Will High Fab Capacity Utilization Rates Trigger the Next Semiconductor Recession?
June 1, 2004 – Saratoga, CA – A flood of double-bookings due to lack of fab capacity could potentially trigger the beginning of the next recession in the Silicon Cycle, said Advanced Forecasting, a semiconductor forecasting house. However, it raises the question of whether the industry is currently at that stage. The level of utilization of existing capacity for processing silicon wafers using the state-of-the-art technology (line width smaller than 0.16 micron) reached ninety-nine percent in the first quarter of 2004, according to a recent report by SICAS. This data causes sources to conclude that the industry is over-heated and that the boom will soon come to an end.
Not so fast, says Advanced Forecasting. “The industry is currently in an early stage of over-heating, though frenzied double ordering reminiscent of 2000 could quickly change that status into severe over-heating,” stated Rosa Luis, Director of Marketing and Sales for Advanced Forecasting. “For the time being, based on our analysis of Actual IC shipments in relation to forecasted Underlying Demand, the boom should continue. As long as the slope of Actual shipments slows down to coincide with that of Underlying Demand, the industry will remain safe”.
The current 99% fab capacity utilization rate for the most advanced technology (less than 0.16 micron) is ominous. However, the utilization rate for the 0.16 to 0.2 micron technology is currently 95%. Together, they are in a similar range as prior to the 1996 and 2001 recessions (97.4% in 1995 (for 0.4 to 0.7 micron) and the 98.4% in 2000 (for 0.3 to 0.4 micron). “Again, we maintain that a very high utilization rate is necessary but not sufficient for triggering a recession,” added Luis.
In line with Advanced Forecasting’s quantitative forecasting model of Underlying Demand, which predicts the turning points in the Silicon Cycle 19 months in advance, Actual shipments of ICs have been climbing steeply since the second half of 2003. Currently, Actuals continue to increase above and in parallel to the forecasted demand. “If Actuals continue to outpace Underlying Demand and over-heating continues to build, the downward turning-point will arrive earlier than predicted for Underlying Demand,” explained Luis. “The true trigger of a recession is the buildup of excessive IC production capacity in relation to softening underlying demand, an indication provided in our forecasts.”
“Contrary to the year 2000 boom behavior in which industry pundits pronounced the boom to continue for 2 or more years, when in fact the recession was just around the corner, they are now erring on the side of caution, hesitating to forecast the longevity of the current boom,” remarked Dr. Moshe Handelsman, President of Advanced Forecasting. “Surveying the opinions of people in the industry wasn’t found to be an accurate methodology for predicting the timing of the IC Cycle Turning-Points. For example, nowadays, people still remember too well the 2001 recession. Only quantitative models that use hard numbers as input, like the one we have used for 18 years, can consistently deliver accurate forecasts.”
Advanced Forecasting continues to stand behind its original prediction that growth for worldwide IC revenues to be greater than 30% for 2004.
Founded in 1987, Advanced Forecasting is a leader in forecasting demand for semiconductors, semiconductor equipment and materials industries. Advanced Forecasting uses a purely quantitative forecasting model, a unique and objective viewpoint that is never modified retroactively, thus appealing to high-level executives and industry leaders. It provides the industry's most accurate market forecasts and has acquired, in its eighteen years, a user base of more than 400 companies worldwide.
Contact:
Rosa Luis
Director of Marketing and Sales
rosal@adv-forecast.com
Phone 1.408.725.2964
Toll Free: 1.888.658.3227
