The IC industry is expected to grow more than 18% in 2021, according to Malcolm Penn, chairman and CEO of semiconductor industry analysts Future Horizons.
Casting the semiconductor industry as “the cavalry that came in and saved the day,” by enabling social distancing and working from home, Penn argued that last year’s global recession was “more of a train wreck than a meltdown. And the industry stayed strong during this turmoil.”
“We do know that there’s a huge pent-up demand there. People are desperate to go on holiday, people are desperate to buy things with the money they have not spent in 2020.”
Penn predicts that this will lead to IC shortages and rising prices in the second half of the year.
“There’s an IC unit growth spurt in progress at the moment, and by the time we get to the end of the year there’ll be a strain on inventory,” he said. “We can’t even make what we want now so we have no chance of making what we want in the third and fourth quarters of the year.”
Penn bases his industry analysis on four major factors: the global economic outlook; IC unit sales; fab capacity; and average selling prices. All these need to be analysed in the context of an industry that is heavily cyclic, not least because it takes two years to build and commission new capacity, and six months for customers to start receiving chips again once they have cancelled orders.
Penn’s analysis suggests that after a 4.4% reduction in global GDP in 2020, global GDP will grow by 5.5% in 2021, pushing it slightly higher than it was in 2019.
Meanwhile, IC unit demand will continue on its long-term growth trend of 8% per year, IC units/silicon area will maintain its 2% annual growth trend, and a strong corelation between the number of wafers shipped and the number of ICs sold will continue.
On IC production capacity, Penn says that it is sold out everywhere in January, and there’s “no hope” for more to be available in the second half of 2021. This is despite above-average investment in capacity of 15.6% of IC sales in 2020.
“If we’re maxed out now it is because we failed to invest last January,” he said. “The capital expenditure end game is that the dollars you get per square inch of wafer processed is constant, so if you want to increase your sales value you have to invest in capacity.”
Penn says that TSMC plans to invest $28bn this year, and Samsung $30bn, while the overall industry will need to invest $80bn “just keeping pace with the market.”
“There’s no relief for tight capacity until 2022. You just can’t do it,” he added.