LONDON — The return of business spending after a four-year lay off and as a complement to consumer spending is set to boost semiconductor sales in 2006 and send worldwide market growth to 20 percent, according to Malcolm Penn, chief executive of Future Horizons.
Penn confirmed his reputation as a bullish forecaster with his prediction but produced a series of arguments in his first newsletter of the year.
Throughout most of 2005 Penn stuck to a 15 percent growth prediction for the chip market. Towards the end he moderated this to 8 to 10 percent but argued that the spirit of his analysis was much closer to reality than the numerous market forecast firms that had started the year predicting that the market would contract and then repeatedly upgraded their predictions to try and home in on a final figure.
In the newsletter Penn acknowledged that 2005 defied his 10 percent prediction and said that overall the market moved 8.2 percent to reach $231 billion but with discretes showing lower growth the IC market revenue grew 9.1 percent.
“Entering 2006, the consensus has not changed that much at all, other than the fact there are now no negative growth positions. Growth predictions, however, are still clustered in the mid to high single-digit range. Our view is again decidedly more positive,” said Penn.
Penn said that the same forces that brought about the perfect storm in 2001 are set to produce perfect growing conditions in 2006 with a strong global economy being propelled by business spending, strong demand for memory, and little or no excess capacity and almost no chance to bring it online in 2006.
Penn reckoned that contrary to many other analysts DRAM would have a good year as PCs and graphics based consumer equipment increases the use of DRAM just as capacity has been moved over to non-volatile flash memory.
“Investment in fab capacity has been modest since the 2001 crash, and it is too late now to significantly alter 2006’s capacity profile. Only a pause in demand can stop capacity shortages occurring this year,” Penn argued.
The limited manufacturing capacity is likely to increase specific prices or at least prevent them falling, Penn said. “Costs and chip prices normally fall 30 percent per year on a per bit/per transistor level, so when price declines slow, the increased cash generated falls straight to the revenue and the bottom lines. Our 20 percent forecast for 2006 is based on a 12 percent unit and 8 percent ASP growth. It could easily be a lot, lot higher,” he argued.
