Chip forecast at 4-6pc range; financial gloom nicks industry recovery!

Early this year, during the IEF 2008 at Dubai, Future Horizons' CEO, Malcolm Penn, had forecast a 12 percent growth for the global semiconductor industry, and that we were all dealing with an industry in 'deep trauma'!

Soon after, the chip market started showing some signs of recovery and actually started to buzz again. This was in early June. Later, in July, the semiconductor industry numbers started indicating that this may not be a bad year after all! It also came to light that lousy memory numbers were holding back overall market numbers.

With the memory market not showing much signs of recovery, several analysts revised their forecasts in August and September, including Future Horizons. In early September, Penn forecast that the global semiconductor industry would probably grow at 4-8 percent.

However, now, with a global slowdown now in place, Penn says that Future Horizons' January (and July) forecast assumptions, and chip market forecasts, are no longer valid. He adds, "We have not yet had chance to fully crunch the numbers, but at first sight, 2008 now looks set to come in at between 4 and 5 percent, with 2009 in the 4-6 percent range."

This is very unfortunate! Just when it seemed a little while ago that the global semiconductor industry was in some stage of a small recovery, the global financial turmoil has more or less, ended that hope!

Penn cautions: "2009, however, could slip negative, depending on what happens to IC unit growth. At the moment we think this highly unlikely, given the 6.1 percent advanced and developing market GDP growth forecast and the fact there have only been two years of negative IC unit growth in the last 23 years, namely 1985 and 2001, both triggered by a massive inventory build."

Obviously, a slowing world economy is bad news for the chip industry! However, the coupling, he notes, is not as strong as one might be lulled into intuitively believing. There have been seven instances in the last 22 years where the chip market has grown in value during a period of slowing economic growth and two occasions when the market has declined in a period of GDP growth.

"IC units have exhibited three periods when they grew in the face of a GDP decline and five occasions when the units declined despite growth in the world GDP. The economy is, thus, not quite king; inventory, excess capacity and ASPs also play a role," adds Penn in his monthly report.

Underlying good news for chip industry
The underlying good news for the chip industry is that all of the other industry trends are good. Inventories do not seem to be seriously bloated; wafer fab capacity utilization levels are high; capital expenditure is low, and has been now for several quarters; and ASPs are in the midst of a long-term structural recovery phase.

Thus, while 2009 IC unit demand must inevitably slow, this slowing will coincide with an inevitable parallel slowing in new capacity additions, itself the result of a significant 2008 and prior Cap Ex cutbacks. The combined effect ought to be a relatively benign decrease in capacity utilisation rates, helping to cushion the inevitable near-term ASP pressures.

Looking at the near-term ASP trends, ASPs overall have been falling during 2008, but they have been falling much slower than the 2007 rate. This means that ASPs are actually increasing when measured on annualised basis.

Slowdown bound to impact ASPs
According to Penn, the economic (demand) slowdown is bound to negatively impact ASPs. What is more important from a market growth perspective however is not that they are falling but how fast they are compared with the same period last year.

While the ASP recovery trend might wobble next year, the underlying trends still look good, providing the world does not slip into global recession.

The immediate world government policy challenge is to stabilize the global financial markets, while nursing economies through a global downturn and keeping inflation under control. "That is quite a steep challenge (it has never before been called upon to be done); the great danger being, aside from the risk of failing, is a return to vested self-interests and protectionism and the impact that this will have on globalisation and future world growth. There is a real danger this is the precursor of World War 3, with economics as the fire-power," he adds.

Penn advises: "Over a longer horizon, policymakers will be looking to rebuild firm underpinnings for financial intermediation and will be considering how to reduce cyclical tendencies in the global economy and strengthen supply/demand responses in commodity markets.

"The electronics industry would also do well to divorce itself from the financial market's casino driven addiction by starting to plan for its longer-term growth needs not the previous (and now seriously discredited) Wall Street greed/bonus-driven quarterly hysteria."

This has indeed been a topsy-turvy year! Apple's iPhone 3G and now, Google's G1 phone have hit the markets. Intel demonstated its Moorestown platform at the IDF in Taipei, promising great things in 2009! Intel also spoke a lot about mobile Intenet devices (MIDs) and what great things these can do.

However, no one, it seems, is able to point out confidently that the cheer in Christmas spend will be back! Or, how, 2009, will pan out! When will the global semiconductor industry see light at the end of the tunnel?

IDF Taiwan: Father of the Atom an Indian!

Delegates at the Intel Developer Forum, Taiwan were treated to a a rare spectacle when Intel's executive Anand Chandrasekher introduced Belliappa Kuttanna, Senior Principle Engineer, Chief Architect Intel Atom Processor, whom he dubbed as ''The father of Atom,'' during the opening day keynote.



When asked about specific challenges faced while developing the Atom processor, Kuttanna said, "It was pretty challenging to reduce the power levels, while maintaining the balance with Intel architecture." The Atom processor has brought about a fundamental shift in design, and was launched at the Shanghai IDF.

The Atom processor is said to be addressing four market segments: embedded, consumer electronics, mobile Internet devices (MIDs), and netbooks and net-tops.

The immersive Web
The digital home has been dubbed as the TV-Internet ecosystem. "Consumers love the rich, social experience of the TV. They can't get it on the Internet," added Chandrasekher. "We are merging the TV and PC worlds seamlessly."

The Intel executive highlighted the CE 3100 media processor, which is said to be the first optimized media processor for consumer electronics, a third-generation SoC. He cited Yahoo's example of the "Cinematic Internet."

Focusing on the embedded segment, Chandrasekher added: "Fifteen billion devices will get connected by 2015. People will interact 24x7 with the Internet. Embedded will be everywhere. Devices will be built for specific applications." Consequently, he felt that mobile Internet would explode. "Social networking today accounts for 27 percent of all traffic on the Internet. Rich media and social networking are driving the immersive Web," he said.

Send emails using voice dictation
Intel's partners took the opportunity to showcase their products and solutions. Eric Montague, vice president, Asia Pacific sales, Nuance, demonstrated two applications: one, sending email using voice dictation easily, even via a Bluetooth headset, and two, doing a voice search on the Web, over an MID.

Montague said: "We are leveraging on the power of the Atom processor on the MID. The Atom is built for mobility." It was no surprise that the IDF saw as many as 38 MID designs, 50 netbook designs, and over 70 net-top designs.

Next, Jonney Shih, chairman, ASUS, demonstrated an ultra-slim netbook. Shih said: "We have been able to achieve a compact design with low power. Besides a lot of our Eee PC products, we will implement the Atom processor into our eTops, eBoxes, etc. Our Eee family of products answers to the future evolution. We are also very excited about Moorestown."

WiMAX and broadband key
A robust broadband infrastructure is key for delivering an ultimate full Internet experience. Intel has been aggressively promoting WiMAX, which has so far had about 407 deployments in 133 countries.

Chandrasekher took time out to introduce Atish Gude, senior vice president, mobile broadband operations, Sprint. For the reference, the entire city of Baltimore is now on XOHM, a Sprint network. Speaking on this particular deployment, Gude said: "The in-building coverage has been fantastic. You know that our network is not complete yet. However, we have not had even one issue with our systems yet! Our highlight has been offering embedded devices."

Chandrasekher wrapped up his session adding that innovation had been his theme. He also highlighted the fact that Intel has been investing in education in over 50 countries. Intel invests over $100 million annually on education.

Intel showcases world's first Moorestown platform at IDF Taiwan

Intel showcased the world's first Moorestown platform at the recently held Intel Developer Forum in Taipei, Taiwan.

In his opening keynote on Day 1 at the IDF: Innovating a New Reality, Anand Chandrasekher, Senior Vice President, General Manager, Ultra Mobility Group, Intel Corp., said: "It is a world in transformation. There have been 3 billion new entrants in the global economy. The resilience of the global economy has been incredibly strong. The Internet has equalized the level-playing field."

He added how technology innovation and strong industry collaboration have driven the digital economy over the past 40 years, and the universal impact that the Internet and mobile Web has had in people's lives.

"Technology innovation is the catalyst for new user experiences, industry collaborations and business models that together will shape the next 40 years," said Chandrasekher. "As the next billion people connect to and experience the Internet, significant opportunities lie in the power of technology and the development of purpose-built devices that deliver more targeted computing needs and experiences."

Asia's growing might
Chandrasekher added: "IT is more important today, than it has ever been over the last 20 years. Asia has been playing a dramatic role." In fact, in 2007, Asia accounted for over 25 percent of Intel's revenue. "Look at the PC companies. ASUS, Acer, Lenovo, etc., are now in the top 10. The number of PCs in China exceeds the US's population. There are more handsets in Taiwan than the people in Taiwan," he highlighted. As for the Internet, Asia is now the fastest growing region online.

The foundation of the Internet is silicon, whose foundation is the Intel architecture (IA). Chandrasekher said: "It is the ecosystem for growth, tomorrow. If you don't have the tools to drive the Internet ecosystem, you have fallen behind." As a comparison, during 1971, the 4004 processor had 2,250 transistors. In 2008, the Core 2 Quad processor has 820 million transistors. It also consumes 93 percent less power. "Process is one piece of the foundation. Architecture is the other," he added.

Welcome Nehalem!
Chandrasekher next focused on the upcoming Nehalem microarchitecture, which, he said, has an extremely energy efficient design. "We have introduced the turbo mode and dynamic power management. We have hyper-threading technology as well." He pointed out that Intel has a 32nm version of the Nehalem, which should be out soon. "There has been a huge performance increase, almost 2X, with Nehalem."

According to him, developers love parallel programming and the Intel IA. "We are giving the Larabee. It increases the throughput performance and the programmability."

World's first working Moorestown platform
The event's showstopper: a live video from a Moorestown lab in Taiwan, which also demonstrated the world's first working Moorestown platform! The Moorestown platform is scheduled for 2009-2010 timeframe.

Moorestown comprises of an SoC, codenamed "Lincroft," which integrates the 45nm processor, graphics, memory controller and video encode/decode onto a single chip and an I/O hub codenamed "Langwell", which supports a range of I/O ports to connect with wireless, storage, and display components in addition to incorporating several board level functions.

Chandrasekher showed off a ''Moorestown'' wafer to the delegates.

In the next blog, I will introduce you to the Father of the Atom!