Market News

TAIPEI, TAIWAN – Compal Electronics reported consolidated revenues for 2008 fell 3% to NT$427.68 billion (US$12.88 billion). Despite the drop, notebook shipments climbed 11% to 25.5 million units.
 
The company failed to realize its shipment and revenue goals in 2008. According to chairman Rock Hsu, expenses, inventory and cost were still acceptable, despite the setbacks.
 
Goals for 2009 include improving the gross margin and establishing an innovation center in Taiwan that will generate 200 to 300 R&D jobs. Compal has also set an ambitious objective of becoming the largest notebook maker. It expects notebook shipments to reach 32 million to 35 million this year.
EL SEGUNDO, CA – Global DRAM revenue will fall 19.8% year-over-year in 2008 to $25.2 billion, the second down year in a row, following a 7% drop in 2007, says iSuppli Corp.
 
Unfortunately, this decline won't mark an end to the memory sinkhole just yet. The troubled DRAM market is expected to suffer a revenue decline of 4% in 2009 as a result of global economic uncertainty.
 
“In the multibillion DRAM industry, many suppliers have engaged in massive spending programs in a bid to increase capacity and take market share from competitors,” said Nam Hyung Kim, director and chief analyst of memory ICs and storage for iSuppli Corp. “Using this strategy, DRAM makers hoped that their competitors would be forced to back out of the spending race and concede market share. However, in 2008, no one won this game of chicken, with players continuing their massive spending drive amid weakening demand, contributing to oversupply, price declines and a massive market downturn that is hurting all suppliers.”
 
The three-year decline contrasts sharply with market conditions in the mid 2000s, which delivered growth of 52.9% in 2004 and 35.2% in 2006, says the firm.
 
“The industry, which has been in decline for seven straight quarters, is in a state of emergency with massive layoffs and production cuts,” Kim observed. “The Top-8 DRAM suppliers have lost nearly $8 billion since 2007, and their total operating loss is expected to amount to $11 billion by the end of next year.”
 
After massive losses in 2001, the overall DRAM business had accumulated profits until 2006. At the same time, DRAM makers increased capital expenditures by more than threefold, rising to $21.1 billion in 2007, up from $7 billion in 2001. Since 2000, the DRAM industry has spent more than $100 billion, which is almost double the level of the Top-8 suppliers' combined market capitalization today, according to iSuppli.
 
“Three Taiwan-based DRAM suppliers – whose total market capitalization now is around $1.4 billion – have spent a total of more than $20 billion on capital expenditures since 2000, which represents an enormous over-investment during the period,” Kim said. “Furthermore, most capital expenditure money has been raised by issuing debt among many suppliers. The frozen credit market is punishing suppliers that need additional cash not for investment, but for their very survival.”
 
The industry's DRAM bit production growth rate didn't slow down, even with a 48% capital expenditure reduction this year, showing how much investment already was made,” Kim said. “This indicates an additional capital expenditure cut is inevitable in the near future.”
 
There are no winners among the DRAM suppliers, says iSuppli. The industry leader, Samsung Electronics, which has spent about $27 billion on DRAM manufacturing investments since 2000, holds the same DRAM market share this year as it did in 2000, at about 30%. The South Korean memory giant in the fourth quarter of 2008 likely lost money in its DRAM business amid oversupply and the global economic slowdown.
 
Four DRAM suppliers now are seeking government bailout packages: Powerchip, Promos, Nanya and Qimonda.
 
Hynix is close to finalizing an additional rescue package of $600 million from its creditor, KDB, according to a local Korean newspaper. The double whammy of over-investment and the global credit crunch clearly has impacted the industry badly, and the prices remain below variable costs for DRAM suppliers, says the research firm.
 
Despite unhealthy economic conditions and an unclear demand picture, iSuppli cautiously predicts the market will turn around in the second half of 2009 because of suppliers' rapid reduction in capacity growth. In the near-term, iSuppli believes prices will stabilize from the current level, and suppliers' losses will be reduced regardless of whether suppliers receive rescue packages from other parties.
 
“Until that time, the game of chicken has turned into a game of survival – a situation that will persist for months to come,” Kim said. 
TOKYO — TDK Corp. will lay off 8,000 workers and close four factories in response to a plunge in revenues.

Most of the laid off staff are full-time employees, although some contract workers will be cut as well.

TDK had 65,500 workers worldwide as of the end September quarter.
TAIPEI, TAIWAN Market watchers are predicting a weak first quarter for IC substrate makers. Kinsus Interconnect Technologies and Nan Ya Printed Circuit Board (NPC) are expected to have a 20% to 30% drop in sales. Because of diversifying customers and products, observers are predicting only a 10% to 15% decline for Phoenix Precision Technology (PPT).
 
Estimates show a 25% decrease in fourth-quarter sales in 2008 for Kinsus and NPC. PPT is expected to show a 20% decline. Chu-Ching Hu, chairman of PPT, expects the company will see up to a 10% decline in January sales and a first-quarter loss.
BANNOCKBURN, ILIPC is seeking nominations to recognize volunteers who contribute to IPC standards development and other association activities. Nominees are sought for contributions ranging from one-time activities to career-long service and accomplishments.
 
The IPC Peter Sarmanian Corporate Recognition Award recognizes a corporation (or division) in the PCB industry (supplier, board manufacturer or OEM) that has taken a leadership role and made contributions to the industry, while demonstrating support of IPC through participation in technical and/or management programs.
 
The IPC Stan Plzak Corporate Recognition Award recognizes a corporation (or division) in the electronics assembly industry (supplier, EMS company or OEM) that has actively contributed to enhancing the industry, while demonstrating support of IPC through participation in technical and/or management programs.
 
The IPC Raymond E. Pritchard Hall of Fame Award honors an individual for contributions with broad significance to the electronic interconnection industry and distinguished service to IPC. The nominee must support the advancement of the industry.

The Presidents Award honors individuals from IPC member companies who have demonstrated ongoing leadership in IPC and have made contributions to the association and the electronic interconnection industry.
 
Committee Leadership Awards are given to committee chairs upon completion of a standard or specific program. Individuals may receive this award more than once. This award can also be presented to an outgoing chairman who has made contributions over a period of time.
 
Distinguished Committee Service (DCS) Awards are presented to committee members who have contributed to a specific standard or other IPC program through consistent participation or regular contributions, ballot submission, and significant impact on a document or project.
 
Individuals or companies that have given exceptional service to an IPC program or the industry are honored with the Special Recognition Award. The activity can be short-term or a one-time event.
 
Nominations must include the candidate’s name, contact information and a statement describing the contribution(s), how the nominee meets the criteria and why they deserve recognition. Self-nominations are accepted.
 
Awards will be presented at Apex the week of March 30 in Las Vegas. For more information, visit www.ipc.org/awards.
 
Send nominations to This email address is being protected from spambots. You need JavaScript enabled to view it. by Feb. 4.  
SAN JOSE – Massive government spending will drive significant growth in China’s semiconductor industry to 2020, according to a just released report.
 
China’s central and local governments have announced investments totaling up to $50 billion toward semiconductor-related projects, says SEMI.
 
China is the world’s leading market for IC consumption, accounting for approximately 28%. Increasingly, this demand will be met with China-produced chips, including leading-edge ICs produced in 300-mm fabs, says SEMI.
 
Meanwhile, equipment and materials suppliers that can leverage current China industry relationships and expand contacts to the next-generation buyers will prosper, the trade group says.
 
In the past five years, China’s government influenced the investment of about $7 billion in new fabs. That figure could triple, as another $20 billion to $25 billion will be invested by local governments throughout the country. Going forward, the central government will invest up to $30 billion in the industry by 2020, according to SEMI.
 
The switch in investment strategy marks a new phase of industry development in China. Up until 2005, China’s focus was foundries, with fabs from SMIC, Grace, Huanhong, TSMC and Hejian driven by private sector investments and supported by government tax incentives. In 2005 to 2006, the government used incentives to aid international integrated device makers such as Intel and Hynix.
 
The current phase business model is government-owned “virtual” IDMs. Many of these projects are based on three pillars: investment from government or state-owned entities, fab operation expertise from established companies such as SMIC or other experienced team, and a marketing/product partner such as Elpida. This business model underscores the growing role of China-based investment and the continued importance of China as a global center of semiconductor manufacturing, according to SEMI.
 
Unlike recent years, China fab equipment and materials purchasing decisions are more often made at the local level and not through corporate contracts originating from Japan, Taiwan or the US. With local, regional and national government funding involved in the building and equipping of new fabs, the purchasing process in China has taken a unique Chinese character. In addition to technical evaluations, request for proposals and request for quotes, multi-discipline delegations and committees are formed that include local government officials and universities. Government plays a critical role in the decision-making process.
 
As the China semiconductor industry grows with the infusion of government, international IDM and foundry, and China-investor investments, the market is also diversifying with increasing 300-mm equipment, a massive assembly and test infrastructure, and rapidly expanding related industries in flat panel displays and solar. Increasingly, these industries are becoming interrelated where university, government, investor and supplier relationships extend across multiple supply chains.
 
Not only has China become the world’s IC consumer, fab materials spending in China will reach $1.5 billion by 2010, with the highest growth rate among all the key microelectronic markets in the world. In addition, with recent 300-mm fab announcements by SMIC, Hynix, Promos and others, and recent changes in the Taiwan government, greater technology spending is anticipated.
 
Along with wafer processing, China’s test and assembly market, including internal IDM assembly and test operations, continues to be world’s fastest growing. More than 45 assembly and test plants are currently operating in China, most centered in Suzhou, Wuxi and Shanghai. Further expansion of the Chinese assembly and test industry is occurring in western China with new plants opening in Xi’an and Chengdu. iSuppli found there are more than 550 fabless semiconductor companies in China that help drive capacity in these plants.
 
China is also experiencing rapid expansion of the display and solar industries. LCD TV sales in China have grown from 3.9 million units in 2006 to an estimated 12.6 million units this year. By 2012, LCD TV sales are forecasted to grow to more than 33 million units. To meet this demand and export market, Generation 6 plants have been announced by BOE-Hiefei, Irico and SVA. A Gen 7.45 plant has also been announced by InfoVision Optronics (Kunshan) Co. Ltd. (IVO). IVO has also announced an expanded cooperation agreement with AUO of Taiwan. Most recently, BOE-Beijing has announced a preliminary plan for a Generation 8 plant.
 
Since 2004, China has been moving toward a huge solar production ramp on all fronts of the domestic supply chain: polysilicon feedstock, wafers, cells and modules. China’s solar cell production and capacity have reached growth rates from 100% to 400%. In the last two years, China’s 10 IPOs have raised nearly $2 billion to meet the world’s growing demand for PV-related products and services. With these highly prominent initial public offerings, China’s solar energy industry is poised to make a major impact on worldwide polysilicon capacity and solar cell production, says SEMI.
 
In 2008, China has become the No. 1 PV producer in the world. However, China’s domestic market for PV installation is quite small. About 98% of its production is shipped overseas. By the end of 2007, China’s accumulative installation was only 100MW, less than 1% of the worldwide installation.
 
Even though China’s government has enacted a number of national renewable energy policies, less emphasis has been put on solar energy. SEMI has joined forces with China’s leading PV companies and formed the SEMI China PV Committee. The committee has recently initiated a PV industry advocacy program to collectively address issues facing China’s PV industry and to petition for more government support in the areas of legislation, policy and financial support, with the aim of stimulating domestic demand while overseas market weakens.
 
In addition to polysilicon, solar grade wafers and solar cells and modules, China will also benefit from an emerging domestic equipment industry representing the entire production process, including thermal process, plasma etch, wet bench, PECVD and semi-automated screen printing.
 
Supporting equipment and component vendors are also expected to emerge in China. The business model for many of these new solar energy firms, such as Suntech, Yingli and Jing’ao, follow a vertically integrated path. Some companies, such as LDK or CSUN, however, specialize in a limited number of steps in the supply chain.
 
Recently, Chinese PV product manufacturers have increased their focus on thin-film silicon PV modules, a sub-area attracting significant interest.
 
The global PV industry is certain to grow during the next several years. Regardless of the ultimate scope and nature of the future industry, China’s role in the global industry will certainly grow, and like most industrial segments in China, achieve global impact, according to SEMI.

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