The semiconductor industry’s recovery is underway. After floating many predictions of 30 percent declines expected for the industry in 2009, the actual fall from 2008 to 2009 is expected to be about 11-13 percent. In addition, the burgeoning recovery in the last two quarters appears to have full steam behind it. This recovery appears to be largely driven by the rise of new nanometer mixed-signal application-specific standard products (ASSPs) targeted at new consumer, mobile computer, and networking market segments. These mixed-signal ASSPs have a significant number of analog and radio frequency (RF) functions that push the limits of performance, power, area, and efficiency. In fact, the analog, mixed-signal, and RF (A/MS/RF) content of semiconductors is at the center of the current semiconductor industry’s recovery and it is growing faster than anytime in history.
The Recovery Brings a New Landscape
The semiconductor industry is poised to deliver strong growth over the next five-year period and this growth will leave behind tremendous changes in its wake, defining a new industry landscape. iSuppli’s latest forecasts for industry growth predict strong double-digit growth through the 2010-2014 period. The fuel for this growth, however, is coming from a very different source than what fueled the last semiconductor boom. Following the great recession of 2008, global share of consumption is expected to see dramatic changes over the next decade. As highlighted in Figure 1, approximately 40 percent of the current world population is located in India, China, and Indonesia and they account for approximately 10 percent of the nominal GDP and 12 percent of global share of consumption. According to the World Bank, over the next five years, consumption in these countries is expected to rise to approximately 26 percent of global share of consumption, driven by the rapid growth of personal income (and therefore, a middle class) accompanying their GDP growth. Whereas the absolute per capita income levels will still be below that of the United States or larger EU countries, the population sizes alone create large markets that are already driving the new face of the semiconductor industry.
New End Market Characteristics
The large markets by population create new markets for both existing products as well as new products. Specifically, these large markets are driving new product definition processes for the OEMs building products that contain electronic subsystems. While the markets are large (and hence attractive for semiconductor suppliers), the combination of very high volumes and “new” middle-class per-capita income levels dictate consumer products that are characterized by different feature sets and dramatically lower final-product pricing, resulting in tremendous pressures material cost of these products. As a result, major initiatives are underway to service these “new middle class” markets in more than eighty percent of the consumer electronics, computer, mobile phone, and automotive companies in the world. Companies will have to adjust to retail purchasing cycles that are based on lunar calendar festivals rather than Christmas. Another significant change is the choice of technology, where products such as flat-panel TVs, notebook computers, and mobile phones are being made with semiconductors in nanometer geometries in order to be able to offer attractive margins at significantly lower end-product prices.