Castellano: Market Environment of Semiconductor Industry Deteriorates Again

Robert Castellano, president of market research firm The Information Network, said that the semiconductor industry environment is deteriorating, and leading indicators show that the market is about to undergo inventory correction; he pointed out that although 2010 will be the semiconductor industry experienced a sharp rebound in growth, but the good times may be afraid Running out.

Castellano predicts that the sales of terminal electronic products will decline, and the first thing that is rushed is the DRAM field; this market has also experienced 135% sales growth in the second quarter of this year; in addition, he also predicted that PC sales performance will slow down. This has negatively impacted microprocessor vendors such as Intel and AMD, and has also given wafer foundry players an impact.

In recent weeks, several market research institutions have revised their forecasts for the growth rate of the semiconductor industry in 2010. Many of them believe that the growth rate will exceed 30%; but there are also some chip makers, including Intel and AMD, but because PC sales slowed down and lowered its performance targets. In fact, market research institutions, including those forecasting the growth rate of the market in 2010, also predict a slowdown in the market in the second half of 2010.

Earlier, Needham & Co. LLC analyst VernonEssi downgraded the performance of several analog chip suppliers; including Exar and PMC-Sierra, and recently lowered their performance targets. However, some wireless chip suppliers, including Infineon and Skyworks Solutions, have recently raised their outlook.

According to Castellano, the "ultra-high growth" that the semiconductor industry has demonstrated in the first half of this year will not be sustainable because the global macroeconomic climate cannot support the semiconductor industry's growth rate of more than 50%. He warned semiconductor and chip equipment makers that the monthly earnings data seems to be “more and more,” indicating that the fragile western world economic situation may not guarantee those growth forecasts.

Castellano expects that the decline in semiconductor sales will affect the performance of semiconductor equipment and materials suppliers. The semi-conductive device market will experience a crowding-out effect. The lithography equipment market will suffer the most.

He also compared 2010 with 2000, saying that at the time, improper inventory control, fear of shortage of chips, and worries about extended delivery of advanced equipment led to a $10 billion in the IC market in 2000. Overcapacity; and the chaos of the chip equipment market has not been fully restored until this year.