July sales data suggest strong, swift recovery underway

USA: In a remarkable turnaround, July IC sales and unit volume numbers indicate that the IC industry is in the midst of a solid, "V-shaped" rebound.

Data shows the upturn is not limited to one or two areas, but is being experienced across many product lines including DRAM, NAND flash memory, analog, and microprocessors, as well as the overall IC industry.

Though some of the markets were down on a year-over-year basis, the real eye-opening trends are revealed when looking at how far IC markets have come since the beginning of the year (Fig. 1).

Growth has been explosive in the 7-month period from January to July 2009 for all the product categories shown in the figure. This is true for both dollar volume and unit volume.

Granted, in January, the semiconductor market was at (or nearly at) its lowest point of the current downturn, but there is no doubt from examining July data that markets have rebounded—in several cases, surpassing levels from the same time last year. The IC industry is not wallowing in a slow, prolonged recovery. Rather, the IC industry recovery is "V-shaped" and is clearly underway.

IC Insights believes the market for ICs is set up for strong growth continuing into 2010 and 2011. Several companies have hinted of stronger bookings and/or production ramps through the balance of 2009 and 2010, global and US.

GDP outlooks have moved well into positive territory and, in the US, about 60 percent of the $750 billion economic stimulus package is expected to be spent in 2010 and 20 percent in 2011—good reasons to believe the economic engine will move into a higher gear.

But, what has captured IC Insights' attention above all else is the fact that many wafer fabs and production lines have closed since 4Q08, resulting in reduced industry-wide capacity as the market returns to health.

Recently, IC Insights showed that IC industry capacity utilization jumped to 78 percent in 2Q09 from 57 percent in 1Q09, and is forecast to increase to around 90 percent by the end of the year.

With significant IC unit demand on the horizon and little capital spending being allocated for new/upgraded facilities, industry-wide capacity utilization stands a very good chance of being maxed out in the coming months, resulting in longer lead times, spot shortages, and escalating average selling prices throughout the industry. That's quite a contrast from the calamitous situation that characterized the market only a few months ago.