Fab lite, fewer startups to fuel doubling of IC growth rates

Fab lite, fewer startups to fuel doubling of IC growth rates

SAN FRANCISCO -- Putting a finer point on a surprisingly bullishsemiconductor-market outlook, IC Insights said Tuesday (Sept. 18)that fewer startups, reduced capital spending ratios and the "fablite" movement will reverse three decades of declining semiconductor revenue growth.

In August, IC Insights(Scottsdale, Ariz.) President Bill McLean forecast that IC salesgrowth rates will rise 54 percent to an average compound annualgrowth rate (CAGR) of 8 percent between 2011-21. Since 1996, theindustry has experienced an average annual growth rate of 5.2percent, according to the report. (At thattime, McLean looked at an historic window of 2006-11, ratherthan 1996-2011, but reached the same bullish outlook).


McLean's prediction noted that unit growth rates will slow from 9.5percent per year (1996-2011) to 7 percent in the next 10 years, butthat average selling prices will jump. The outlook runs counter tolong-held assumptions that relentless manufacturing improvements incomponents and fewer "killer" high-margin apps like servers andearly communications infrastructure devices have conspired to fix ICgrowth rates permanently in the low single-digits.

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McLean tied improving sales growth rates to:

• Fewer startups: "The IC industry is now closed to newmajor manufacturing startups. This will help moderateover-investment in new fabs."
• Fab-lite foundry movement: "This should lead to lessoverspending for IC fabrication capacity."
• Shrinking capital-expenditure ratios: IC Insights sees theratio falling from 21 percent in 2011 to 19 percent this yearand 15 pecent by the end of the decade.
• Wafer size pause: 450-mm wafer manufacturing will be delayedalong with the attendant cost reduction phase for ICmanufacturing.

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TAG:semiconductors IC electronics business merger forecast outlook IC Insights Bill McLean