This ain't a normal chip cycle but a three quarter pause and restart: Future Horizons

UK: According to Malcolm Penn, chairman and CEO, Future Horizons', May’s semiconductor sales were up 2.6 percent on April, 3.6 percent for ICs, continuing the steady sequential industry growth that started in January 2009,17 months ago.

May’s results mean Q2-10 will show at least 8.3 percent quarterly growth over Q1-10, increasing the full year growth forecast to 36 percent. Given last year’s growth was minus 9 percent, mathematically this is a classic industry cycle. It is NOT!

At this point in the ‘recovery’, it is much more important to look at sequential and quarterly growth rates rather that the 12:12 rates, given the high double digit rates they show are just as misleading and irrelevant as the high double digit negative rates from this time last year. The reality is they net each other out thereby highlighting the real nature of the current cycle. This downturn was a pause, the recovery a restart, it was NOT a classic semiconductor bust and boom.

We have very publicly been telling everyone that the industry recovery started in March 2009, first in the April 2009 edition of our Global Semiconductor Report, substantiated by a very long and detailed analysis at the Geneva IEF2009 Forum last October.

The recovery, together with ever-increasing substantiating data, has been a recurring theme in our Global Semiconductor Monthly Report ever since, as well as at the Dresden IEF2010 event in May 2010.

At the same time, I have been warning that industry was cutting back existing capacity far too much and too fast whilst simultaneously failing to invest in net new capacity. Our clear message always was that these two factors were a recipe for disaster. The disasters are now starting to happen.

While we obviously do not expect firms to run their business based on what we say, if the market recovery really has taken firms by surprise, executives from the top down either failed to recognise the significance of the data we were drawing their attention to over the past 15 months or they simply made the decision to ignore it.

Ignore the industry fundamentals at your peril!