MICRO: Editor's Page

Pop the cork

The evidence is mounting, and the numbers are ever harder to dispute. The smiles have begun to outnumber the frowns, though worry lines still crease many faces. Terms like "double bookings" and "fully loaded capacity" are being heard for the first time since the great semiconductor manufacturing sector boom of 2000 burst and splattered like an overblown Bazooka Joe bubble.

It's time to ice the champagne. The downturn is over: long live the upturn!

Market forecasters at the recent Industry Strategy Symposium (ISS) in
Pebble Beach, CA, unanimously stated their belief that 2004 and at least most of 2005 will mark a return to healthy, even prodigious, double-digit growth for the chip equipment and materials sectors. They also believe that the chipmakers will continue to ride the upward surge that began to swell in early 2003, driven largely by customers in the Asia-Pacific region. On the end-user side, no single killer app is driving growth. Broad-based demand from the consumer, business, and industrial (especially automotive) sectors will push chipmakers' capacity limits and test equipment and materials companies' supply chains.

The 2004 revenue forecasts for the global semiconductor market ranged from SIA's 19.4% at the low end to VLSI Research's nearly 32% at the high end. On the equipment side, the growth projections were mostly in the high 30s, with the increase coming primarily from 300-mm tool purchases. IC Insights sees a 48% gain in capital expenditures and a 22% uptick in the materials side. SEMI's materials forecast is a bit more conservative, foreseeing a 12% hike in that segment. Nearly all varieties of chips and every type of tool and material should see at least moderate and, in some cases, torrid growth this year.

Given the largely supplier-side demographic makeup of those at ISS, concerns about the supply chain's ability to handle an aggressive upturn punctuated many of the presentations as well as informal conversations among the attendees. Have the equipment companies cut too much capacity and personnel during the lean times, and have their outsourcing networks been stretched too thin? VLSI's Dan Hutcheson sees "panic through the supply chain," adding "the industry's not ready for the upturn." Carl Johnson of Infrastructure countered that supplier companies can handle the spike in bookings, since they can add capacity and ramp their own manufacturing quickly because of an improved ability to recapitalize.

The supply chain signals were mixed among the corporate execs as well. When asked if his company had any infrastructure concerns, Applied Materials' head honcho Mike Splinter replied simply, "Applied will be ready." MEMC CEO Nabeel Gareeb noted that the wafermakers' capacities are at or above 90% and that there could be a silicon shortage in the near future. A manager from one of the component suppliers told me that although his company's lines are running at full capacity, their bookings visibility doesn't extend past the next few quarters, causing him to worry about possible manufacturing hiccups and fostering doubts about the ultimate strength of the recovery.

Despite the good news, no one believes the boom-and-bust cycles of the semiconductor world are over. The prognosticators warned that the more abrupt the equipment business upturn and the more heated the fab capacity expansion, the quicker the next downturn will arrive. Since prevailing management wisdom holds that you plan for the next upturn during the downturn and vice versa, does that mean it'll soon be time to put aside the rose-colored glasses and take a look through those double-tinted Raybans again?

The doom and gloom of the past few years may still be fresh in our vision, but I for one would like to see the sun shine through for awhile and enjoy it while I can.

Pop the cork.

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