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FUTURE HORIZONS

Presents

The Global
Semiconductor
Monthly Report
March 2010

Time For A Reality Check …


Pessimism Has Swung Too Far
In This Issue:
Executive Overview ...................................................................................... 1
Market Summary ........................................................................................... 6
Industry Capacity ........................................................................................ 11
World Economic Round Up ........................................................................ 16
Russia/CIS – Mixed Blessings In Ukraine................................................... 20
Economic Case Study – Big vs Small Government..................................... 22
Market Trends – Ultra-Wideband ................................................................ 24
Semiconductor Spotlight – Photovoltaic Developments ............................. 27
plus … Exchange Rate Trends & FH Reports & Upcoming Events
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The Global
Semiconductor
Monthly Report
March 2010
A CEO favourite, the Global Semiconductor Monthly Report provides
analysis and commentary on the global semiconductor industry and its impact
on Future Horizons’ semiconductor market forecast, as published in the Annual
Semiconductor / Semiconductor Application Markets (previously called Key
Market Drivers) Reports. These three reports provide a comprehensive in-depth
analysis of the worldwide semiconductor, electronics equipment and economic
environment. Together they provide the latest information on developments in the
semiconductor industry, the companies involved, the changes in the markets, and
the impact of the global economic and political situation.
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The Global Semiconductor Industry Analysts
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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.

Figure E1 - 12/12 Worldwide IC Monthly Growth Rates

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

Total IC Units ASP Value


Jan 2010 vs Jan 2009 78.4% -2.6% 73.7%
Jan 2010 vs Dec 2009 10.0% -4.7% 4.8%
Source: WSTS/Future Horizons (Growth rates adjusted for 5-week months)

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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.

Figure E2 – 2009 12:12 Monthly Forecast Sales Trend

25% 80%

20%

15% 60%

10%

5% 40%

Monthly 12:12 Growth Rate


0%
YoY Growth

-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

Source: WSTS/Future Horizons

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.

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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

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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

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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?”

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SMU-2010-03 Mar.doc 2010 Edition
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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.

Figure M1 - World Sales By Product Category 12/12 Growth Rate


100% IC Opto Disc

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

Figure M2 - Europe Sales By Product Category 12/12 Growth Rate


IC Opto Disc
130%

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

Source: WSTS/Future Horizons

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SMU-2010-03 Mar.doc 2010 Edition
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March 2010

Figure M3 - 12 Month Rolling Worldwide & Europe Sales By Product


(Billions Of US$)
M3a - Total WW Semiconductor M3b - Total Europe Semiconductor
23 3.4

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%

M3c - Total WW IC M3d - Total Europe IC


19 3.4

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)

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SMU-2010-03 Mar.doc 2010 Edition
The Global Semiconductor Monthly Report

March 2010

Figure M3 - 12 Month Rolling Worldwide & Europe Sales By Product (Cont)


(Billions Of US$)
M3e – Total WW Optoelectronics M3f – Total Europe Optoelectronics
1.8 0.25

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%

M3g – Total WW Discretes M3h – Total Europe Discretes


2.0 0.40

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)

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SMU-2010-03 Mar.doc 2010 Edition
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March 2010

Figure M4 - 12 Month Rolling Worldwide Unit Sales & ASPs By Product


(Units In Billions & ASP In US$ Dollars)
M4a – Total Semiconductor Units M4b – Total Semiconductor ASP
52
0.48
50
0.47
48
0.46
46
0.45
44

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%

M4c – Total IC Units M4d – Total IC ASP


15 1.45

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)

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SMU-2010-03 Mar.doc 2010 Edition
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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

5.0 0.16 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 41.7% Jan 2010 vs Jan 2009 0.6%
Jan 2010 vs Dec 2009 27.6% Jan 2010 vs Dec 2009 -11.0%

M4g - Total Discretes Units M4h - Total Discretes ASP


32 0.085

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)

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SMU-2010-03 Mar.doc 2010 Edition
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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.

Figure C1 - MOS Wafer Fab Capacity By Feature Size


(200mm Equ Wafer Starts/Week x000)
2,200 0.7µm & Above < 0.7µm to 0.4µm < 0.4µm to 0.3µm
< 0.3µm to 0.2µm < 0.2µm to 0.16µm < 0.16µm to 0.12µm
< 0.12µm to 0.08µm < 0.08µm to ³ 0.06µm < 0.06µm
2,000

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

Source: SICAS/Future Horizons

Table C1 – Q4-09 vs Q3-09 Wafer Fab Capacity Increase By Wafer Size


Wafer Technology wsw (k) Q4 vs Q3
Total MOS 6.9 0.4%
200mm Wafers in MOS Total -26.4 -4.0%
300mm Wafers In MOS Total 37.6 3.7%
150mm & Below Wafers in MOS Total -4.3 -2.3%
BIPOLAR (5 inch equivalents) -1.3 -1.0%
TOTAL IC's (8 inch equivalents) 6.4 0.3%
Source: SICAS/Future Horizons

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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

Source: SICAS/Future Horizons

Figure C3 - MOS Wafer Fab Mix By Feature Size


(200mm Equ Wafer Starts/Week x000)
0.7µm & Above < 0.7µm to 0.4µm < 0.4µm to 0.3µm
< 0.3µm to 0.2µm < 0.2µm to 0.16µm < 0.16µm t o 0.12µm
< 0.12µm to 0.08µm < 0.08µm to ³ 0.06µm < 0.06µm
100%

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

Source: SICAS/Future Horizons

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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.

Figure C4 - MOS Wafer Fab Life Cycle By Feature Size


(200mm Equ Wafer Starts/Week x000)
800 0.7µm & Above < 0.7µm to 0.4µm < 0.4µm to 0.3µm
< 0.3µm to 0.2µm < 0.2µm to 0.16µm < 0.16µm to 0.12µm
< 0.12µm to 0.08µm < 0.08µm to ³ 0.06µm < 0.06µm
700

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

Source: SICAS/Future Horizons

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.

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Figure C5 - MOS Wafer Fab Capacity Utilisation
(Percent Of Total)

2,400 Total MOS Capacity Utilisation % 100%

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

Figure C6 - Advanced MOS Wafer Fab Capacity Utilisation


(Percent Of Total)

Advanced MOS Capacity Utilisation %


1,100 100%

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

Source: SICAS/Future Horizons

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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?

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World Economic Round Up


World Economy
The global recession was made in America, but the recovery is being made in
Asia. During the crisis, emerging market consumers (Asia), more numerous and
better off than they were a couple of decades ago, outspent American consumers
for the first time in modern history. Experts calculate emerging market consumers
will account for 34 percent of global consumption, and US consumers 27 percent
in 2010.
It therefore appears that the Asian markets have done the same for the world in
2009 that the US consumers did back in 1998 (during the Asian financial crises).
However, Asia cannot lead the world to growth by itself. Their economies rely on
exports, and they need the worlds ‘mature economies’ - the US, Europe and Japan
to make a recovery sooner rather than later. None are yet healthy, but the US is
doing better than the others.
The US economy is growing helped by a mix of fiscal and monetary stimulus
along with the eagerness of businesses to rebuild depleted inventories. But by the
standards of past recoveries, it is not growing very fast. March saw oil dip toward
US$82 a barrel and gold slipped towards US$1 120/oz, reacting to the dollar
strengthening against the euro.
North America
Despite the Federal Reserve (FED) announcement that the labour market was
stabilising (it held steady at 9.7 percent in February) and business spending on
equipment and software significantly rose, the US Central Bank are to keep
interest rates close to zero for an extended period.
Despite the labour market stabilising, American businesses and the government
shed 36,000 positions in February compared to 26,000 in January; however, this is
better than the 60,000 industry experts predicted. US consumers increased their
borrowing for the first time in a year, indicating Americans may be starting to feel
more comfortable about spending.
The US manufacturing sector continued to expand in February. The
manufacturing index of activity was 56.5, down 1.9 from a month earlier, but a
number above 50 represents expansion. Manufacturing has played a significant
role in the nascent recovery, even adding jobs as other industries cut them.
New home construction fell in February as snowstorms and wavering demand
deterred building. The fragile state of the economic recovery still warranted a

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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.

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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.

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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.

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Russia/CIS – Mixed Blessings In Ukraine


Even in Ukraine, elections can end. After two rounds of voting and weeks of legal
rumbles, Viktor Yanukovich has been inaugurated as Ukraine’s fourth
democratically elected president. In November 2004 he tried and failed to steal
the crown. Now he has played (mostly) by the rules - and won. Although Yulia
Tymoshenko, his charismatic rival and Ukraine’s prime minister, refuses to
recognise Mr Yanukovich’s victory, she withdrew her legal appeals this week.
Ukraine’s highest office has thus moved from an incumbent to an opposition
leader, a rare achievement in an ex-Soviet republic.
Mr Yanukovich’s legitimacy is now accepted by the world’s leaders and not just
by Russia’s prime minister, Vladimir Putin, who rashly congratulated him on his
rigged victory in 2004. This time Moscow made no such crude statements.
Instead, it asserted its feelings of fraternity towards Kiev by dispatching Patriarch
Kirill, head of the Russian Orthodox Church, to bless Mr Yanukovich before his
inauguration. This says as much about Mr Yanukovich’s piety as about Moscow’s
tactic of using the church to extend its influence. Rarely have the Russians used
soft power so well. Yet Mr Yanukovich, conscious of his pro-Russian image,
tried to downplay the patriarch’s visit, and is planning his first foreign visit to
Brussels, not Moscow.
His biggest problems lie at home, where his slender victory is yet to turn into real
power. Ms Tymoshenko’s legal challenge was not meant to overturn the election
or trigger street protests. Her aim was to rally supporters by showing that she
never gives up, to label Mr Yanukovich’s victory illegitimate and to blame
Ukraine’s corrupt courts for “cynically refusing to establish the truth”. All this
was meant to chip away at Mr Yanukovich’s mandate. As it is, he is the first
directly elected president in Ukraine’s history to win with less than 50 percent of
the vote.
The election has affirmed Ukraine as a functioning democracy, but it has neither
brought political stability nor resolved the crippling question of where power lies
in a country of 46 million people. Ukraine is still trapped in the constitutional
compromise agreed to by the outgoing president, Viktor Yushchenko, which
divides executive power between the President and a Prime Minister chosen by
the Verkhovna Rada (parliament). This means that, despite his win, Mr
Yanukovich can do little without a new parliamentary coalition.
Creating one has proved harder than he expected, not least because of conflicting
interests in his own Party of Regions. After a long and expensive campaign, his
backers want to turn his victory into profit and are thus reluctant to share power.

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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.

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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.

Economic Case Study – Big vs Small Government


Under the rein of Blair (UK) and Clinton (US), downsizing the State and
privatising State-run companies was the fashion of the day. Due to the global
crisis it appears the trend of ‘the BIG government’ is returning. The US has seen
its financial capital shift from New York to Washington DC, and the government
has been trying to extend its control over the healthcare industry. Britain has seen
many of its banks collapse only to be rescued and essentially nationalised by the
government.
The obvious reason for this change is the financial crisis. Global markets
collapsed like a pack of cards from car manufacturers, banks, financial
organisations and even organizations deemed ‘too big to fail’. Following Lehman
Brothers collapse, the American government found itself the proud owners of
General Motors and Chrysler, whilst the British government found themselves
running high street banks.
However, there is evidence that both the US and Britain were on the march for
‘BIG Government’ before the collapse of Lehmans. UK Prime Minister Gordon
Brown reverted from his ‘Mr Prudent’ reputation of the first three years to an Old
Labour spending binge. He increased National Health Service spending by 6
percent a year and boosted spending on education. Labours’ 13 year reign has
seen two thirds of all new jobs created in the public sector, with pay growing
faster than in the private sector.
America on the other hand was never reserved with money. In 2001, Bush
responded to the September 11th terrorist attacks by spending huge sums on
weapons. He also added a big new drugs entitlement to Medicare, created the
Department of Homeland Security and expanded the federal governments control
over education and the states.
Public spending is not the only way to indicate the states power. America’s
federal government employs a quarter of a million bureaucrats whose job is to

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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.

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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.

Market Trends – Ultra-Wideband


Ultra-Wideband (UWB) is a low power, short-range radio technology that uses a
large portion of the radio spectrum to carry high bandwidth data. UWB uses
pulse-coded information with sharp carrier pulses using a number of centre
frequencies. It has traditional applications in radar imaging. As well as
transmitting data, it has been used for sensor data collection as well as precision
locating and tracking applications.
UWB communications transmit in a way that should not interfere with other more
traditional 'narrow band' and continuous carrier wave used in the same frequency
band. However studies have shown that a number of UWB transmitters increases
the noise level and can make traditional communications services more difficult in
proximity to the UWB transmitters. This may affect the stability and reliability of
existing systems.
Ultra-Wideband (UWB) is an unlicensed radio technology that can provide
audio/video data streaming over short distances. It is expected to deliver the
bandwidth and Quality of Service (QoS) for multi-channel consumer video
equipment in the home, which is more difficult for other data transmission
technologies like WiFi. UWB transceivers can communicate at a data rate of up
to 480Mbits/sec and operate at 3.1 to 10.6 GHz. ISO/IEC and also the European
Commission have approved the standard. As well as streaming high-definition
video, UWB can also be used for transferring digital data between domestic
entertainment and computer equipment.
Agreeing standards is problematical but UWB is a good concept. It uses a wide
slice of the radio spectrum, is efficient, and sends data at almost minimal power
over a short distance. Technically it is quieter than background radio noise, yet it
can theoretically transmit data signals of 480MBits/s. Realising this potential has
been more difficult in practise. Lack of agreement in UWB technology choice
was beginning to hinder the market potential for UWB as established wireless
LAN (IEEE803.11) has developed higher bandwidth solutions in the new ‘n’
specification, which has the possibility to steal some applications in higher speed
media streaming.

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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.

Figure 1 – UWB Wireless-USB Hub

Source: Belkin/Future Horizons

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.

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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.

Figure 2 – Worldwide UWB Unit Sales, 2004-2014


1,600

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

Source Future Horizons March 2010

Future Horizons © 1989-2010, All Rights Reserved - Reproduction Prohibited 26


SMU-2010-03 Mar.doc 2010 Edition
The Global Semiconductor Monthly Report

March 2010

Semiconductor Spotlight – Photovoltaic Developments


Photovoltaic (PV) cells are arrays of cells that convert radiation from the sun into
(direct current) electrical energy. This conversion happens without intermediate
steps although the efficiency of the conversion can vary. Semiconductor materials
used for photovoltaic devices include various types of silicon and other
semiconductors with dopants including boron and phosphorus.
The increasing interest in green energy sources including photovoltaic modules
has spurred research and development in PV especially in the last four years.
Production has been increasing, especially, as government grants and incentives
have become available for smaller installations.
Although the total power produced by PV modules installed worldwide has
increased significantly in the last two years it is still a very small percentage of the
electricity produced by fossil fuels and is still far behind nuclear power stations.
The worldwide production from photovoltaic sources is approximately 21
Gigawatts and for nuclear is 370 Gigawatts
The PV effect is caused by photons of light stimulating electrons into a higher
state of energy. When a photon is absorbed, the energy of the photon is
transferred to an electron in an atom of the semiconductor cell photodiode. The
higher energy electron is able to escape from its ‘normal’ position associated with
the atoms in the material to become part of the current in an electrical circuit.
The absence of the electron in its usual position causes a hole to form and the
current flows through the PN junction with enough voltage and current to drive a
load viz.charge a battery or light a light bulb. Polysilicon (c-Si) is the primary
material of wafers used to fabricate crystalline silicon solar cells but cheaper
alternatives are being developed such as thin film (CdTe) casting wafers instead of
sawing, thin film copper indium gallium and selenium (CIGS), as well amorphous
and microcrystalline silicon.
Almost all photovoltaic devices are an adapted photodiode with a large light
collecting area. An example of a solar cell arrangement is given in Figure S1.
The semiconductor interest is primarily in the PV cell itself but there is also the
need for control and management of the system using microprocessors and also
the components necessary for the inverter. The inverter is needed to bring the low
voltage direct current battery or from the solar cell to AC mains voltages for use in
the premises or for onward transmission to the grid.
Advances in technology and increases in manufacturing competence have resulted
in price reductions for PV solar cells and modules, which is typical of other

Future Horizons © 1989-2010, All Rights Reserved - Reproduction Prohibited 27


SMU-2010-03 Mar.doc 2010 Edition
The Global Semiconductor Monthly Report

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.

Figure S1 - Photvoltaic Cell & System

Source US Department Of Energy/Future Horizons

Solar PV installations can either be stand-alone or connected to the grid depending


on the location. Stand-alone applications include cellular base stations, telemetry,
electrical power for remote buildings, rural communities, parking meters and
emergency telephones. Grid connected systems are used in houses and in
industrial buildings as a supplementary source of power. Some more extensive
arrays for commercial energy production are also grid connected.
Many governments are pushing green energy and solar cells and arrays are
important components in the mix of renewable energy options, especially for
smaller installations and also on a larger scale in more extensive arrays in suitable

Future Horizons © 1989-2010, All Rights Reserved - Reproduction Prohibited 28


SMU-2010-03 Mar.doc 2010 Edition
The Global Semiconductor Monthly Report

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.

Figure S2 - PV Generation Capacity Production Forecast

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

Source Future Horizons March 2010

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.

Future Horizons © 1989-2010, All Rights Reserved - Reproduction Prohibited 29


SMU-2010-03 Mar.doc 2010 Edition
The Global Semiconductor Monthly Report

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.

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SMU-2010-03 Mar.doc 2010 Edition
The Global Semiconductor Monthly Report

March 2010

This Page Left Intentionally Blank

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March 2010

IEF2010 - Sign Up Now


May 5-7, Hilton International, Dresden, Germany

A proven industry catalyst, this Forum is the world ’s premier networking and
visionary event for defining and shaping future electronics industry directions.
Past delegate quotation: “This Forum is a ‘must do’ for every industry
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SMU-2010-03 Mar.doc 2010 Edition
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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.

Figure R1 - 2010 Exchange Rate Trend


(Euro vs. US$/UK£)

1.00 £/Euro $/Euro 1.60


1.55
0.95
1.50
1.45
0.90
1.40

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

Figure R2 - Exchange Rate History, 1999-To Date


(Euro vs. US$/UK£)

1.00 £/Euro $/Euro 1.60

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

Source: Financial Times/Future Horizons

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March 2010

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Market Research Reports Or Due Diligence?
We ARE the Global Semiconductor Industry Analysts. We DO NOT
charge stratospheric prices for so-called 'information services', essentially a
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competition. We DO, however, offer a better value alternative, with a
research efficiency and analysis that is second to none.

We know old habits are hard to break, but with budgets tight and discretionary
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Founded in 1989, Future Horizons offers the highest possible standards in all of its
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European Fabless Semiconductor Report (Optional Database)
European Semiconductor Wafer Fabrication Capacity (Optional Database)
Russian Electronics Industry Report
Russia & The Other Countries Of The Former USSR IC Manual
East European Semiconductor Report

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March 2010

Summary Of Key Reports – 2010 Reports Now Out


Brochure downloads are available from our website. Reports can be purchased online, by fax, or
email and are supplied in A4-ring binder and CD-ROM format. Respect copyright laws, multi-
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Global Semiconductor Update Report


A CEO favourite, this report is all a busy executive needs to keep in touch with industry trends. E-
mailed monthly, the report provides a useful industry momentum indicator by compiling 12-
monthly rolling charts for Units, Average Selling Prices (ASP) and Revenues broken down by total
SC, IC, Optoelectronics and Discretes. Also included is a review of the world economy, broken
out by region, plus a monthly feature on a key semiconductor market driver. The link between the
economy and the semiconductor industry is not perfect but by measuring and understanding the
impact of wafer fab capacity on lead-times and prices, and by monitoring the level of system OEM,
distribution and semiconductor company inventory, more sense can be made of this fundamentally
unstable industry. The report focus is on in-depth analysis and the underlying industry trends.

Annual Semiconductor Report


This report provides market analyses and forecasts of the worldwide and European semiconductor
market analysed by major product and application segments. This value-added bundle is a must-
have for anyone interested in the global semiconductor market and European market size detail.

Semiconductor Application Markets Report


(Previously called the Key Market Drivers Report)
The Annual Semiconductor report provides a detailed analysis of the key semiconductor end-user
applications and industry market drivers, collectively accounting for around 90 percent of the total
IC market. Individual chapters, available for separate purchase, describe how each application
works, the technology used, the unit sales history and forecast, the semiconductor content and the
associated semiconductor market size. This vital research resource volume is a proven industry
favourite. Individual applications are also available as separate reports; please call for details.

European Fabless Semiconductor Report


(Previously called the European Chipless & Fabless IC Design House Report)
This report covers the European and Israeli, chipless, fabless and independent IC design house
community, and is essential for those planning the resources of subcontracting new product design,
both in the semiconductor industry and the final system end product. It will also prove invaluable
for authorities and government departments, planning and directing economic growth, as well as
companies seeking investments, potential partners or acquisitions. As an added user benefit,
chipless and fabless IC design house company database is available in Excel format as an optional
CD extra (not available separately), with both pre-organised sorts (by country, design skill and
application) and in raw data format allowing customised searches and analyses. This best-selling
report has a proven track record as an invaluable research resource.

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Annual Semiconductor Report


Updated Annually – Over 370 Pages / 350 Figures & Tables

Annual Analysis & Forecast Of The


Worldwide & European SC Industry
Topics Include
Semiconductor Market & Product Forecasts
Semiconductor End-Use Markets
Global Economic Environment
Regional Market Analysis
5 Year History Plus 5 Year Forecast

- There IS No Better Value-Added Package -

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Semiconductor Application
Markets Report
Updated Annually - Over 450 Pages / 320 Figures & Tables

Digital
Still Camera
Amusement Navigation
STB Mobile
10:30
SOC
Engine Phone
H/PC DVD Player
PDA
Digital TV
Digital HDD
TV

Annual Analysis & Forecast Of The Top


Semiconductor Applications For The
Worldwide Electronics & SC Industry
(Previously Called The Key Market Drivers Report)
Topics Include (32 Top Applications Analysed)
Mobile Phone Handsets & GPS
Personal Computers & PDAs
Automotive Electronics & Robotics
Smartcards & RF-ID Tags
DVD Recorders & Players
Bluetooth, Wireless LANs & Wi-Fi
Digital STB & Still Cameras
Video Games Consoles
- Report Covers Around 90 Percent Of The Worldwide IC Market -

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European Fabless
Semiconductor Report
Updated Annually - Over 320 Companies Analysed

4 Mbit
DRAM

CPU
I/F
DISP
Graphic
Engine

2 Mbit
2 Mbit
DRAM
DRAM

Chip
Board

Annual Strategic Analysis & Reference Guide For The


European Chipless & Fabless IC Design Industry
(Previously Called The European Chipless & Fabless IC Design House Report)

Topics Include
European IC Design House Phenomenon
IC Design House Industry Drivers
IP Market Development
IC Design House Market Segmentation
IP Portfolios & Design Skills Analysed
Over 320 Design Companies Profiled (Europe & Israel)

- Includes The Popular European Fabless SC Database Disk -


(Optional Extra, Available Exclusively To Report Purchasers Only)

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2010 Diary Dates (Sign Up Now – Online @ www.futurehorizons.com)
Jan 26th – Industry Forecast Semiconductor Industry Briefing, London
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May 5-7th – International Electronics 2010 Forum
IEF2010 - 19th Annual International Electronics Industry Forum. An international forum
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Jun 7th – Silicon Chip Industry Training Seminar, London
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Annual analysis & forecast of the European & WW semiconductor market plus B2B
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rd
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Market Research is not an expensive luxury but a key strategic tool, not just for established firms
but also for start-ups and SMEs. It is never too timely to access industry intelligence … even the
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Future Horizons is a global semiconductor industry analyst with over 148 man-
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