ChangeWave Research: Semiconductor and Equipment Trends
ChangeWave Research Report:Semiconductor and Semi Equipment Trends Industry Continues to Show Improvement
Overview
Our previous Semiconductor survey (November 2003) provided strong evidence that the semi industry was picking up steam.
This report presents the findings from an April 20 – 26, 2004, survey of ChangeWave Alliance semiconductor industry members on current trends – as well as the sub-segments and companies most likely to win or lose in the semi chip and equipment marketplaces. A total of 60 Alliance members participated.
Key Findings:
A. Semiconductor Industry Trends
Future Growth. Better than three-quarters of respondents (78%) believe there will be double-digit growth for the semiconductor industry in the second half of 2004. This reflects a healthy increase from the previous survey (November 2003), when 63% of respondents believed there would be double digit growth for the industry.
Strong Fab Capacity Utilization. Fifty-seven percent (57%) of respondents believe fab capacity utilization is now 90% or more – a huge 44-percentage point increase from November 2003. Another 25% believe fab capacity utilization currently falls between 75% and 89%. Only 3% see it as less than 75% overall.
Best Performing Sub-Segments. RFID Chips (Net Difference Score +30) looks to be the best performing sub-segment over the next six months – it experienced a healthy 8 pt. increase in Net Difference Score from the previous survey. Also, Flash Memory (+23) looks poised to do well.
Of note, while Communications Chips for Telecom and Data Networking Gear still ranks near the bottom (-3), it did show the largest overall improvement from the previous survey – experiencing a 19 pt. increase in Net Difference Score.
Worst Performing Sub-Segment. Microprocessor Chips (Net DifferenceScore -28) looks to be the weakest performing semiconductor sub-segment over the next six months. Moreover, its Net Difference Score has fallen 30 pts. since November 2003.
ChangeWave Research: Semiconductor and Equipment Trends
Capital Spending Split. Better than one-third (35%) of respondents say that New 300mm Fab Construction will be the number one area of capital spending by chip companies over the next 12 months. Another 30% say Fab Upgrades to .18 Micron or Less will get the largest portion of the capital spending budget, while 22% say it will be Fab Upgrades to Support Increased Shipment Volume.
B. Semiconductor Companies: Best and Worst Performers
Who Will Gain Market Share? Texas Instruments (Net Difference Score +42) still tops the list of companies our respondents believe will gain market share over the next six months, despite a 1 pt. dip from our last survey (November 2003).
Surprisingly, Nvidia’s Net Difference Score (+7) has jumped 15 pts. compared to November 2003 – the largest increase of any company – suggesting that they too should gain market share over the next six months.
And for the first time we included Silicon Images in our company pick list and they garnered the second highest Net Difference Score (+20), which suggests they are also poised to do well.
Least Market Share Momentum. For the second consecutive survey, AMD (Net Difference Score -12) was the chip vendor seen as least likely to gain market share over the next six months. Interestingly, Intel’s Net Difference Score fell from +33 in our November 2003 survey to just +8 in the current survey, a 25 pt. downturn.
C. Semiconductor Equipment Sector
Best Performing Semi Equipment Sub-Segments. ATE/Packaging and Wafer Processing (Net Difference Scores +15) both appear poised to perform well over the next six months. However, ATE/Packaging’s Net Difference Score improved 24 pts. from our previous survey (August 2003), while Wafer Processing showed just a 6 pt. gain.
Worst Performing Semi Equipment Sub-Segments. Specialty equipment had the lowest Net Difference Score (-13), falling 12 pts. from our August 2003 survey. Automation/Material Handling and Software (Net Difference Score -12) also looks like it will not be performing as well over the next six months.
Bottom Line: The semiconductor industry continues to show improvement, bolstered by the performance of a few robust sub-segments such as RFID Chips and Flash Memory. The semi equipment sector is also showing signs of modest improvement, led by ATE/Packaging. According to our semi industry respondents, Texas Instruments is the company most likely to gain market share over the next six months, and it has a large and widening lead over Intel in terms of perceived market momentum.
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ChangeWave Research: Semiconductor and Equipment Trends
I. Summary of Key Findings
Overview
Our previous Semiconductor survey (November 2003) provided strong evidence that the semi industry was picking up steam - propelled by robust growth in cell phone communications chips, flash memory, RFID chips and Graphics/Video chips.
This report presents the findings from an April 20 – 26, 2004, survey of ChangeWave Alliance semiconductor industry members on current trends – and the sub-segments and companies most likely to win or lose in the semi chip and equipment marketplaces. A total of 60 Alliance members participated.
The survey results focus on three areas:
A. Semiconductor Industry TrendsB. Semiconductor Companies: Best and Worst PerformersC. Semiconductor Equipment Sector
Semiconductor Industry Continues to Improve 78% of respondents
believe there will be double-digit growth in the second half of 2004, a healthy increase from 63% in Nov ‘03
Strong Fab Capacity Utilization: 57% believe capacity utilization is at 90% or more–a hugeincrease over Nov ‘03
Bottom Line: The semi industry continues to improve, bolstered by the performance of a few robust sub-segments such as RFID Chips and Flash Memory. The equipment sector is also showing improvement.
Companies Gaining Market Share Over Next 6 Months Texas Instruments (Net
Diff. Score +42) still tops the list of companies our respondents believe will gain market share over the next 6 months
Nvidia (Net Diff. Score +7) jumped 15 pts. since Nov ’03 – the most of any company
Least Market Share Momentum AMD (Net Diff. Score
-12) is seen as least likely to gain market share over the next 6 months
Intel's Net Diff. Score fell from +33 in our Nov ‘03 survey to only +8 in the current survey
Semiconductor Sub-Segments Best Performers:
RFID Chips (Net Diff. Score +30) will likely perform best over the next 6 months. Flash Memory (+23) also looks poised to do well
Most ImprovedSub-Segment: Communications Chips for Telecom and Data Networking Gear – (Net Diff. Score increased 19 pts. since Nov ’03)
Worst Performer: Microprocessor Chips – (Net Diff. Score fell 30 pts. since Nov ’03)
ChangeWave Research: Semiconductor and Equipment Trends
II. The Findings
A. Semiconductor Industry Trends
(1) Question Asked: "Do you believe there will be double-digit growth for the semiconductor sector in the 2nd half of 2004?”
CurrentSurveyApr ‘04
PreviousSurveyNov ‘03
PreviousSurveyAug ‘03
PreviousSurveyJul ‘02
Yes - Double-Digit Growth in 2nd half of 2004
78% 63% 28% 15%
Little Possibility of Double-Digit Growth in 2nd half of 2004
20% 29% 52% 51%
Absolutely No Possibility of Double-Digit Growth in 2nd half of 2004
2% 2% 14% 31%
Don't Know 0% 5% 6% 2%
*Note: In the current survey question we are asking about the 2nd half of 2004, whereas in the previous survey questions we asked about "either the 'current quarter' or 'next quarter.'"
Future Growth. Better than three-quarters of respondents (78%) believe there will be double-digit growth for the semiconductor industry in the second half of 2004. This reflects a healthy increase from the previous survey (November 2003), when 63% of respondents believed there would be double digit growth for the industry.
(2) Question Asked: "Some analysts claim many fabs are running at 90% of capacity or more. Others question these numbers. Which of the following statements best reflects what you are seeing and/or hearing in terms of fab capacity utilization?”
CurrentSurveyApr ‘04
PreviousSurveyNov ‘03
Fab Capacity utilization is tight (90% or more) overall 57% 13%Fab Capacity utilization is firm (75% to 89%) overall 25% 65%Fab Capacity utilization is softer than expected (less than 75%) overall 3% 7%Don't Know 12% 7%Other 3% 7%
Strong Fab Capacity Utilization. Fifty-seven percent (57%) of respondents believe fab capacity utilization is now 90% or more – a huge 44-percentage point increase from November 2003. Another 25% believe fab capacity utilization currently falls between 75% and 89%. Only 3% see it as less than 75% overall.
ChangeWave Research: Semiconductor and Equipment Trends
(3A) Question Asked: "Which of the following semiconductor sub-segments do you think will perform the best over the next six months? (Choose No More Than Two)”
CurrentSurveyApr ‘04
PreviousSurveyNov ‘03
PreviousSurveyAug ‘03
PreviousSurveyNov ‘02
PreviousSurveyMar ‘02
Communications Chips for Cell Phones 37% 42% NA NA NARFID Chips 33% 31% NA NA NAFlash Memory 30% 33% NA NA NAAnalog Chips 18% 11% NA NA NAGraphics/Video Chips 17% 24% 20% 22% 22%Communications Chips for Telecom and Data Networking Gear
17% 13% NA NA NA
Memory Chips 17% 7% 4% 4% 19%Logic/Programmable Chips 8% 7% 14% 16% 32%Microprocessor Chips 5% 15% 4% 4% 5%*Note: In the Aug ‘03, Nov ‘02 and Mar ‘02 surveys, members could only choose one category, whereas in the current survey and the Nov ‘03 survey, members were able to choose up to two categories.
(3B) Question Asked: "Which of the following semiconductor sub-segments do you think will perform the worst over the next six months? (Choose No More Than Two)”
CurrentSurveyApr ‘04
PreviousSurveyNov ‘03
PreviousSurveyAug ‘03
PreviousSurveyMar ‘02
Microprocessor Chips 33% 13% 20% 8%Memory Chips 22% 16% 24% 11%Communications Chips for Telecom and Data Networking Gear
20% 35% NA NA
Analog Chips 18% 18% NA NACommunications Chips for Cell Phones 18% 15% NA NAGraphics/Video Chips 18% 9% 4% 5%Logic/Programmable Chips 10% 20% 10% 0%Flash Memory 7% 9% NA NARFID Chips 3% 9% NA NACommunications Chips NA NA 22% 51%Other 2% NA NA NA*Note: In the Aug ‘03, Nov ‘02 and Mar ‘02 surveys, members could only choose one category, whereas in the current survey and the Nov ‘03 survey, members were able to choose up to two categories.
Best Performing Sub-Segments. RFID Chips (Net Difference Score +30) looks to be the best performing sub-segment over the next six months – it experienced a healthy 8 pt. increase in Net Difference Score from the previous survey. Also, Flash Memory (+23) looks poised to do well.
Of note, while Communications Chips for Telecom and Data Networking Gear still ranks near the bottom (-3), it did show the largest overall improvement from the previous survey – experiencing a 19 pt. increase in Net Difference Score.
ChangeWave Research: Semiconductor and Equipment Trends
Worst Performing Sub-Segment. Microprocessor Chips (Net DifferenceScore -28) looks to be the weakest performing semiconductor sub-segment over the next six months. Moreover, its Net Difference Score has fallen 30 pts. since November 2003.
(4) Question Asked: "Which one of the following four categories do you see as the number one area for capital spending by chip companies over the next 12 months?”
CurrentSurveyApr ‘04
PreviousSurveyAug ‘03
PreviousSurveyJan ‘03
PreviousSurveyNov ‘02
PreviousSurveyMay ‘02
New 300mm Fab Construction 35% 12% 32% 33% 22%
Fab Upgrades for Shrinking to .18 Micron or Less
30% 58% 37% 42% 50%
Fab Upgrades to Support Increased Shipment Volume*
22% 8% 8% 9% 13%
New 200mm Fab Construction 3% NA NA NA NA
Don’t Know / No Answer 10% 20% 16% 7% 6%
*Note: In the previous surveys, this choice was “Fab Improvements to Support Increased Shipment Volume.”
Capital Spending Split. Better than one-third (35%) of respondents say that New 300mm Fab Construction will be the number one area of capital spending by chip companies over the next 12 months. Another 30% say Fab Upgrades to .18 Micron or Less will get the largest portion of the capital spending budget, while 22% say it will be Fab Upgrades to Support Increased Shipment Volume.
ChangeWave Research: Semiconductor and Equipment Trends
B. Semiconductor Companies: Best and Worst Performers
(1A) Question Asked: "Let's focus on the chip companies themselves. Based on your own knowledge and what you are seeing in the industry, which of the following chip vendors are most likely to pick-up market share over the next six months? (Choose All That Apply)”
Who Will Gain Market Share? Texas Instruments (Net Difference Score +42) still tops the list of companies our respondents believe will gain market share over the next six months, despite a 1 pt. dip from our last survey (November 2003).
Surprisingly, Nvidia’s Net Difference Score (+7) has jumped 15 pts. compared to November 2003 – the largest increase of any company – suggesting that they too should gain market share over the next six months.
And for the first time we included Silicon Images in our company pick list and they garnered the second highest Net Difference Score (+20), which suggests they are also poised to do well.
Least Market Share Momentum. For the second consecutive survey, AMD (Net Difference Score -12) was the chip vendor seen as least likely to gain market share over
ChangeWave Research: Semiconductor and Equipment Trends
the next six months. Interestingly, Intel’s Net Difference Score fell from +33 in our November 2003 survey to just +8 in the current survey, a 25 pt. downturn.
ChangeWave Research: Semiconductor and Equipment Trends
(2) Question Asked: "Is your company primarily focused on the communications marketplace (telecom and data networking), business marketplace (computer and data storage hardware) or consumer marketplace (electronics)? (Choose All That Apply)”
CurrentSurveyApr ‘04
PreviousSurveyNov ‘03
Communications Marketplace (Telecom and Data Networking) 27% 18%Consumer Marketplace (Electronics) 22% 22%Business Marketplace (Computer and Data Storage Hardware) 15% 31%All of the Above 38% 42%
Communications Marketplace on the Rise. Twenty-seven percent (27%) of respondents say their companies’ primary focus is on the Communications Marketplace, up from 18% in November 2003. Interestingly, the percentage of respondents saying their companies’ primary focus is on the Business Marketplace fell to 15% – better than a 50% drop from our last survey (November 2003).
(3) Question Asked: "Nanotechnology is playing an increasingly central role in the chip manufacturing process. Can you identify any key emerging nano-technologies and/or small nanotech-focused companies that you believe will be superior performers over the next 12 months? Please tell why?”
ChangeWave Research: Semiconductor and Equipment Trends
C. Semiconductor Equipment Trends
(1A) Question Asked: "Which one of the following Semi Equipment sub-segments do you think will perform the best over the next six months? (Please Choose Only One)”
(1B) Question Asked: "On the down side, which one of the following Semi Equipment sub-segments do you think will perform the worst over the next six months? (Please Choose Only One)”
Best Performing Semi Equipment Sub-Segments. ATE/Packaging and Wafer Processing (Net Difference Scores +15) both appear poised to perform well over the next six months. However, ATE/Packaging’s Net Difference Score improved 24 pts. from our previous survey (August 2003), while Wafer Processing showed just a 6 pt. gain.
Worst Performing Semi Equipment Sub-Segments. Specialty equipment had the lowest Net Difference Score (-13), falling 12 pts. from our August 2003 survey. Automation/Material Handling and Software (Net Difference Score -12) also looks like it will not be performing as well over the next six months.
(1C) Question Asked: "Why did you choose these particular Semi Equipment sub-segments as the best/worst performers?”
(A) Wafer Processing
Best Performer - Reasons:
BIG4363 writes, “We are adding more wafer processing equipment and more operators as well.”
HAM5839 writes, “Wafer shortage.”
W.S1509 writes, “New 200 and 300 mm wafer technology.”
MIK5770 writes, “Larger wafers, lower cost per chip.”
CLA8139 writes, “Increased margins.”
DEN5033 writes, “Here at work our books are filled, (3rd Q, might slow down) but for now we see lots of pick up, its a rush to get the 200mm tools out the door.”
ChangeWave Research: Semiconductor and Equipment Trends
CTS5820 writes, “Good Processings & Yeilds produce profits.”
CHI8142 writes, “Focus remains with wafer capability.”
MIK2846 writes, “Demand due to new construction/capacity expansion.”
LEE6396 writes, “Capacity is tight.”
PHI1286 writes, “This is key for transition below .18.”
Worst Performer - Reasons:
BEC2885 writes, “This segment is dominated by Applied Materials.”
KDP6740 writes, “There are still many used wafer equipment in the market.”
RUS0368 writes, “Slow on copper technology adaptation.”
MHE6157 writes, “Lagging technology.”
GEN8705 writes, “Front end capacity last to be expanded.”
(B) ATE/Packaging
Best Performer - Reasons:
ASH8301 writes, “Volume increases for semi revenue growth.”
KJO9758 writes, “Units are increasing; prices firming; M&A will continue (consolidation and expansion); IDM's will continue to spin-out non-core business units that test or assemble - which folks like Amkor, ASE or STATS-ChipPAC will suck up.”
AMU8461 writes, “Time on the tester is a bottleneck because vector sets have gotten huge, so vector sets must be loaded in subsets. This causes chips to spend too much time on a tester, or they must spend time on a series of testers for complete verification. New test vector compression techniques such as Embedded Deterministic Test can drastically reduce the cost of test by eliminating or postponing tester upgrades, and by allowing full vector sets to be loaded in a single session.”
KEV8408 writes, “They are beyond capacity today.”
BEC2885 writes, “The relative cost of ATE/Packaging as a percentage of total end-product cost is small enough to allow good margins in a capacity constrained environment.”
KIM0900 writes, “Testing is key bottleneck to supplying immediate demand.”
ChangeWave Research: Semiconductor and Equipment Trends
WTK2295 writes, “outsourcing trend.”
KDP6740 writes, “LCD is replacing CRT in TV and PC monitors.”
IRO0617 writes, “Chip volume after shrink.”
ETH1183 writes, “ATE/Packaging will ride the homeland security changewave.”
GEN8705 writes, “Assy/Test capacity first to be expanded.”
Worst Performer - Reasons:
MIK2846 writes, “Still unused capacity existing in ATE/test.”
DEN7210 writes, “Packaging is fairly mature.”
ESH4187 writes, “Increased integration means more devices in the same # of packages.”
BLA0579 writes, “Competition.”
W.S1509 writes, “ATE Cost of testers.”
(C) Lithography
Best Performer - Reasons:
SBG5506 writes, “technology upgrading.”
DEN7210 writes, “Shrink to sub-.2 um.”
ELL2754 writes, “Front end leader.”
HSM4473 writes, “AMAT/Industry Leader.”
SHU6149 writes, “AMAT dominance.”
HFC8959 writes, “90nm is the trend, which make Lithography and Packaging more challenging.”
Worst Performer - Reasons:
COS2687 writes, “Still problems below 130nm.”
ETH1183 writes, “Printing semiconductors is an old idea and a clever one, but I just don't see where it gains over wafer processing and other new technologies.”
ChangeWave Research: Semiconductor and Equipment Trends
HAC5852 writes, “Tech is away from specialty application.”
LEE6396 writes, “Processing becomes standard.”
SHU6149 writes, “NVLS losing market shares.”
WTH1202 writes, “High margins but smaller market.”
MIK5770 writes, “Growth of necessary standards.”
CLA8139 writes, “Decreased margins.”
(2) Question Asked: "LCD sales are booming. What semi capital equipment supplier stands to benefit the most from the growth in LCDs?
ESH4187 writes, "AMAT."
SHU6149 writes, "AMAT."
HSM4473 writes, "AMAT."
CTS5820 writes, "AMAT."
KDP6740 writes, "Applied Materials."
ASH8301 writes, "PHTN, AMAT."
HIT8477 writes, "GNSS."
DEN7210 writes, "Genesis Microchip."
CHE4929 writes, "All."
HAM5839 writes, "Sharp."
BEC2885 writes, "Photon Dynamics. - This company makes non-contact test equipment for LCD screens. The technology allows engineers at the LCD manufacturers to have much more process control data available than would be available with destructive contact testing."
SIM3624 writes, "AUO."
MIK5770 writes, "Zoran."
KIM0900 writes, "KLAC."
KJO9758 writes, "Unclear to me - there are so many players here. If I knew, I'd buy them. Advantest (ATE supplier - Japan) will get some share. "
ChangeWave Research: Semiconductor and Equipment Trends
III. ChangeWave Research Methodology This report presents the findings from an April 20 – 26, 2004, survey of ChangeWave Alliance semiconductor industry members on current trends – as well as the sub-segments and companies most likely to win or lose in the semi chip and equipment marketplaces. A total of 60 Alliance members participated.
The Alliance’s proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.
ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, interprets and reconciles the information in a cohesive manner and converts the information into valuable quantitative and qualitative reports. The Alliance has assembled its membership team from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (58%) have advanced degrees (e.g., Master’s or Ph.D.) and 94% have at least a four-year bachelor’s degree.
The business and investment intelligence provided by the Alliance provides a real-time view of companies, technologies and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.
ChangeWave Research: Semiconductor and Equipment Trends
IV. About ChangeWave Research
ChangeWave Research, of Phillips Investment Resources, Inc. is a market research intelligence network powered by thousands of accredited and organized front-line professionals – the ChangeWave Alliance.
ChangeWave is the alternative to traditional “sell-side” investment research. The company publishes ChangeWave Investing, the investment advisory service for individual investors dedicated to researching and discovering growth stocks that profit from radical change, and Weekly WaveWire, a free e-mail newsletter distributed to nearly 200,000 investors.
ChangeWave has a very unique asset in its 4,500-member Alliance. We have assembled our membership team from a broad cross section of more than 20 vertical markets such as Internet e-commerce, semiconductors, data storage, and biotechnology, along with a wide range of professional disciplines including CIOs, IT managers, executive management, scientists, engineers and sales personnel.
The ChangeWave Alliance is composed of senior technology and business executives in leading companies – credentialed professionals who spend their everyday lives working on the frontline of technological change.
ChangeWave Research Reports provide a real-time view of companies, technologies and business trends in key market sectors along with an in-depth perspective of the macro economy – well in advance of other available sources. ChangeWave surveys its 4,500 Alliance members on a wide range of investment research topics and converts the findings into valuable investment and business intelligence reports. ChangeWave delivers its products and services on the Web at www.ChangeWaveResearch.com
ChangeWave Research does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report.
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