed weakness in 2013.
There will be a slight increase for capacity for Q111 compared with 4Q10. 2Q11 is almost on par or slightly below 1Q11.
The rumor that of iPhone5 will be launched in Sept, (news of UK APPLE is employing Temporary sales for iPhone5) means there should be a driver for the capacity to be maintained or increased due to the new demand iPhone5 staring in end July.
So 3Q11 should maintain as forecasted. However, due to the US economy, and high unemployment rate, I am not too optimistic for Q4 which will slash demand compared to 3Q11. LED market will keep nose diving till Q4 as I see no new driver for more equipment purchase, as the world largest LED drivers IC is On and National (now they became one) that would be some effect on our IC capacity.
SMT purchases seem to have softened demand in June and this is likely to continue into the future unless there is an outstanding demand for iPhone5.
CIS makers have to increase capacity due to demand for Iphone4, (iphone3 still making 1m unit a month by now) and Camera module for iPadII. They are optimistic for Apple product going forward.
In Short, Q3 will be slower than Q2. Q4 will be even worse unless there is an up-sign for market growth in the coming three months. Note that the Gold price keep on rising after hitting record $1800 an ounce. S ceiling debt 1.2 trillion Dollars in 10 year, Standard Poor rated US bank credit as AA+ instead of AAA. All this means that US will slow down their spending. They might stat printing money again fo paying debt. At the present time we do not see 2012 being a very good year. At best they will maintain similar growth to 2011, that is about US$338 at a growth rate of 7% as of 2011.
HK Snob
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