Second quarter growth of semiconductors looks like it will reach 18 percent sequentially, prompting questions as to why a traditionally slow season should show such growth.
Future Horizon CEO Malcolm Penn said: “Second quarter growth is usually pretty pathetic. There have been only three historical precedents when such a spurt has happened.” He said the question is whether this is the start of the recovery of the semiconductor market, or a “blip on the statistics radar screen”.
He thinks its both. The market collapse in the fourth quarter was far too steep, he said, based on a “severe overreaction to last year’s gross financial uncertainty, culminating with the Lehman Brothers collapse in September.”
The first quarter of this year saw things stabilize, but that still doesn’t explain the growth, he said.
The nature of the semiconductor beast is that the chip market overreacts and cuts back production and inventories too far, then there’s a correction phrase followed by a resumption of demand driven build, Penn said.
He thinks we are currently in phase two of the recovery cycle, but the industry will face a problem because capacity will get tight. “The underinvestment eagle is one day coming home to roost,” he said. “We are already seeing the first signs of shortages at UMC affecting Xilinx and other firm’s second quarter sales.”
This will mean average selling price increases. Unfortunately, “market trends are not based just on rational decisions, but emotional ones as well,” he said.