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Artificial shortage meant to hike prices

Posted: 08 Jul 2009 ?? ?Print Version ?Bookmark and Share

Keywords:artificial IC shortage? NAND? foundry? semiconductor?

An analyst believes that chipmakers are creating artificial shortages, possibly in an effort to drive up IC prices in 2H 09.

The first half of the year was a bust due to the IC downturn. Many chipmakers and foundries have been forced to slowor halttheir capacity outputs as a result of the downturn.

Some expect an upturn in 2H. Some believe that IC vendors are holding back their fab capacities as a means to create artificial shortagesif or when the market picks up.

"In recent discussions with domestic distributors we keep hearing that distributors say that chip manufacturers have furloughed their fabs so long that they are trying to drive a shortage so that they can raise chip prices in 2H09," said Craig Berger, an analyst with FBR Capital Markets, in a report.

"The distributors further said that, while they will try to push back on these price hikes, old and lower margin chips have already seen price hikes as chip firms improve or exit and lower-than-desired chip segments," Berger said.

There is some evidence to back up Berger's claims. Business is expected to improve in the foundry arena, as there are whispers about possible allocations and price hike scenarios in the sector. The foundries have been slow to boost their capacities.

NAND flash vendors are slowing their production, causing prices to firm in some cases.

In any case, there is a major debate taking place about the IC market for 2H. Some said it's way too early to see a real recovery in ICs. Others see a slight rebound. The bears see the rebound as a short-lived event or "head-fake."

Others have a different view. The second half of 2009 will bring welcome relief to the semiconductor and capital equipment industries, according to market research firm IC Insights Inc., which is predicting strong seasonal strength for electronic system sales, worldwide GDP growth and continuation of an IC inventory replenishment trend that began in Q2.

Compared to a dismal first half, the second half of 2009 will bring 18 percent growth in the worldwide semiconductor market, 43 percent growth in foundry sales and a 28 percent increase in semiconductor capital equipment spending, according to a soon-to-be released mid-year update from IC Insights.

- Mark LaPedus
EE Times

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