Semicon industry likely to boom: analysts

Semicon industry likely to boom: analysts
By Rachel Kelly | Posted: 07 February 2011 1810 hrs

SINGAPORE: With a number of new wireless gadgets expected to be launched, analysts say the semiconductor industry could witness a boom in production and hiring in 2011.

Computer memory prices have been more than halved, between January 2010 and last month.

As computer makers begin to replenish stocks of components, a recovery in prices is now under way -- and that's showing up on stock markets.

Shares of South Korea's Hynix have gone up 24 per cent this year, while those of Japan's Toshiba have risen 18 per cent.

The chipmaking industry is putting last year's slump behind it.

According to a global survey of semiconductor executives by KPMG, 78 per cent expect revenues to grow by more than five per cent this year.

And an anticipated revival in PC demand is not the only source of excitement in the semiconductor industry.

It is expecting bigger gains from sales of premium chips used in smartphones, tablets and 3D TVs.

Chipmakers are looking to build new capacities to make the most of this demand growth.

Frost & Sullivan program manager, Asia Pacific Tim Chuah said: "So these are new markets or untapped markets that have been created, that will really push demand beyond your typical replacement cycles and that's smart phones.

"Then you get to your 3D Tvs (which) are new segments being created, that will drive demand in 2011.

"If you look at it from the supply side as well, there has been quite a tight supply market in 2010 because of shortage in capacity.

"I think manufacturers have been more aware of this glut in supply that has happened recently that has caused price erosion. They have been aware of this and they have not expanded supply as much as they would want to.

"So in 2011, I think a lot of them will be expanding as well.

"If you look at Global Foundries which bought over Chartered Semiconductor, they are going to spend $6 billion in 2011; TSMC is going to spend almost $7 billion in fab expansion -- so this sentiment that is happening in 2011 is something that really reflects actual demand.

"Otherwise, I don't think these companies would want to spend so much on expansion".

According to the KPMG survey, 29 per cent of global semiconductor firms predict workforce to grow more than five per cent in 2011.

With expansion comes the search for the right manufacturing location.

IDC Manufacturing Insights director Christopher Holmes said: "One of the things I'm hearing a lot of discussion (on) is the move to the next low-cost country -- where is it, what is it going to be.

"We are already seeing more and more factories moving further inland in China; we are starting to see the growth of Vietnam as a potential new low-cost centre and we are even starting to hear conversations about moving to Africa, Middle East - potential new low cost centres".

According to market research firm IHS iSuppli, sales of chips used in tablets may jump a staggering nine-fold this year.

Fitch Ratings has a stable outlook on the Asia-Pacific memory chip industry in 2011.

However, the ratings agency in a recent report said that overall industry revenue growth and profitability may come under pressure compared with 2010 due to oversupply and resultant falls in memory prices.

In a recent release by Fitch Ratings, Alvin Lim, associate director in Fitch's Asia Pacific Telecom Media and Technology ratings team, noted that "memory makers in Fitch's rating universe will be able to retain sound credit profiles in 2011 despite the likely suppression of profitability.

"The potential negative impact from a continued decline in memory prices will be well mitigated by these companies' strong market positions, efficient cost structures enabled by technology leadership, and robust liquidity".

Memory makers in Fitch's current rating universe include Samsung Electronics Co Ltd, Hynix Semiconductor Inc, and Toshiba Corporation.

-CNA/wk

- wong chee tat :)