By Mark LaPedus, SemiMD senior editor

The IC market is expected to bounce back in 2012, but capital spending is projected to see a steep double-digit drop this year, according to IC Insights Inc., a market research firm.

Bill McClean, president of IC Insights, predicted that the semiconductor market will hit $343.1 billion in 2012, up 7 percent from 2011. In 2011, the IC market reached $319.5 billion, up 2 percent over 2010, McClean said. “The growth of the IC industry in 2012 is forecast to be highly dependent on GDP growth,” he said during a chip forecast event in Sunnyvale, Calif.

Worldwide GDP is projected to hit 3.4 percent in 2012, compared to 3.3 percent in 2011. Hit by a major debt crisis in select countries, “Europe (is) still the wildcard,” he said. “China and India (are) expected to help drive growth.”

Electronic systems sales are projected to grow 7 percent in 2012, compared to 6 percent in 2011, according to IC Insights. “Good demand is expected for PCs, autos, etc.,” he said.

Capital spending is projected to hit $51.8 billion in 2012, down 16 percent from 2011, he said. In 2011, capital spending reached $61.9 billion, up 15 percent over 2010. The pure-play foundry market is expected to grow by 10 percent in 2012, up from 4 percent in 2011, he said.

In another major trend, flash memory is expected to overtake DRAM in terms of sales for 2012. And the DRAM market is due for another shakeout.

Sky is not falling

Overall, 2012 is expected to be a better year than 2011. “2011 was one of the strangest years that I have ever been involved in,” McClean said during the event. “None of the correlations worked.”

The various correlations or leading indicators – which are used by forecasters to look at the economy – simply fell flat. And there were several market “headwinds” for the worldwide semiconductor market and economy in 2011. For example, the DRAM market was a disaster. Chip inventories swelled. The unrest in the Middle East caused higher oil prices. There was the devastating earthquake in Japan. And there were natural disasters in the United States.

In the early part of 2012, DRAM prices have stabilized to a large degree. Companies that accumulated “inadvertent” IC inventory in the first half of 2011 are burning off their stock piles.

But there were other “headwinds” in 2011 — such as the European debt crisis and the floods in Thailand — which are spilling over into the first part of 2012, McClean said. “The first quarter (of 2012) is not going to be great,” he told SemiMD. “In the second half, we will see a snap back” in demand.

Based on IC Insights’ 7 percent growth forecast, IC sales are expected to fall by 2 percent in the first quarter in 2012, but will grow 5 percent in the second quarter, 11 percent in the third and 4 percent in the fourth, according to the firm.

The fastest growing IC markets in 2012 are expected to be NAND flash (15 percent growth), wireless (15 percent), 32-bit MCU (15 percent), MPU (14 percent), automotive-special purpose logic (11 percent), automotive-application specific analog (11 percent), display drivers (9 percent), PLDs (9 percent), 16-bit MCU (8 percent), wired telecom-special purpose logic (8 percent) and wired telecom-application specific analog (8 percent), according to IC Insights.

The NAND flash market is expected to hit $29.53 billion in 2012, up from $25.791 billion in 2011. Unit ASPs are projected to fall from $3.87 in 2011 to $3.64 in 2012, according to the firm.

The key drivers for NAND are smartphones, tablets, PC SSDs and embedded SSDs. The smartphone business is projected to grow from 475 million units in 2011 to 740 million units in 2012, according to the firm. Tablet PCs are projected to grow from 61 million units in 2011 to 105 million units in 2012, according to IC Insights.

DRAM shakeout

The DRAM market is still soft. The DRAM market is expected to hit $30.3 billion in 2012, down from 3 percent in 2011. In 2011, the DRAM market fell by a whopping 24 percent, according to the firm.

The DRAM market is ripe for more consolidation, according to Brian Matas, an analyst with IC Insights. A consolidation in the vendor base could help firm up average selling prices for DRAMs, he said.

The question is which vendors will be forced out of the business. Japan’s Elpida Memory Inc. is saddled with $6 billion in debt and has suffered losses of some $700 million from April to September of last year, he said.

Elpida is ‘’seeking $500 million in aid from customers,” he said, adding there were reports that Toshiba Corp. would possibly become a white knight for Elpida. Matas believes it’s unlikely Toshiba will buy Elpida, saying Toshiba would not want to step in the cyclical DRAM business.

The Taiwan vendors —ProMOS, Powerchip and Nanya — are also saddled with losses and may have to consolidate or go under. “Many (perhaps all) Taiwanese players will have a very difficult time trying to keep pace with the top group of DRAM suppliers. After investing heavily to bring 50nm — and 40nm — class processes to their 300mm wafer lines, Taiwan‐based suppliers have run short on cash and will have a hard time keeping pace with Samsung, Hynix, Micron, and Elpida when it comes to moving forward to the next process shrink,” according to IC Insights.

“At some point, even these major DRAM suppliers may have to join forces with other companies in order to afford upgrades or all new wafer fabs,” according to the firm.

Tags: DRAM, foundry, IC Insights, memory, Microprocessor

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