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Monthly Report
March 2010
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The Global
Semiconductor
Monthly Report
March 2010
A CEO favourite, the Global Semiconductor Monthly Report provides
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SMU-2010-03 Mar.doc 2010 Edition
The Global Semiconductor Monthly Report
March 2010
Executive Overview
Figure E1 shows the 12/12 worldwide monthly growth rates for IC sales in dollars,
units and ASP for January 1997 to January 2010 inclusive. They need to be
looked at in conjunction with the other 12/12 and rolling 12-month charts
provided in the Market Summary section of this report.
January’s WSTS results continued to follow the underlying industry recovery
trend, with ICs sales up 4.8 percent versus December (on a 5-week month adjusted
basis). They were also up 73.7 percent versus January 2009, a relatively
meaningless number other than to recall just how bad things were this time last
year. The real significance of January is its potential impact on first quarter sales.
Were this run rate to continue through February and March, first quarter sales
would be up 8 percent versus Q4-09. That would make 2010 grow a staggering 40
percent on 2009. This is by no means a forecast but it does serve to illustrate the
strength of the recovery from the abyss this time last year.
80%
70%
60%
IC Units
50% IC Value
40%
30%
20%
10%
0%
-10%
-20%
-30%
IC ASP
-40%
-50%
Jan-97
Apr
Jul
Oct
Jan-98
Apr
Jul
Oct
Jan-99
Apr
Jul
Oct
Jan-00
Apr
Jul
Oct
Jan-01
Apr
Jul
Oct
Jan-02
Apr
Jul
Oct
Jan-03
Apr
Jul
Oct
Jan-04
Apr
Jul
Oct
Jan-05
Apr
Jul
Oct
Jan-06
Apr
Jul
Oct
Jan-07
Apr
Jul
Oct
Jan-08
Apr
Jul
Oct
Jan-09
Apr
Jul
Oct
Jan-10
March 2010
Figure E2 shows the 12:12 monthly total semiconductor sales trend versus our
2009 and 2010 forecasts. Ignoring the structurally (and typically) wild individual
monthly fluctuations – which simply means no single month is a good indicator of
the underlying trends – the month on month numbers will not settle down until the
second quarter of 2010. That being said, given the likely strength of the first
quarter versus Q4-09, our current 22 percent forecast for the total year now looks
far too low.
25% 80%
20%
15% 60%
10%
5% 40%
-5% 20%
2009 Actual -9.0%
-10%
-15% 0%
-20%
-25% -20%
FH YoY F'Cast Value
-30%
-35% -40%
Jan Fe b Mar Apr May Jun Jul Aug Sep O ct Nov De c Jan
2009 vs 2009 vs 2009 vs 2009 vs 2009 vs 2009 vs 2009 vs 2009 vs 2009 vs 2009 vs 2009 vs 2009 vs 2010 vs
Jan Fe b Mar Apr May Jun Jul Aug Sep O ct Nov De c Jan
2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2009
Our 22 percent forecast for 2010 was based on the relatively benign quarterly
growth pattern of -1.0, +1.0, +6.2 +2.0 percent; in essence a very weak year. No
one we speak with is seeing a negative first quarter, with a consensus now
building for at least 3 percent positive growth. That alone would bring the year on
year growth up to 28 percent.
At the same time, almost everyone is also boasting a strong Q2 backlog with price
stabilisation, even increasing; low inventory levels; and tightening supplies which
places severe doubt on the credibility of our plus 1 percent second quarter growth
forecast. Were this to be say plus 3 percent, the year on year growth would be 30
percent.
March 2010
It does however give us further confidence in our analysis and now places our
forecast at the low end of the forecast range. Barring an epic 9/11, Act Of God or
immoral banker style disaster, growth of anything less than 22 percent in 2010 is
now all but impossible.
We fully expect to be increasing our forecast to around the plus 30 percent level at
our forthcoming IEF2010 International Electronics Forum in Dresden, May 5-7
bringing the 2010 market within spitting distance of US$300 billion in revenues.
The real irony behind this recovery is it is taking place in the first half of the year
when things are usually quiet and the strength of the recovery is therefore
understated. In addition no one believes (a) what they see it or (b) that it will last,
even though there is not a shred of evidence to support a second-half year market
collapse, quite the contrary. This is really a very serious problem indeed.
With everyone still running on empty – neither hiring nor spending money – the
industry is in a very weak structural position to grow. Capacity is maxed out,
wafer shortages are becoming rife, lead times are stretching and some firms are
even paying their foundries a price premium to jump the delivery queue.
Some are also finding the low-ball orders they took at rock bottom margins are
now loosing money due to foundry wafer price increases. Both of the issues
(wafer deliveries and cost) are a fundamental problem of the fabless, and now
fablite, business models. Never forget the sole reason for the FSA’s (now
renamed GSA) formation in 1994 was to address the wafer shortage issue during
the then market boom, following three years of low market growth and capacity
under investment.
The chip market sentiment pendulum has clearly swung to far towards pessimism,
driven in part by the 2000s decade of ‘lost’ growth. The overall IC market
compound annual growth rate (CAGR) for 2000-2009 was a paltry 0.8 percent, the
worst decade ever for the semiconductor industry, prompting cries of despair that
the chip market glory days are over. We strongly disagree.
Clearly, from a mathematical perspective the 0.8 percent CAGR number is correct
but the conclusions to be drawn from this need to be interpreted with care. For a
start, the data range covered happens to measure a peak (2000) to trough (2009)
period; the CAGRs one year either side of this period were 7.8 percent for 2001-
2010 and 5.4 percent for 1999-2008. Moreover, looking at the corresponding
values for IC units rather than US dollars shows the underlying annual 10 percent
IC unit growth rate intact.
Herein lies the fundamental danger of statistics though. You can derive any
CAGR value you want simply by choosing the right start and finish points. In so
March 2010
doing you can then ‘prove’ virtually any scenario you like, providing amply fodder
for the optimists and pessimists alike.
The fact that IC units showed growth in line with their average points to the fact
that the ‘problem’ with the 2000s was one of declining average selling price
(ASP) not growth. The 2000s were thus a decade of depressed ASPs.
The real question is thus not the low market value growth – this was the effect –
but whether the cause – an above average decline in ASPs – was a bell weather of
things to come, as many believe, or a temporary occurrence, the result of a
coincidence of events? We believe the latter, as first reported in our November
2009 Report.
Just to recap and bring the situation up to date. ASPs are a very complex issue,
driven not just by price increases but also product mix, IC innovation, fab capacity
and production techniques. For sure the industry has seen declining ASPs since
the 2001 crash but it is fundamentally flawed logic to extrapolate this into the
future; a little like saying real-estate prices will forever keep on rising. They do
not; neither will IC ASPs keep on falling.
We see the 2000s ASP fall as one side of a cycle; the coincidence of events rather
than a sign of more bad news to come. It is vital therefore to understand the
events that caused the problem.
First the industry experienced a major yield bust at the 130nm node, delaying its
introduction by a year and destroying the ASP price enhancement it would
otherwise have brought.
Second was the transition to 300mm wafers, the sole purpose of which was to
reduce IC costs. A 2x plus increase in gross die per wafer for only a 40 percent
wafer cost increase means a 40 percent die cost decrease. As is typical in our
industry, all of this cost reduction was immediately passed on to the customer
meaning all 300mm wafer sourced ICs were reduced in selling price by up to 40
percent. By the end of the decade this was over half of all silicon made.
Third, for DRAMs, where fabs must always be kept fully loaded, the increase in
die output due to the 300mm transition was more than the market could use
meaning rampant oversupply and the mother of all price wars. It is only now that
this massive one-off incremental capacity increase has been absorbed that pricing
has return to its ‘normal’ pricing curve.
With DRAM demand hot – 4Gb is the entry point for 64-bit/Window 7 systems;
strong demand for servers; new Intel processors in prospect; and a two to four year
backlog in enterprise workstation upgrades – and Flash growing too, driven by
March 2010
exploding demand for Smart phones, the memory market has entered a positive
cycle for growth and profits.
The last two years of DRAM Cap Ex restraint has now triggered a fab famine, the
like of which no amount of die shrinking can offset. ASPs are already now double
what they were just 12 months ago, with a minimum two-year period of positive
ASP news now in prospect. The DRAMeXchange experts even say three.
A fourth factor was the brutal Intel-AMD 32-bit MPU price war that saw ASPs
fall around 30 percent from their more normal US$100 level to US$70. With
AMD now bloodied, bruised and losing money, we can expect to see MPU ASPs
trending up.
Finally, excess capacity also played its role but is already no longer a factor due to
the significant slow down in new capacity investment over the past two plus years.
Wafer fab capacity is now essentially sold out, with allocations, extended lead
times and price increases the new industry norm. As mentioned earlier, some
firms are already paying a price premium in order to jump the foundry wafer
delivery queue. Those that refuse will simply not get their parts. No wafers, no
sales; yes it really is that simple. Interestingly overall industry revenue per wafer
start increased to US$7.70 per sq cm in 2009 from US$ 6.96 in 2008, despite 2009
being the worst recession year in the history of the chip industry. Watch for this
number to hit its US$8.00 to US$9.00 long-term average in 2010.
With current wafer fab capacity tight, additional capacity will now be driven
primarily by Cap Ex, not one-off gains such as wafer size transitions, and this will
be governed by industry’s willingness to invest – they currently are not – which
translates into no new capacity for at least the next 12 months, due to last year’s
incredibly low level of investment. Even a 50-80 percent increase in 2010 Cap Ex
– the current top end of the forecasts – will not significantly increase 2011’s net
new capacity; the current starting point is so low. Prices, and therefore ASPs, will
rise. 10 percent IC unit growth (the underlying growth trend) coupled with any
positive ASP growth means double-digit growth at the IC value level.
This is all really good news for the industry as a whole but not for all companies.
For a start, the OEMs will need to get used to a capacity (supply) limited market
with increasing, rather than decreasing, IC buying prices. Secondly, the fabless
and fablite firms will need to adjust to a world of tight foundry wafer supply and
increasing prices. It will be a sanguine moment when they suddenly realise that
they are no longer in control of the delivery times and prices they quote to their
customers; their business is now at the mercy of their foundry partners. Better
start to learn the new industry lexicon “Please Sir … may I have some more?”
March 2010
Market Summary
Figures M1 and M2 show the worldwide and European 12/12 industry growth
rates for ICs, Opto, and Discrete Devices from January 1998 to date. These show
the current month as compared with the same period 12 months ago, and are a
useful industry momentum indicator. Figures M3a-M3h show 15-month rolling
worldwide and European sales by major product category. Figure M4a-M4h show
the comparable worldwide unit and ASP trends.
80%
60%
40%
20%
0%
-20%
-40%
-60%
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
110%
90%
70%
50%
30%
10%
-10%
-30%
-50%
-70%
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
March 2010
22
3.2
21
3.0
20
19 2.8
18
2.6
17
16 2.4
15
2.2
14
2.0
13
12 1.8 Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Jan 2010 vs Jan 2009 71.9% Jan 2010 vs Jan 2009 41.9%
Jan 2010 vs Dec 2009 5.9% Jan 2010 vs Dec 2009 12.6%
18 3.2
17 3.0
16
2.8
15
2.6
14
2.4
13
2.2
12
2.0
11
10 1.8
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Jan 2010 vs Jan 2009 73.7% Jan 2010 vs Jan 2009 41.6%
Jan 2010 vs Dec 2009 4.8% Jan 2010 vs Dec 2009 10.0%
Source: WSTS/Future Horizons (Growth rates adjusted for 5-week months)
March 2010
1.7 0.23
1.6 0.21
1.5 0.19
1.4 0.17
1.3 0.15
1.2 0.13
1.1 0.11
1.0 0.09
0.9 0.07
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Jan 2010 vs Jan 2009 42.5% Jan 2010 vs Jan 2009 25.6%
Jan 2010 vs Dec 2009 13.5% Jan 2010 vs Dec 2009 18.6%
1.9 0.38
1.8 0.36
0.34
1.7
0.32
1.6
0.30
1.5
0.28
1.4
0.26
1.3
0.24
1.2
0.22
1.1 0.20
1.0 0.18
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Jan 2010 vs Jan 2009 85.9% Jan 2010 vs Jan 2009 57.1%
Jan 2010 vs Dec 2009 10.7% Jan 2010 vs Dec 2009 28.7%
Source: WSTS/Future Horizons (Growth rates adjusted for 5-week months)
March 2010
42 0.44
40 0.43
38
0.42
36
0.41
34
0.40
32
30 0.39
28 0.38
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Jan 2010 vs Jan 2009 93.3% Jan 2010 vs Jan 2009 -11.1%
Jan 2010 vs Dec 2009 16.7% Jan 2010 vs Dec 2009 -9.3%
14
1.40
13
12
1.35
11
1.30
10
9
1.25
8
7 1.20
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Jan 2010 vs Jan 2009 78.4% Jan 2010 vs Jan 2009 -2.6%
Jan 2010 vs Dec 2009 10.0% Jan 2010 vs Dec 2009 -4.7%
Source: WSTS/Future Horizons (Growth rates adjusted for 5-week months)
March 2010
Figure M4 - 12 Month Rolling Worldwide Unit Sales & ASPs By Product (Cont)
(Units In Billions & ASP In US$ Dollars)
M4e - Total Optoelectronics Units M4f - Total Optoelectronics ASP
10.0 0.24
9.5
0.23
9.0
0.22
8.5
0.21
8.0
7.5 0.20
7.0
0.19
6.5
0.18
6.0
0.17
5.5
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Jan 2010 vs Jan 2009 41.7% Jan 2010 vs Jan 2009 0.6%
Jan 2010 vs Dec 2009 27.6% Jan 2010 vs Dec 2009 -11.0%
30
0.080
28
26
0.075
24
22 0.070
20
0.065
18
16
0.060
14
12 0.055
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Nov
Dec
Jan 09
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan 10
Jan 2010 vs Jan 2009 127.5% Jan 2010 vs Jan 2009 -18.3%
Jan 2010 vs Dec 2009 16.8% Jan 2010 vs Dec 2009 -5.2%
Source: WSTS/Future Horizons (Growth rates adjusted for 5-week months)
March 2010
Industry Capacity
Overall MOS wafer fab capacity increased marginally by 0.4 percent in Q4 versus
Q3-09, from 1,877k 200mm equivalent wafer starts per week to 1,884k, Figure
C1. Only 300mm leading edge capacity showed any increase in the quarter, at
around 3.7 percent growth, Table C1 and Figures C2 and C3. This increased was
not enough to offset the previous quarter’s 0.7 percent decline but is a reversal of
the 1.6 percent quarterly decline reported this time last year.
Overall MOS capacity is down 12.3 percent from Q4-2008 and on a par with
where it was in the first half of 2007. Capacity has been essentially flat for the last
three consecutive quarters.
1,800
1,600
200mm Equ WSpW x1000
1,400
1,200
1,000
800
600
400
200
0
1Q-05 2Q-05 3Q-05 4Q-05 1Q-06 2Q-06 3Q-06 4Q-06 1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08 1Q-09 2Q-09 3Q-09 4Q-09
March 2010
Figure C2 - MOS Wafer Fab Capacity By Wafer Size
(200mm Equ Wafer Starts/Week x000)
150mm & Under 200mm 300mm
2,200
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
1Q-05 2Q-05 3Q-05 4Q-05 1Q-06 2Q-06 3Q-06 4Q-06 1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08 1Q-09 2Q-09 3Q-09 4Q-09
90%
80%
70%
200mm Equ WSpW x1000
60%
50%
40%
30%
20%
10%
0%
1Q-05 2Q-05 3Q-05 4Q-05 1Q-06 2Q-06 3Q-06 4Q-06 1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08 1Q-09 2Q-09 3Q-09 4Q-09
March 2010
At 640.4k wafer starts per week, Q4-09 200mm capacity continued its absolute
value decline, from 666.8k in Q3-09, a fall of 4.0 percent. 200mm capacity is
now down 22.5 percent versus the same period last year.
300mm wafers now account for 56.3 percent of the total MOS capacity, up from
54.5 percent in Q3-09 and 48.2 percent from the same period last year. 300mm
wafers now account for over half the total capacity, with 200mm in second place
at 34.3 percent, down from 35.5 percent in Q3-09 and 39.1 percent in Q4-08.
Advanced capacity (i.e. 0.06 micron and below) grew 6.9 percent or 40.8k 200mm
equivalent wafer starts per week, Figure C4, as leading-edge designs migrate to
the 5x and below nodes.
600
500
400
300
200
100
0
1Q-99
3Q-99
1Q-00
3Q-00
1Q-01
3Q-01
1Q-02
3Q-02
1Q-03
3Q-03
1Q-04
3Q-04
1Q-05
3Q-05
1Q-06
3Q-06
1Q-07
3Q-07
1Q-08
3Q-08
1Q-09
3Q-09
As correctly predicted 15 months ago in our June 2009 Report Capacity review,
the combination of capacity cutbacks and recovering IC demand caused total MOS
IC Q4-09 utilisation rates to reach near sold-out levels, reaching 89.2 percent,
Figure C5, up from 87.0 percent in Q3-09 and 68.4 percent for Q4-08. Advanced
IC capacity, i.e. 0.06 micron and below, reached 96.2 percent (from 93.8 percent
in Q3-09), Figure C6, whilst 300mm and 200mm wafers checked in at 96.7
percent (Q3 = 96.1 percent) and 82.4 percent (Q3 = 80.2 percent) respectively,
Figure C7.
March 2010
Figure C5 - MOS Wafer Fab Capacity Utilisation
(Percent Of Total)
2,200 95%
2,000
90%
1,800
200mm Wafer Starts/Week
85%
1,600
Utilisation
80%
1,400
75%
1,200
70%
1,000
65%
800
600 60%
400 55%
1Q-99
1Q-00
1Q-01
1Q-02
1Q-03
1Q-04
1Q-05
1Q-06
1Q-07
1Q-08
1Q-09
Source: SICAS/Future Horizons
1,000
95%
900
90%
200mm Wafer Starts/Week
800
700
85%
Utilisation
600
80%
500
400 75%
300
70%
200
100 65%
1Q-99
1Q-00
1Q-01
1Q-02
1Q-03
1Q-04
1Q-05
1Q-06
1Q-07
1Q-08
1Q-09
March 2010
Figure C7 - MOS 200mm & 300mmWafer Fab Capacity Utilisation
(Percent Of Total)
100%
90%
80%
70%
60%
50%
200mm Utilisation % 300mm Utilisation % Full Capacity
40%
1Q-99
1Q-00
1Q-01
1Q-02
1Q-03
1Q-04
1Q-05
1Q-06
1Q-07
1Q-08
1Q-09
Source: SICAS/Future Horizons
It doesn’t get more ‘sold out’ than this … and this at the START of the IC
recovery cycle. Given the further 46 percent cut back in 2009 Cap Ex spending,
2010 capacity will be scarcer than hen’s teeth. Foundry price rises, extended lead
times, allocations and premiums for priority delivery will dominate the landscape
… watch out for an awful lot of fabless and fablite firms to be caught with their
trousers down committed to woefully low IC ASPs based on anticipated
continuingly low foundry wafer prices.
2010’s capacity cannot increase much beyond today’s level, so any increase in die
output is dependent on shrinks and yield improvements. 2011’s capacity increase
will depend on 2010 Cap Ex, off to a flat start on Q4-09. This means capacity
will be tight through at least mid-2011 yet industry is STILL in collective denial.
We have said it before and we’ll say it again. There is already not enough
capacity in place to meet 2010’s demand, 2011 will be even worse … the fablite
model will be the worst hit by this shortage; depending on who you are, the
fabless firms won’t escape unscathed either. Never forget the FSA (now renamed
GSA) was formed in 1994 as a direct result of the wafer starvation caused by the
early 1990’s Cap Ex underinvestment and the 1993-1994 market boom. Déjà vu?
March 2010
March 2010
very loose monetary policy and the FED is not expected to change this any time
soon.
Eurozone
The eurozones’ recovery remains fragile. Service sector companies are struggling
to keep pace with export-led growth in manufacturing and February’s GDP
announcement of just 0.1 percent in the last three months of 2009 has done
nothing to boost confidence in the 16-country region. This poor performance is
likely to keep interest rates on hold at 1 percent for the remainder of the year, and
economists continue to predict the eurozone to expand just 0.7 percent in 2010.
Despite this, the European Central Bank (ECB) is continuing to unveil its own
plans to unwind economic stimulus.
The number of Europeans with jobs dropped in 2009 for the first time in the 14-
year history of the statistic, and experts predict that it could fall again in 2010 if
the fragile economic recovery fails to gain strength. January saw retail sales fall
with economists blaming the harsh winter weather. But, with people concerned
about job security February sales could fall further. February saw the Euro
tumble to a one-year low against the yen and 4.8 per cent against the dollar this
year, hurt by the persistent worries about Greece’s fiscal woes.
Germany’s economy did not grow at all in the fourth quarter of 2009 and the only
reason it didn’t contract was that German industry managed to boost exports to
healthier economies. It is predicted that Germany’s budget deficit will rise to
almost 6 percent in 2010. Spain continues to operate in a double-digit budget
deficit and an unemployment rate of nearly 19 percent. Greece currently has a
public deficit of 12.7 percent, four times higher than eurozone rules allow.
UK
The UK economy grew by 0.3 percent in the final three months of 2009, faster
than expected. This was due to stronger growth in services and production.
However, British unemployment rose sharply in January after two months of
decline and is expected to rise again in the coming months. Average earnings rose
at a record-low pace for a third straight month.
Despite the British Retail Consortium (BRC) reporting an increase in sales from a
year earlier, they also warned that these are not strong results. The results are
compared with very weak figures from a year ago. The Bank of England (BOE)
has not ruled out further quantitative easing programmes and has said the UK now
needs to secure growth from investment and net exports rather than household and
government consumption.
March 2010
The beginning of March saw sterling extend losses to a nine month low against
the dollar as uncertainty about looming national elections, combined with a higher
than predicted public borrowing rate of £4.3 billion in January, compared to the
predicted £2.8 billion. February saw mortgage lending edge 6 percent higher than
January, however this is still the second lowest since February 2000.
House prices recorded their first monthly fall since June 2009 with a 1.5 percent
drop in February. The end of the stamp duty holiday, the cold weather and more
properties being put up for sale caused the drop. The average home is now worth
£166,857. Consumer price inflation hit 3.5 percent in January, well above the
BOE 2 percent target, although it is expected to fall back within target by the end
of the year. Car production rose for the fourth successive month in February with
weaker sterling cited as one of the factors helping the industry.
Japan
Japan’s economy grew at a slower rate than previously thought in the fourth
quarter of 2009. GDP expanded at an annualised rate of 3.8 percent in the fourth
quarter of 2009, less than the 4.6 percent predicted. Currently the worlds second
largest economy, Japan risks ending the year in third place as it struggles to cope
with renewed deflation and a shrinking population. However, the Bank of Japan
(BOJ) said they are striving to end deflation by the end of 2010.
Japan’s strong yen is also causing them problems. The yen is 18 percent stronger
than it was in August 2008 compared to an inflation-adjusted basket of currencies
weighted toward Japan’s largest trade partners. The strong yen has negatively
affected exports. Japan’s debt problem is now likening them to Greece. The main
tool to be considered to ease the debt problem is an increase in sales tax to 5
percent (almost 15 percent lower than European tax levels).
However, even at 5 percent experts worry it could knock consumer spending and
push the country back into recession. It was not all bad news as January saw
Japan’s jobless rate and consumer spending improve. However, industry experts
warn these positive trends could be short lived once the government stimulus
measures expire.
China
The rapid growth in China’s bank lending and investment spending slowed in
February. Chinese inflation hit a 16-month high in February and industry experts
have warned Bejing to unwind stimulus measures even further to avoid further
inflation. The Consumer Price Index (CPI), the nations key inflation gauge, rose
2.7 percent in February from a year earlier the fastest rise in more than a year.
March 2010
However, the Chinese New Year holiday may have impacted this, with people
buying more food and travelling over the holiday, which tends to drive up prices.
Interest rates, which have been on hold since 2007, may now rise in the second
quarter of 2010. Some experts are still worried that the government is not doing
enough to prevent the economy from overheating.
China’s exports jumped by 46 percent in February compared with a year ago,
raising hopes of a strong recovery in global trade. This increase is likely to
increase pressure on the government to raise the value of the yuan, which the US
in particular complains it is undervalued, in order to boost exports. As China
powers out of the recession there is growing pressure on policymakers to let the
yuan appreciate.
India
India’s economy is expected to grow by 8.7 percent in the current fiscal year.
Their economy is recovering faster than expected, growing at an annual rate of 7.9
per cent in the three months to the end of September 2009. Weakness in
agriculture had checked the speed of India’s recovery after a growth of 9 percent a
year before the global financial crisis, however, strong growth in India’s
manufacturing sector is also helping to compensate for falling agricultural output.
The government has stressed the need to cut India’s fiscal deficit, as well as cut
public debt and spending. The budget deficit has grown to its highest level in
more than 15 years, at 6.9 percent of GDP. There plan is to cut this to 5.5 percent
by 2011. The government realise there is a huge threat of inflation which needs to
be controlled. In December 2009 prices rose by more than 15 percent, the highest
rate of inflation in 11 years.
Asia Pacific
The global recession’s recovery is being made in Asia. Thailands’ economy
expanded at an annual rage of 15.3 percent in the fourth quarter and Taiwan’s
grew at 18 percent. It would appear that it is the Asian countries closely linked to
China i.e Taiwan, Malaysia, Singapore that have been growing the fastest.
However, China cannot take the full credit for this growth, Asia consumers are
doing their part too.
In January auto sales in Malaysia were up 33 percent from a year earlier compared
to only 6 percent in the US, and not far behind India’s 50 percent. Asia
unemployment rates are falling and this has given Asians the confidence to travel
and spend. Personal travel is a real indicator of consumer spending and tourism is
a good industry to stimulate growth. South Korea in particular has come out of
the financial crisis so fast that they have seen prompt interest rate rises.
March 2010
March 2010
Ms Tymoshenko is now calling on the Rada to hold a confidence vote in her
government. Her nominal coalition could formally break up shortly, but even that
would not resolve Mr Yanukovich’s problem.
Mr Yanukovich may muster sufficient votes to oust Ms Tymoshenko as prime
minister. But to form a majority coalition he needs the support of Mr
Yushchenko’s Our Ukraine block. Our Ukraine’s deputies have their own
financial and political interests - and satisfying them does not come cheaply. Ms
Tymoshenko is also bidding to hang on to some of the party’s deputies. Despite
Mr Yushchenko’s spectacular defeat in the presidential election - he won just 5
percent of the vote in the first round - his party is now in a position to be
kingmaker.
Despite the cynicism of Ukrainian politics, ideology plays a part in all this. Our
Ukraine draws support exclusively from western Ukraine, the more nationalistic
part. Its voters will see betrayal in any alliance with Mr Yanukovich, who made
his first victory speech in Russian, who has suggested that the Russian Black Sea
fleet may stay in Sebastopol after its lease runs out in 2017, and who has offered
Gazprom the lure of a joint consortium to operate Ukraine’s gas pipelines. The
blessing by Kirill may be the last straw.
To make an alliance more palatable, Mr Yanukovich may have to accept a
compromise prime minister. One choice is Arseniy Yatseniuk, a former central
banker who has served as foreign minister and speaker of the Rada. Mr
Yatseniuk, who himself tried for the presidency, has proved flexible in dealing
with different political forces and yet is popular with Our Ukraine’s voters. He is
also said to be favoured by Rinat Akhmetov, Ukraine’s richest tycoon and Mr
Yanukovich’s sponsor.
Yet part of the new president’s entourage feels this would be too much of a
concession to a losing party. Mr Yanukovich would prefer to see an old comrade,
Nikolai Azarov, as Prime Minister. Mr Azarov served as Mr Yanukovich’s deputy
in 2006 and is loyal to him rather than to Mr Akhmetov. He is seen by some as an
ideal caretaker Prime Minister who could bring Ukraine’s dire public finances into
some sort of order, even if he may not turn out to be much of a reformer.
If Mr Yanukovich fails to build a new coalition, he will have to call a new
parliamentary election. This may be the best way to break the stalemate. It would
certainly be more democratic than gluing together a coalition dependent only on
participants’ vested interests. But it would be risky for Mr Yanukovich. Given
his narrow win in the presidential election, there is a chance that his party would
lose more seats than it would gain in a parliamentary vote.
March 2010
Serhiy Tyhypko, who came third in the first round of the presidential election,
taking votes from both front-runners, will form a faction and have demands of his
own. Unlike Mr Yatseniuk, Mr Tyhypko is seen as a potential rival to Mr
Yanukovich.
The next few months may bring more clarity. But for the moment Ukraine’s
politics continues to be in chaos and its politicians are too busy making deals to
pay much attention to the country’s economic problems - or its national interests.
March 2010
write and apply federal regulations. The power of the regulations is growing all
the time. It seems there are now rules on everything and anything.
However, it appears that the majority of American and British citizens meet these
changes with wide spread approval. There are some logical reasons for this
acceptance.
1) The demand for public services will soar in the coming decades. The world’s
aging population is expected to rise significantly, the over 60’s population
group is expected to rise from 11 percent today to 22 per cent by 2050. In the
developed world by 2050 one in three people will be pensioners and one in ten
will be over 80. In America alone more than ten thousand babies will become
eligible for social security and Medicare every day for the next two decades.
2) Fear of terrorism and crime has helped to inflate the state. Britain has one
CCTV camera for every 14 people, and under Bush, there was a massive
programme of telephone tapping before the Supreme Court shut it down.
3) Some of the world’s largest companies are now either directly owned or
substantially owned by the state, with numbers likely to grow. Chinese state
controlled companies have been buying up private companies and Russia’s
state controlled companies have a long history of purchasing private
companies on the cheap.
4) Concern over global warming and an implicit acceptance that government
intervention is needed to deter people and companies from over heating the
world and to change their behaviour.
However, the economic crisis may have promoted state growth in the short term,
but in the long term it is likely to incur serious cuts in public spending, especially
in those regions where public debt is high. It may however transpire that these
cuts may be difficult to make in reality, for example, if people continue to retire at
age 65s, they may go on to live for another 20 years. With an increasing aging
population, this will place huge demands on government spending, unless they
simultaneously increase the age of retirement.
Within the public sector, 75 percent of public officials are in some sort of pay for
performance scheme and in America, 30 percent of people in the public sector are
unionised, compared with seven percent in the private sector, all who enjoy better
pension rights and higher pay. Add the above to the perverse incentives used by
the politicians to buy public sector votes using public money means governments
can still spend a lot of money without actually improving public sector services.
March 2010
The size of the government does need to be considered. The government really
needs to be asking themselves what the state should be involving itself in and
what they should leave well alone, before it collapses under its own weight.
March 2010
The lack of agreement caused the IEEE Standards Association to disband the
IEEE 802.15.3a Task Group. Nevertheless, some of the world's top chip firms
still consider the UWB market important, especially for the high volume and
potentially lucrative home consumer market.
The industry was helped, during 2006, by some more concrete applications for
wideband wireless Bluetooth version 3.0 and wideband wireless USB links. An
example of wireless USB hub currently in production is shown in Figure 1.
On 28 March 2006, the Bluetooth Special Interest Group announced its selection
of the WiMedia Alliance Multi-Band Orthogonal Frequency Division
Multiplexing (MB-OFDM) version of UWB for integration with current Bluetooth
wireless technology (although it does also see the Bluetooth protocol stack being
used with WiFi as well). However, in 2009, the Bluetooth SIG made an
announcement concerning Bluetooth 3.0 High Speed, which (notably) did not
mention UWB and only 802.11 as the physical layer, which must come as a
warning sign for UWB technology.
Unfortunately, UWB has seen a number of technical and standards issues and
although the technology shows some promise, the full potential has yet to be
realised. Despite the initial optimism over the use of UWB a number of
companies have either been taken over or ceased operations. Tzero Technologies
joined a shakeout of UWB manufacturers in 2009 that also claimed Focus
Enhancements. WiQuest and Artimi also merged with Staccato to pool resources.
Intel also announced that it was stopping development in November 2008.
March 2010
Bluetooth technology using the UWB physical radio layer has the capability to
meet the high-speed demands of synchronising and transferring large amounts of
data but at the moment appears to be beset by technical problems with a very
much lower than expected data rate in current silicon. However, these problems
are likely to be temporary and it could still be an ideal solution to enable high-
quality video and audio applications for portable devices, multi-media projectors
and television sets.
Home video networking applications cannot easily be met using existing wire-
based technologies (for installation and aesthetic reasons), and modified existing
wireless technology is struggling to meet the latest video networking
requirements. UWB could resolve most of these issues at least in a single room -
at short range. It does, however, need the broad agreement of the consumer
electronics industry on standards for this to happen. If it does, then home video
networking applications could drive UWB with connections likely to be seen on a
broad range of consumer products.
In summary UWB has lost some traction because of standards and technical
problems but Future Horizons believes the technology is delayed rather than dead
and our forecast for unit sales in Figure 2 shows steady growth from 2011
onwards.
1,400
1,200
1,000
800
600
400
200
0
2004 2005 2006 2007 2008 2009 2010F 2011F 2012F 2013F 2014F
UWB Semi M. Units 0 0 0 1 7 11 57 287 574 775 1400
March 2010
March 2010
semiconductor devices. Financial incentives, including attractive feed-in tariffs
for solar-generated electricity, have also led to growth of solar PV installations in
many countries where these incentives exist. Australia, China, Germany, Greece,
Israel, Japan, Spain and the United States are examples of countries where
incentives are offered and others are set to follow.
March 2010
locations. Because of this, the demand for PV cells has almost doubled every two
years for the last seven years, despite the relatively high cost of installation and a
long time for payback (tens of years).
Further reductions in the cost of PV installations will reduce this payback and
encourage future market growth. The main suppliers of PV modules include
Suntech, Sharp, JV Solar, Q-Cells, BP Solar and SunPower.
The economic downturn did have an effect on the PV market but it has shown
some resilience and despite a build up of inventory in the early part of 2009 the
inventory has mostly been consumed during the upturn in the second half of the
year. The forecast in Figure S2 shows the growth in the generation capacity of PV
modules to 2014.
50.0
45.0
40.0
35.0
30.0
Gigawatts
25.0
20.0
15.0
10.0
5.0
0.0
2007 2008 2009 2010 2011 2012 2013 2014
YEAR
Thin film based technologies will grow its share of total production from 15
percent in 2008 to over 35 percent by 2014. The technology is advancing and
prices are falling which will encourage uptake. On the other hand, this growth
will be negatively affected by the gradual reduction of government subsidies either
as direct grants or the benefit of generous feed-in-tariffs.
March 2010
To summarise, the PV market is still growing and is forecast to grow at a CAGR
of 54 percent between 2008 and 2014. The effective price of PV silicon and
modules will reduce by approximately 40 percent during the same period, which
will encourage this growth. The forecast does not include the essential peripherals
such as inverters, which will also add to the semiconductor total for these
installations.
March 2010
March 2010
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March 2010
Exchange Rates
Figure R1 shows the weekly Euro exchange rate vs the US$ and UK£ for 2009.
Figure R2 shows the historical trend since its 1st Jan 1999 launch.
0.85 1.35
1.30
0.80 1.25
1.20
0.75
1.15
0.70 1.10
1.05
0.65 1.00
Jan 04-09
Jan 25
Feb 15
Mar 08
Mar 29
Apr 19
May 10
May 31
Jun 21
Jul 12
Aug 02
Aug 23
Sep 13
Oct 04
Oct 25
Nov 15
Dec 06
Dec 27
0.95 1.50
0.90
1.40
0.85
1.30
0.80
1.20
0.75
Jan 1999 Launch Rates
1.10
0.70
1.00
0.65
0.60 0.90
0.55 0.80
Dec 31
Jan 1999
Jul
Jan 2000
Jul
Jan 2001
Jul
Jan 2002
Jul
Jan 2003
Jul
Jan 2004
Jun
Jan 2005
Jul
Jan 2006
Jul
Jan 2007
Jul
Jul
Dec 29
Jul 29
Dec 28
March 2010
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