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What's in the cards for the chip industry?

Posted: 28 Jan 2011 ?? ?Print Version ?Bookmark and Share

Keywords:chip industry structural changes? NAND flash growth? PC market growth? LED chips?

What does 2011 hold for the chip industry? Analysts Brett Simpson, Dan Gardiner, Nam Hyung Kim and Jagadish Iyer, all from Arete Research LLC, sifted through various reports and drew up a list of predictions for the new year. Here's how the immediate future looks:

1. Semi smash up
"As consumer, mobile and PC worlds collide, a strategic battle is raging across semis, which could lead to some of the biggest ever structural changes in the landscape:

A) Qualcomm, Broadcom, Marvell and ST-E (will) all begin to target Mediatek's grey market customers in low-cost smartphones.

B) Chipmakers shipping Android products rise from four today to 20 in 18 months' time.

C) GHz processors pricing falls to D) CSR and Synaptics get acquired this year. CSR's best-in-class Bluetooth and GPS

technology could make it attractive to players such as Intel and Marvell that we believe are looking to boost their wireless portfolios, particularly now that its legal issues with Broadcom have been solved. Synaptics' exposure to the fast growing touch-screen market and modest valuation make it attractive.

E) A raft of infringement claims between Intel and ARM chipmakers/foundries."

2. Memory: Do not pass go "The major trend in memory will be the structural shift between memory sub-sectors as growth in NAND flash outstrips DRAM. We expect DRAM to fall 26 percent in '11. We expect NAND to grow 28 percent to $29 billion from $22 billion.

We believe 4Q prices declined 30 percent sequentially and forecast further 29 percent and 12 percent declines in 1Q11 and 2Q11, respectively. From a demand perspective, the key issue will be to what extent consumer spending shifts away from the traditional PC to smartphones/tablets. PC industry growth as usual will be a key swing factor impacting the DRAM market this year.

This trend obviously has a major impact on capex: while DRAM capex drops 40 percent, 85 percent growth in NAND flash capex in '11 should see it surpass DRAM for the first time in the history of memory. Despite this massive increase, we are not expecting oversupply this year as three new fabs (Toshiba, IMFS and Samsung) will only reach their full ramp by 1H12. Our view is that oversupply is unlikely before mid-2012.''

3. Capex heats up
"The semicap equipment outlook has improved in the last month. Despite DRAM languishing, record foundry spending and accelerating logic investment should drive 8 percent WFE growth in '11 to $32 billion.

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