Though most metrics for the 2012 holiday season shopping are higher than in 2011, it will not be enough to cover the year's losses as the OEM build in the third and fourth quarters used a lot of existing inventory.
The fourth quarter of 2012 is expected to be 4 percent larger than the same timeframe in 2011; however, this is primarily driven be few applications in demand including tablets and smart phones. There are many reasons to blame for the market contraction, the largest of which are a poor global economies and component oversupply. The supply chain is expected to recover in the second quarter of 2013 which will lead the way back into positive market growth.
The six semiconductor end market segments are far from cohesive, ranging from the computer market's decline to slight growth in the consumer segment. The Industrial, automotive, and computer market segments will all end 2012 negative, with computer leading the way at negative 8 percent. The automotive and industrial segments will fall roughly half that percentage, but their five year CAGR's will be in line with the entire semiconductors rate.
Both the wired and wireless segments will end between flat growth and 1 percent. The consumer end market, consisting largely of smartphones and tablets, will grow by 2 percent in 2012, not near as high as the last two years but positive nonetheless. There are also many regional trends that affect the end markets, specifically industrial.
Growth in global industrial production has remained uneven, at best, in most regional markets leading up to the third quarter of 2012, as the lingering effects of the Euro-region debt crisis and a sudden contraction in China have both weighed on consumer confidence in other regions. Specifically, in Europe, manufacturing output continued to tumble, with November marking 16 consecutive months of contraction as the debt crisis shows little signs of wavering.
Also, China, normally the rock of the global electronics market, suffered a seventh straight quarter of slowed growth in the third quarter due to continuous declines in business activity and a tumble in export orders during September. As a result, most economists expect that 2012 will be China's weakest full year of growth since 1999.
While it is possible that there may be a late year boost in the fourth quarter thanks to the holiday season, it will not be enough to save the results of the entire year, and in all likelihood global manufacturing growth will remain sluggish heading into 2013.
These macroeconomic effects have had direct consequences on the spending on semiconductor manufacturing equipment over the past year. Specifically, after a strong 2011 for fab spending, the weakened market conditions which first arose towards the end of 2011 caused many IC suppliers to slash their 2012 expansion plans for additional spending on new fabs and equipment.
Many firms, fearing an oversupply situation similar to the one in late 2010, have been careful to avoid being left with too much inventory which would cause a plummet in chip prices.
However, a few of the top firms have bucked this trend. Samsung, for example, continued in 2012 to make significant investments in new equipment and fabs to further boost its NAND Flash output, including its recently announced 128GB model.
Specifically, in September 2012 Samsung began construction on brand new facility in Xi'an, China which will use a 10-nanometer manufacturing process to produce the NAND Flash. Samsung began with an initial investment of $2.3 billion in the facility, and the firm plans to invest a whopping $7 billion in the factory, making it Samsung's largest investment in China ever.
The site, which is projected to be fully operational by 2014, is expected to help ease the production load at Samsung's Line 16 site in Hwaseong, Korea which opened just one year ago at 10,000 WPM capacity and produces on 300mm wafers. Samsung has yet to reveal the exact manufacturing capacities for the factory in Xi'an, but it is likely to be around a hundred thousand of 300mm wafers per month.
Most suppliers are looking forward to the shallow recovery that is forecasted for mid-2013, Databeans expects the market for 2013 to fall in line with the 5 year compound annual growth average of 10 percent.
This recovery will continue to increase fab spending for new manufacturing equipment and promote a much better management of product supply to prevent another oversupply. The recovery we expect will be led by the Asia Pacific region that will see positive growth as early as Q1 of 2013.
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