Data suggests possible recovery despite glum Semicon West mood

San Francisco, CA. Semicon West wrapped up last week with mixed messages on the economic prospects for the semiconductor industry as well as the semiconductor equipment market, including the market for test equipment. Exhibit space had shrunk to two halls here—Moscone North and South—with the lively Intersolar North America having taken over much of the West Hall, which used to house the  backend portion—test and packaging—of the show. With respect to prospects for the semiconductor industry, exhibitors and visitors were cautious at best—with the notable exception of keynoter Walden C. Rhines, chairman and CEO of Mentor Graphics (see "Mentor’s Rhines explodes IC market ‘myths’").

In a Tuesday press conference, Stanley T. Myers, president and CEO of SEMI, said a few data points indicate positive momentum for the industry. Among those points is that the silicon-area shipment index (measured on a three month moving average) is up 60% from the trough at the beginning of this year. In addition, he said, lead-frame unit shipments on a three-month moving average were up 20% from in May compared with April (albeit 31% less than a year ago, and semiconductor unit shipments on a three-month moving average were up 8.9% in May over April (albeit 19% below a year ago). Finally, he said, combined monthly revenues for outsource manufacturers ASE, SPIL, TSMC, and UMC were up about 81% in Q2 over Q1, yet 23% off the 2007 peak.

“We see tangible signs of progress,” Myers said, adding that the question is, do these data points represent true demand? He said the answer will probably come in the third quarter. He cautioned that market conditions remain extremely challenging, with equipment spending through 2010 remaining “quite conservative.” He cited figures showing that equipment spending as a percentage of semiconductor revenues would be 7% and 10%, respectively, down from a high of 24% in 2000 and from 12% in 2008.

As for the semiconductor equipment outlook, Myers said SEMI’s mid-year 2009 semiconductor consensus forecast estimates sales of $14.14 billion in 2009 and $20.74 billion in 2010, compared with actual sales of $42.77 billion in 2007 and $29.52 billion in 2008. The test-equipment portion of those totals is $5.05 billion in 2007 (actual), $3.45 billion in 2008 (actual), $1.78 billion in 2009 (forecast), and $2.54 billion in 2010 (forecast).

In summary, Myers said that semiconductor unit shipments bottomed out in Q1 2009 but left open the question of how much conditions will improve through the remainder of the year. As for the semiconductor equipment market, he said bookings are at levels last reported in the 1990s, with the market to decline by 52% or more in 2009; SEMI forecasts 40% to 50% growth in 2010, off the extreme lows of 2009.