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Somsubhro Pal Choudhury, managing director, Analog Devices, spoke to Pradeep Chakraborty of EFY about the global semiconductor industry, global semiconductor capital spend, etc. excerpts:
Q. How has the global semiconductor industry performed this year so far? is it on target?
A. Till date this year, the overall semiconductor industry has shown muted performance in the face of strong headwinds from the global economy—after a very strong dollar growth of 32 per cent in 2010 coming out of the global recession and slight growth in 2011 for both the semiconductor industry and the analogue/mixed-signal sector.
The industry came back from an inventory correction late last year and Q1 2012 grossed $24.4 billion for the month of May 2012, which was a 1.4 per cent increase over the previous month according to iSuppli.
Q. Industry experts had pointed out that the industry will reach $301 billion this year. What’s your take?
A. Obviously, it depends on which market research firm you ask. Gartner and iSuppli had predicted numbers anywhere between $307 billion and $312 billion in 2011, while the worldwide semiconductor trade statistics (WSTS) reported $299.5 billion in 2011.
If you take the 2012 projections from Gartner and iSuppli, and discount these based on the global economic situation in the last few months, you would still see these northward of $301 billion. WSTS, on the other hand, might be able to barely make it. It is probably too close to call, given that the overall semiconductor industry can be fairly unpredictable due to price erosion, particularly in memory and commodity products.
So far, the semiconductor industry has been down year-on-year. The second half is expected to improve, but to show overall growth, it has to improve significantly.
Comparing apples to apples, the industry might see flat to slightly increasing worldwide revenues. The exact number is best quoted by the above market research companies. While the original estimate was a rise in 2012 and semiconductor firms started building up some amount of stockpile in anticipation of a growing demand, since then Euro crisis, lackluster job growth in USA, and slowing growth in China and India have all acted as headwinds.
Q. Why does the outlook remain to be one of ‘cautious op-timism’?
A. Given the fundamental role that semiconductors play throughout the global economy, ‘optimism’ describes the long-term sentiment. This is particularly true for analogue and mixed-signal technologies, which enable many growing and increasingly important emerging applications in energy, healthcare, industrial, transportation and communication.
However, in the short term, looking at the headwinds from the global economy, caution prevails. As you rightly pointed out, ‘cautious optimism’ is on everyone’s mind today looking at the global economy.
We hope the US GDP growth to bolster from the current 1.9 per cent today, after the presidential elections this year and decisions on taxes, fiscal deficit and healthcare taking a definitive direction.
The Euro crisis will take a longer time to recover, even though it seems Europe’s political leaders have committed themselves to the creation of a banking union, allowing troubled countries easier access to euro-zone rescue funds.
The sentiment will improve in India with the Prime Minister re-initiating the stalled regulations. China’s low inflation rate at 2.2 per cent will also drive the growth with investment boost.
At the end, it is all about the end demand. Except for smartphones and tablets, all the sectors from a global perspective are currently weak due to headwinds.
Q. How do you see the global semiconductor capital spend?
A. According to industry analysts, capital spend is down three per cent this year, mostly driven by 28nm/20nm capacity. These technology nodes are extremely expensive.