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Electronics industry analysts see mixed omens

Posted: 01 Nov 2010 ?? ?Print Version ?Bookmark and Share

Keywords:electronics? industry? outlook? analysts?

With only a couple of months left in the year, analysts are saying that the outlook is cloudy for the rest of 2010 and the beginning of 2011. Here are five good and five bad signs for the electronics industry:

On the upside

1. Bill Jewell, an analyst for Semiconductor Intelligence LLC, said: "2010 will be a strong year, with growth over 30 percent according to most recent forecasts. Growth is expected to slow down significantly in 2011 and 2012, despite a continuing recovery in the world economy. In their June forecasts, WSTS and SIA forecast growth to slow to about 6 percent in 2011 and 3 percent to 4 percent in 2012. Recent forecasts from Gartner and iSuppli call for 2011 growth of about 5 percent and 2012 growth of less than 2 percent. We at Semiconductor Intelligence believe these forecasts are too conservative. Semiconductor Intelligence forecasts 2011 growth of 9 percent and 2012 growth of 8 percent. These growth rates are consistent with a continued economic recovery (primarily driven by emerging economies)."

2. The MPU market is projected to grow 13.6 percent in 2011, reaching $45.7 billion in revenue, according to Semico Research Corp. Semico expects to see continued sustained growth into 2011.

3. VLSI Research Inc., in a research note, said: "NAND flash had another solid week despite finishing the week lower. High-density NAND, which accounts for the majority of NAND demand, was surprisingly strong. Even though NAND demand in the spot market is slowing, supplies are relatively tight. This is keeping overall ASPs at very healthy levels."

4. Gary Mobley, an analyst with Benchmark, said: "Unlike many chip companies, Broadcom reported another beat-and-raise quarter. Third-quarter revenue exceeded consensus by 3 percent. Management's Q4 2010 guidance calls for revenue ranging between $1.8 billion and $1.9 billion, up 3 percent sequentially using the midpoint. Sequential revenue growth for Q4 2010 should be driven by Broadcom's VideoCore mobile media processor design win ramp at Nokia, strong sales of Apple's iPhone and iPad and baseband share gains at Nokia."

5. "Rapidly declining equipment costs combined with stronger government support have set the stage for explosive growth in the U.S. solar market over the next decade," according to Bloomberg New Energy Finance.

"Solar-powered generating capacityusing photovoltaic and solar thermal electricity technologiescould reach 4.3 percent of the nation's power capacity by 2020, depending on the industry's ability to attract an estimated $100 billion of investment," according to the firm. "The U.S. today has just 1.4GW of installed solar power capacity, ranking it fifth globally."

"But that could rise to 44GW by 2020," according to Bloomberg New Energy Finance. In a new report, "forecast capacity from large-scale solar thermal projects is projected to rise from 0.4GW currently to 14GW by 2020. For photovoltaics, the group anticipates a 34 percent annual growth rate to 30GW by 2020."

On the downside
1. VLSI Research Inc., in a research note, said: "Demand for mainstream DDR3 has been painfully slow in the spot market and it's not expected to pick up any time soon. The Chinese National Holidays did not have any meaningful effect on demand, leaving many traders disappointed and anxious to clear up inventory. This has created a severe pricing environment, which is taking a toll on both branded and non-branded parts."

2. Paul McWilliams, an analyst for Next Inning Research, said: "On Monday I wrote about a rumor that HDDs for notebook PCs were in short supply. Based on what I've learned since, I think the rumor is valid. While I think this bodes well for HDD manufacturers like Seagate Technology and Western Digital, it is also a clear vote of confidence for HDD controller leader, Marvell Technology Group and is implicitly good news for Intel.

While some of this imbalance in supply and demand can likely be attributable to what appears to be an up-tick in the demand for notebook PCs, there is also an element of a move to higher density HDDs that is probably aggravating the situation.

As DRAM prices increased, PC manufacturers looked for ways to reduce costs so that PC prices could remain stable. What we saw in a number of cases was lower DRAM content and/or smaller HDDs. With DRAM prices now lower, we're seeing those trends reverse. The problem is HDD manufacturers didn't build up the higher density inventories. Therefore, higher density HDDs are in short supply, but it appears smaller ones are fairly available."

3. Craig Berger, an analyst from FBR, said: "We are downgrading Silicon Labs from 'Outperform' to 'Market Perform' as we temporarily move to the sidelines following the firm's downside Q4 2010 revenue guidance and a simultaneous rally in shares. We directionally expected Silicon Labs' weak Q4 2010 revenue guidance, but not to that magnitude. Weakness is driven by (a) customer inventory de-stocking (or take-rate resets), (b) revenue atrophy in its mature access businesses (dial-up embedded modems, European telco chips), and (c) handset FM tuner revenue atrophy as Wi-Fi/bluetooth combo chips take share."

4. C.J. Muse, an analyst from Barclays Capital, said: Novellus' "September quarter was generally better, while its December quarter is better at midpoint. Novellus discussed cautious tone from customers and uncertain timing of both foundry and memory projects while we believe this is due to push-outs in the last week from TSMC/UMC. Novellus was very upbeat on NAND outlook (versus Lam Research suggesting flat to -10 percent.)"

5. VLSI Research Inc., in a research note, said: "The book-to-bill ratio for IC equipment has been decelerating considerably in the last few months and it's expected to fall below parity in October. This earnings season, equipment suppliers have been bullish about their prospects in the coming quarters while chipmakers have turned cautious. TI was the latest company, among others, to warn of a slowdown ahead. The company had a strong Q3 2010 that exceeded analysts' estimates. Demand for industrial products was very strong in Q3 2010 while consumer demand cooled, impacting markets such as computing and televisions. Moreover, the company expects things to cool down for the rest of the year because of 'continued soft demand in computing and consumer markets, and slowing growth in the industrial market.' This, along with crashing spot prices, is a sign that we could see equipment pushouts become publicly visible in the next few quarters."

- Mark LaPedus
EE Times

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