Weak dollar will impact semiconductor supply chain markets

NEW TRIPOLI, USA: Since last March, the dollar has weakened considerably, which will have an impact on market share leadership, according to the report “Chemicals And Materials For Sub-100nm IC Manufacturing,” recently published by The Information Network.

Market share leadership in a business sector has strategic benefits for a company. It gives them the opportunity to issue press releases and publish pie charts in their annual reports because customers prefer to buy from them over competitors.

More significantly, it means that customers often come to them for solutions because they are more convinced by leaders. Customers look up to leaders to provide them with decisions and solutions to their needs and wants. In addition, market leadership shows the financial community that the company is worth investing in.

“A weak dollar means that goods sold in dollars are less expensive,” noted Dr. Robert Castellano, president of The Information Network. “Companies with a large portion of foreign sales will benefit as their products are cheaper, providing an impetus to buy more.”

When global market shares are compiled by us analysts, they are typically calculated in dollars. If the product is sold by a foreign company in that country’s currency, it is then converted into dollars to total up market shares. This is usually a challenge because there are a variety of methods that could be used, such as the average conversion rate throughout the year or the conversion rate on December 31.

Either will only give an estimate of dollar revenue. The only accurate way is if a company converts each sale into dollars at the time of purchase. Complicating the conversion are multinational companies who sell in different currencies in each country they have an office.

In the semiconductor equipment and materials sectors, which we analyze, market leaders held razor thin leadership positions in 2008, and exchange rates will play a big part in global positions in 2009.

Shown in the table are 2008 market share differences between the top two leaders in three major chemical and material sectors and two equipment sectors for companies who are US based versus foreign based.Source: The Information Network, USA

The differences were 2.1 percent and less. With the top leaders are in different countries, swings in exchange rates will readily tip the scale.

A weaker dollar will generally benefit US companies in the calculation of global market share because revenues generated in a foreign currency will be converted to fewer dollars.

Based on the strength of the dollar for 2009, we suspect market share leadership in to be held by Air Products, Honeywell Electronic Materials, OM Group, Lam Research, and Applied Materials. In a competitive environment, market share is sometimes also a matter of luck and dependent on customers’ performance. If a customer underperforms and stops buying, it will impact revenues of all its vendors up the supply chain.

Semiconductor equipment bogged down!

NEW TRIPOLI, USA: Rises in the book-to-bill ratio by North American and Japanese semiconductor equipment manufacturers is giving hope that the downturn has bottomed out. BUT HAS IT asks the report: “The Global Market for Equipment and Materials for IC Manufacturing,” recently published by The Information Network.

SEMI reported this week that North America-based manufacturers of semiconductor equipment shipped about $391.9 worth of equipment in May 2009, about 1 percent more than April 2009, but 72 percent less than May 2008.

Japan-based manufacturers of semiconductor equipment registered billings in May 2009 of 39.2 billion yen ($409.7 million). The billings figure is 3.2 percent down from April 2009 and 68.7 percent down the May 2008 billings level.

While North American manufacturers posted a 1 percent increase while the Japanese manufacturers posted a 3.2 percent decrease in billings.

Keep in mind that North American billings numbers are “preliminary” and usually drop when the final figures are published a month ago. March billings were reported in April at $455.3 million and revised down to $438.3 million a month later.

April billings were reported in May at $389.9 million and revised a month later at $385.7 million.

To complicate matters, we are now hearing that a significant amount of capacity is entering the market because of the downturn. Qimonda’s bankruptcy can add 120,000 300mm wafer starts per month in used equipment bought by semiconductor manufacturers.

Add to that equipment from other troubled memory manufacturers such as Powerchip and ProMOS, and a total of 400,000 wafer starts a month are possible. The latest SICAS repot shows that in Q1 2009, 300mm capacity was 433,000 wafers starts per week. So, this excess capacity on the market represents 25 percent of the capacity.

“Our proprietary leading indicators, which determine inflection points in economic activity and which we utilize to show turning points in semiconductor equipment sales have turned positive, indicating that an upturn in equipment sales will begin by October, not now (see below),” noted Dr. Robert N. Castellano, president of The Information Network.

“We have been using these indicators since 2000 and they have proven to be highly quantitative metrics in every forecast we have given, and in nearly every given year we have not had to change our forecast midstream. We do not give forecasts in tenths of percentages only to change them two months later.”

Competition intense in semiconductor chemicals and materials

NEW TRIPOLI, USA: Semiconductor chemicals and materials market leaders are holding onto razor thin leadership positions, and exchange rates can play a big part, according to the report “The Global Market for Equipment and Materials for IC Manufacturing,” recently published by The Information Network.

“Market share differences between the top two leaders in four major chemical and material sectors is less than 2.1 percent,” noted Dr. Robert N. Castellano, president of The Information Network.

“In three out of the four sectors, the top leaders are in different countries, so that swings in exchange rates will readily tip the scale. Coincidently, a strong dollar will make US goods more expensive to foreign purchasers.”Source: The Information Network

Silicon wafer shipments drop in Q1-09

SAN JOSE, USA: Worldwide silicon wafer area shipments declined sharply during the first quarter 2009 when compared to the fourth quarter 2008 area shipments according to the SEMI Silicon Manufacturers Group (SMG) in its quarterly analysis of the silicon wafer industry.

Total silicon wafer area shipments were 940 million square inches during the most recent quarter, a 34 percent decrease from the 1,428 million square inches shipped during the previous quarter. The new quarterly total area shipments are 57 percent below first quarter 2008 shipments and at the lowest levels since 2001.

"Clearly, difficult global economic conditions continued to have an impact on wafer shipments in the first quarter of the year,” said Nobuo Katsuoka, chairman of SEMI SMG and director, SOI process Engineering Department for Shin-Etsu Handotai Co., Ltd. ”However, market conditions recovered after the bottom observed in the January and February period.”

Quarterly Silicon Area Shipment Trends
Semiconductor Silicon Shipments* -- Millions of Square Inches*Shipments are for semiconductor applications only and do not include solar applications
Source: SEMI

Silicon wafers are the fundamental building material for semiconductors, which in turn, are vital components of virtually all electronics goods, including computers, telecommunications products, and consumer electronics.

The highly engineered thin round disks are produced in various diameters (from one inch to 12 inches) and serve as the substrate material on which most semiconductor devices or "chips" are fabricated.

Intel Capital invests in ASM International NV

SANTA CLARA, USA: Intel Capital, Intel's global investment organization, announced an investment in ASM International (ASMI).

Intel Capital’s investment through open market stock purchases is 4 percent of ASMI's total common share capital, based on approximately 54 million common shares outstanding.

ASMI has been at the forefront of delivering materials and equipment innovation to integrated circuit manufacturers worldwide. ASMI’s equipment and materials are used in wafer processing, assembly and packaging of semiconductor devices. Its advanced technologies, which meet key International Technology Roadmap for Semiconductors criteria, are important to extending Moore’s law.

“Equipment and materials innovation is critical to enabling new capabilities in semiconductor device manufacturing,” said Arvind Sodhani, Intel executive vice president and president of Intel Capital. “Our investment in ASMI is part of Intel Capital’s strategy to foster innovation that aligns with Intel’s manufacturing technology roadmap.”