Annual Semiconductor Report

Additional Information

Report Excerpt

As a result, one fab in three was redundant in 2001 and the 2000 investment binge meant the problem would get worse before it could get better. It takes a year from turning the tap off for the added new capacity to stop flowing. This is why excess capacity-driven recessions take so long to recover from; with demand collapsing in parallel, the 2001 recession was apocalyptic.

The 2009 recession is likewise unique, caused this time as a side effect of the worldwide financial problems, not a problem of the industry itself. This will help to cushion the global recession impact, offset by the fact that, for the first time in the industry’s history, this time all markets and all regions were simultaneously impacted.

Clearly the market has turned ugly, but it is important to remember that from a long-term perspective this time the downturn circumstances are significantly different.

First we have no serious overcapacity in place (pre-slowdown utilisation rates were in the 90 percent region), with Cap Ex deep in a retrenchment that started 12-18 months before the slowdown hit home.

Second, prior to the financial meltdown there was little sign of inflated demand, with IC units running at or below the 10 percent per year long-term trend line and no serious excess inventory in the supply chain.

Third, ASPs were in the midst of a structural recovery, having suffered the dual impact of the 130nm fiasco and the 300mm wafer conversion.