SMU-2009-12 Dec

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FUTURE HORIZONSPresents

The Global

Semiconductor

Monthly Report

December 2009

Q4s Off To A Great Start

Is Plan B In Your Back Pocket?

In This Issue:Executive Overview ...................................................................................... 1

Market Summary ........................................................................................... 5

Industry Capacity ........................................................................................ 10

World Economic Round Up ........................................................................ 15

Russia/CIS Down In The Dumps.............................................................. 20

Economic Case Study Brazil: From Ruin To Reform............................... 22

Market Trends WiMax Mobile, Running Out Of Time?.......................... 25

Semiconductor Spotlight Semiconductor LEDs ....................................... 27

plus Exchange Rate Trends & FH Reports & Upcoming Events

Sign Up Now For IFS2010Future Horizons Annual Industry Forecast Seminar

Jan 26, London, England / Jan 27, Geneva, Switzerland(Visit Our Website www.futurehorizons.com for Further Details & Registration)

Future Horizons Ltd, 44 Bethel Road, Sevenoaks, Kent TN13 3UE, England

Tel: +44 1732 740440 Fax: +44 1732 740442Wholly-Owned Subsidiary In Moscow, Russia. Affiliates In Tokyo, Japan, Israel & San Jose, California, USA

www.futurehorizons.com e-mail: [email protected]

8/14/2019 SMU-2009-12 Dec

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The Global

Semiconductor

Monthly Report

December 2009

A CEO favourite, the Global Semiconductor Monthly Report provides

analysis and commentary on the global semiconductor industry and its impacton 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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your company Intranet but please respect international copyright laws. Site

licence available for only 3,370 p/a. Please email Future Horizons [email protected]. Please call too for pricing in UK or US$.

Copyright 2009 by Future Horizons, Republication Prohibited

The Global Semiconductor Industry Analysts

All rights reserved. No part of this publication may be reproduced, stored in retrieval

systems, or transmitted in any form or by any means (mechanical, electronic,

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securities. This firm and/or its officers, stockholders, or members of their families may,

from time to time, have a position or may sell or buy such. The information contained in

this report has been derived from statistical and other sources deemed to be reliable butits completeness and accuracy cannot be guaranteed. Opinions expressed are based on

our studies and interpretations of available information. They reflect our judgement at

that time and are subject to future change. Whilst the report has been prepared in good

faith, Future Horizons bears no responsibility for any consequences whatsoever aroused

to the buyer through the reading of, or acting upon, any data or information, etc.

contained in the report.

Future Horizonswww.futurehorizons.com [email protected]

In Russia Tel/Fax: East-West Electronics +7 (495) 151 4635; e-mail: [email protected](East-West Electronics is a Wholly-Owned Subsidiary of Future Horizons)

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SMU-2009-12 Dec.doc 2009 Edition

The Global Semiconductor Monthly Report

December 2009

Future Horizons 2009, All Rights Reserved - Reproduction Prohibited 1

Executive Overview

Figure E1 shows the 12/12 worldwide monthly growth rates for IC sales in dollars,

units and ASP for January 1997 to October 2009 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.

October set the fourth quarter off with a blast, with IC units up 9.2 percent versus

the same period last year and a staggering 22.8 percent versus September 2009.

More importantly ASPs were up 5.3 percent versus October 2008, bringing the

October 12:12 growth in value to plus 15.1 percent. This is the first such positive

growth since July 2008. Octobers strength also makes our 3 percent fourth

quarter growth incredibly conservative, with no sign at all of a near-term industry

bust. With industry struggling to keep pace with second half-year demand, there

has been no chance yet for inventories to be replenished after their Q4-08/Q1-09

purge. We are now condemned to enter 2010 with tight fab capacity and no

excess stock. Already device lead times are starting to feel the pinch; no one we

speak to yet believes what the data is saying.

Figure E1 - 12/12 Worldwide IC Monthly Growth Rates

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

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

IC UnitsIC Value

IC ASP

Total IC Units ASP Value

Oct 2009 vs Oct 2008 9.2% 5.3% 15.1%

Oct 2009 vs Sep 2009 22.8% -7.7% 13.4%

Source: WSTS/Future Horizons (Growth rates adjusted for 5-week months)

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December 2009


Figure E2 shows the 12:12 monthly total semiconductor sales trend versus our

2009 forecast. Ignoring the structurally (and typically) wild individual monthly

fluctuations which simply means no single months data is a good indicator of

the underlying trends Octobers result places us safely within our current minus

10 percent 2009 growth estimate.

Having said that, even this revised estimate is now looking too pessimistic given

future monthly 12:12 numbers will be measured against a dynamic whereby the

2009 numbers are trending up whereas the 2008 numbers were trending down,

amplifying the impact of the 2009 positive monthly trends. We are on track for

November to be the month when the monthly 12:12 growth rate breaks back intopositive territory, as predicted in our October 2009 Report (Augusts WSTS data).

Figure E2 2009 12:12 Monthly Forecast Sales Trend

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

Jan 2009

vs Jan

2008

Feb 2009

vs Feb

2008

Mar 2009

vs Mar

2008

Apr 2009

vs Apr

2008

May

2009 vs

May

2008

Jun 2009

vs Jun

2008

Jul 2009

vs Jul

2008

Aug 2009

vs Aug

2008

Sep 2009

vs Sep

2008

Oct 2009

vs Oct

2008

Nov 2009

vs Nov

2008

Dec 2009

vs Dec

2008

2009Growth

-40%

-30%

-20%

-10%

0%

10%

20%

Monthly12:12G

rowthRate

2009 F'Cast Value

Source: WSTS/Future Horizons

Based on Octobers data, it is now very difficult to see anything less than a 20

percent growth year for the semiconductor market in 2010 (our current forecast

still look at plus 22 percent, as reported in last months Report) just based on the

current industry momentum (i.e. a fourth quarter growth of around 6 to 7 percent)

and a very average quarterly growth pattern for 2010. Indeed we are now

starting to see the first industry guidance revisions that tend to indicate even this

range might be low.

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December 2009


For sure the global economic outlook is worryingly fragile and there are many

structural problems remaining largely unresolved. There are also new sources of

volatility to be dealt with but the emerging economies are still in much better

structural shape than the over-indebted rich world and these will continue to grow

at around twice the rate of the established world economies, a structural trend that

first started around 20 or so years ago.

Despite these macro economic concerns and unknowns, the fact of the matter is

whilst there is an obvious link between the chip market and global economic

growth rates this relationship is statistically very weak. The semiconductor

market growth rate can thus fare much better (or for that matter much worse) thanthat of the overall economy due to the fact other factors such as ASPs, under/over

capacity and inventory adjustments play a critical determining role in the overall

market behaviour.

It is also important to remember that the absolute size of the world economy is

still very big similar in size to what it was in 2007 and there was no chip

market bubble preceding the 2009 downturn. Yet no one I have spoken to has any

real confidence in our analyses or the numbers, or for that matter in the longer-

term industry outlook!

This attitude is clearly entrenched in the recent WSTS fall 2009 forecast,

published only a few weeks ago, which calls for a 0.5 percent growth in Q4-09and 12.2 percent growth in 2010. This is also pretty much where the global

industry consensus currently sits. The current reality is very different.

For only 0.5 percent growth in Q4 means a market size of US$62.2 billion. With

October already at US$22.1 billion, November plus December would be only

US$40.2 billion. This means both must be lower than Octobers run rate, which

would indicate the market had already now peaked. There is absolutely no

evidence to support this position; quite the opposite in face, there is every reason

to believe that the market is strengthening, not weakening.

Even if Q4 were 0.5 percent growth, to then have only 12.2 percent growth in

2010 would require a quarterly growth pattern of something like: Q1 = -4 percent /Q2 = +0 percent / Q3 = +8 percent / Q4 = +2.5 percent. This implies a market

collapse in the first half of 2010 followed by a very slow recovery for the second

half of 2010. This too is not what is currently being experienced. There is no

company out there experiencing or forecasting this kind of an outlook.

Even if November and December were flat versus October, Q4 would exhibit 6.4

percent growth over Q3. This now represents the bottom end of the likely range.

In reality the odds are growth will be in the 7 to 8 percent growth.

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December 2009


Ignoring this upside, with Q4-09 at plus 6.4 percent growth, to keep 2010s

growth at the plus 12.2 level would need a 2010 quarterly growth rates of: Q1 = -6

percent / Q2 = -2 percent / Q3 = +5 percent / Q4 = +2 percent a truly

cataclysmic year and something that at this stage is simply not realistic.

Alternatively holding the original 2010 quarterly growth pattern constant but with

a 6.4 percent Q4-2009 increases 2010s growth from 12.2 to 18.8 percent, not a

whole lot different from our 22 percent number, Figure E3.

Figure E3 2010 Growth rate Scenarios

Secnario FH Scenario A FH Scenario B FH Scenario C FH Oct F'Cast WSTS Fall F'Cast WSTS Q4 Impact

Q1-09 44.221 44.221 44.221 44.221 44.221 44.221

Q2 51.711 51.711 51.711 51.711 51.711 51.711

Q3 61.929 61.929 61.929 61.929 61.929 61.929

Q4 63.787 65.025 66.264 65.882 62.238 65.892

2009 221.647 222.886 224.125 223.743 220.099 223.753

Q1-09 -15.3% -15.3% -15.3% -15.3% -15.3% -15.3%

Q2 16.9% 16.9% 16.9% 16.9% 16.9% 16.9%

Q3 19.8% 19.8% 19.8% 19.8% 19.8% 19.8%

Q4 3.0% 5.0% 7.0% 6.4% 0.5% 6.4%

2009 -10.8% -10.3% -9.8% -10.0% -11.5% -10.0%

Q1-10 -2.0% -2.0% -2.0% -2.0% -4.0% -4.0%

Q2 2.0% 2.0% 2.0% 0.0% 0.0% 0.0%

Q3 12.0% 12.0% 12.0% 10.3% 8.0% 8.0%

Q4 3.0% 3.0% 3.0% 2.0% 2.5% 2.5%

2010 22.4% 24.1% 25.7% 22.0% 12.2% 18.8%

Q1-10 62.511 63.725 64.938 64.564 59.749 63.256Q2 63.761 64.999 66.237 64.564 59.749 63.256

Q3 71.412 72.799 74.186 71.214 64.529 68.317

Q4 73.555 74.983 76.411 72.638 66.142 70.025

2010 271.239 276.506 281.772 272.981 250.168 264.855 Source: WSTS/Future Horizons

The chances are 2010 will show much stronger quarterly growth rates than our

current forecast is assuming, especially if prices start to harden during the first half

year due to shortages, increased lead-times and product allocations.

We remain absolutely convinced that the industry has lulled itself into a false

sense of security, which will hold for the first half of 2010 due to the normal firsthalf year seasonal slowdown, only to collapse with a vengeance under the second

half-years strength, by which time it will be impossible to do anything about it.

Only another major economic crisis can now derail the market recovery; in the

absence of such a calamity, the baseline numbers have never looked as strong.

Our New Years message to industry is thus, By all means plan your budget and

operations for a modest growth year but you better have a more aggressive Plan B

in your back pocket. Happy 2010 and a prosperous new decade.

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December 2009


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

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

IC Opto Disc

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

-70%

-50%

-30%

-10%

10%

30%

50%

70%

90%

110%

130%

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

IC Opto Disc

Source: WSTS/Future Horizons

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December 2009


Figure M3 - 12 Month Rolling Worldwide & Europe Sales By Product(Billions Of US$)

M3a - Total WW Semiconductor

12

13

14

15

16

17

18

19

20

21

22

23

Aug

Sep

Oct

Nov

Dec

Jan09

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

M3b - Total Europe Semiconductor

1.8

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

Aug

Sep

Oct

Nov

Dec

Jan09

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Oct 2009 vs Oct 2008 13.8%

Oct 2009 vs Sep 2009 14.9%

Oct 2009 vs Oct 2008 1.7%

Oct 2009 vs Sep 2009 19.1%

M3c - Total WW IC

10

11

12

13

14

15

16

17

18

19

Aug

Sep

Oct

Nov

Dec

Jan09

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

M3d - Total Europe IC

1.6

1.8

2.0

2.2

2.4

2.6

2.8

Aug

Sep

Oct

Nov

Dec

Jan09

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Oct 2009 vs Oct 2008 15.1%

Oct 2009 vs Sep 2009 13.4%

Oct 2009 vs Oct 2008 1.8%

Oct 2009 vs Sep 2009 16.6%


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December 2009


Figure M3 - 12 Month Rolling Worldwide & Europe Sales By Product (Cont)(Billions Of US$)

M3e Total WW Optoelectronics

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

Aug

Sep

Oct

Nov

Dec

Jan09

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

M3f Total Europe Optoelectronics

0.07

0.09

0.11

0.13

0.15

0.17

0.19

0.21

0.23

0.25

Aug

Sep

Oct

Nov

Dec

Jan09

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Oct 2009 vs Oct 2008 7.9%

Oct 2009 vs Sep 2009 25.1%

Oct 2009 vs Oct 2008 -5.5%

Oct 2009 vs Sep 2009 28.3%

M3g Total WW Discretes

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

A

ug

Sep

O

ct

N

ov

D

ec

Ja

n09

Feb

M

ar

A

pr

M

ay

Ju

n

Ju

l

A

ug

Sep

O

ct

M3h Total Europe Discretes

0.18

0.20

0.22

0.24

0.26

0.28

0.30

0.32

0.34

0.36

0.38

0.40

A

ug

S

ep

O

ct

N

ov

D

ec

Jan09

F

eb

M

ar

A

pr

M

ay

Jun

Jul

A

ug

S

ep

O

ct

Oct 2009 vs Oct 2008 7.7%

Oct 2009 vs Sep 2009 21.9%

Oct 2009 vs Oct 2008 6.4%

Oct 2009 vs Sep 2009 32.6%


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December 2009


Figure M4 - 12 Month Rolling Worldwide Unit Sales & ASPs By Product(Units In Billions & ASP In US$ Dollars)

M4a Total Semiconductor Units

28

30

32

34

36

38

40

42

44

46

48

50

52

Aug

Sep

Oct

Nov

Dec

Jan09

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

M4b Total Semiconductor ASP

0.38

0.39

0.40

0.41

0.42

0.43

0.44

0.45

0.46

0.47

0.48

Aug

Sep

Oct

Nov

Dec

Jan09

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Oct 2009 vs Oct 2008 14.6%

Oct 2009 vs Sep 2009 20.8%

Oct 2009 vs Oct 2008 -0.7%

Oct 2009 vs Sep 2009 -4.9%

M4c Total IC Units

7

8

9

10

11

12

13

14

15

A

ug

Sep

O

ct

N

ov

D

ec

Ja

n09

Feb

M

ar

A

pr

M

ay

Ju

n

Ju

l

A

ug

Sep

O

ct

M4d Total IC ASP

1.20

1.25

1.30

1.35

1.40

1.45

A

ug

S

ep

O

ct

N

ov

D

ec

Jan09

F

eb

M

ar

A

pr

M

ay

Jun

Jul

A

ug

S

ep

O

ct

Oct 2009 vs Oct 2008 9.2%

Oct 2009 vs Sep 2009 22.8%

Oct 2009 vs Oct 2008 5.3%

Oct 2009 vs Sep 2009 -7.7%


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December 2009


Figure M4 - 12 Month Rolling Worldwide Unit Sales & ASPs By Product (Cont)(Units In Billions & ASP In US$ Dollars)

M4e - Total Optoelectronics Units

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

Aug

Sep

Oct

Nov

Dec

Jan09

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

M4f - Total Optoelectronics ASP

0.16

0.17

0.18

0.19

0.20

0.21

0.22

0.23

0.24

Aug

Sep

Oct

Nov

Dec

Jan09

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Oct 2009 vs Oct 2008 29.7%

Oct 2009 vs Sep 2009 28.7%

Oct 2009 vs Oct 2008 -16.9%

Oct 2009 vs Sep 2009 -3.0%

M4g - Total Discretes Units

12

14

16

18

20

22

24

26

28

30

A

ug

Sep

O

ct

N

ov

D

ec

Ja

n09

Feb

M

ar

A

pr

M

ay

Ju

n

Ju

l

A

ug

Sep

O

ct

M4h - Total Discretes ASP

0.055

0.060

0.065

0.070

0.075

0.080

0.085

A

ug

S

ep

O

ct

N

ov

D

ec

Jan09

F

eb

M

ar

A

pr

M

ay

Jun

Jul

A

ug

S

ep

O

ct

Oct 2009 vs Oct 2008 13.4%

Oct 2009 vs Sep 2009 17.7%

Oct 2009 vs Oct 2008 -5.0%

Oct 2009 vs Sep 2009 3.6%


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December 2009


Industry Capacity

Overall MOS wafer fab capacity decreased a further 0.7 percent in Q3 versus Q2-

09, from 1890k 200mm equivalent wafer starts per week to 1877k, Figure C1.

Only 300mm leading edge capacity showed any increase in the quarter, at around

6.7 percent growth, Table C1 and Figures C2 and C3. These cutbacks add to the

previous quarters 2.7 percent decline and compared with a 1.1 percent quarterly

growth this time last year.

Whilst some of the decline can be attributed to closing of older lines due to the

recession, new lines were also affected as a direct result of the deliberate

slowdown in capital expenditure that began mid-2007 before the recession started

is now really starting to bite. Overall MOS capacity is now on a par with where it

was in the first half of 2007.

Figure C1 - MOS Wafer Fab Capacity By Feature Size(200mm Equ Wafer Starts/Week x000)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

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

200mmEquWSpWx

100

0.7m & A bo ve < 0.7m t o 0.4m < 0.4m t o 0.3m < 0.3m t o 0.2m

< 0.2m to 0.16m < 0.16m to 0.12m < 0.12m to 0.08m < 0.08m

Table C1 Q3-09 vs Q2-09 Wafer Fab Capacity Increase By Wafer SizeWafer Technology wsw (k) Q3 vs Q2

Total MOS -12.8 -0.7%

200mm Wafers in MOS Total -12.9 -1.9%

300mm Wafers In MOS Total 64.1 6.7%

150mm & Below Wafers in MOS Total -64.0 -25.4%

BIPOLAR (5 inch equivalents) -21.1 -14.2%

TOTAL IC's (8 inch equivalents) -21.1 -1.1%

Source: SICAS/Future Horizons

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December 2009


Figure C2 - MOS Wafer Fab Capacity By Wafer Size(200mm Equ Wafer Starts/Week x000)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

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

150mm & Under 200mm 300mm


Figure C3 - MOS Wafer Fab Mix By Feature Size(200mm Equ Wafer Starts/Week x000)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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

200mmEquWSpWx1000

0.7m & Above < 0.7m to 0.4m < 0.4m to 0.3m < 0.3m to 0.2m< 0.2m to 0.16m < 0.16m t o 0.12m < 0.12m to 0.08m < 0.08m


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December 2009


At 644.8k wafer starts per week, Q3-09 200mm capacity continued its absolute

value decline, from 679.7k in Q2-09, a fall of 1.9 percent. 200mm capacity is

now down 21.1 percent versus the same period last year.

300mm wafers now account for 54.5 percent of the total MOS capacity, up from

50.7 percent in Q2-09 and 47.6 percent from the same period last year. 300mm

wafers now account for over half the total capacity, with 200mm in second place

at 35.5 percent, down from 36.0 percent in Q2-09 and 39.4 percent in Q3-08.

Advanced capacity (i.e. 0.08 micron and below) grew 6.1 percent or 55.9k 200mm

equivalent wafer starts per week, Figure C4, similar to last years equivalent 7.7

percent growth.

Figure C4 - MOS Wafer Fab Life Cycle By Feature Size(200mm Equ Wafer Starts/Week x000)

0

200

400

600

800

1000

1200

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

0.7m & Above < 0.7m to 0.4m < 0.4m to 0.3m < 0.3m to 0.2m

< 0.2m t o 0.16m < 0.16m to 0.12m < 0.12m to 0.08m < 0.08m


As predicted in our Q1-09 capacity review (June 2009 Report), due to the capacity

cutbacks and recovering IC demand, total MOS IC Q3-09 utilisation rates

continued their Q2-09 bounce back reaching 87.0 percent, Figure C5. The

comparable figure for Q3-08 was 87.5 percent. Advanced IC capacity, i.e. 0.08

micron and below, also rebounded reaching 94.2 percent (from 90.2 percent in

Q2-09), Figure C6, whilst 300mm and 200mm wafers checked in at 96.1 percent

(Q2 = 91.9 percent) and 80.2 percent (Q2 = 72.3 percent) respectively, Figure C7.

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December 2009


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

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

1Q-99

1Q-00

1Q-01

1Q-02

1Q-03

1Q-04

1Q-05

1Q-06

1Q-07

1Q-08

1Q-09

200mmW

aferStarts/Week

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

Utilisation

Total MOS Capacity Uti li sati on %


Figure C6 - Advanced MOS Wafer Fab Capacity Utilisation(Percent Of Total)

100

200

300

400

500

600

700

800

900

1,000

1,100

1Q-99

1Q-00

1Q-01

1Q-02

1Q-03

1Q-04

1Q-05

1Q-06

1Q-07

1Q-08

1Q-09

200mmWa

ferStarts/Week

65%

70%

75%

80%

85%

90%

95%

100%

Utilisation

A dv an ced MOS Cap acit y Utilis at io n %


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December 2009


Figure C7 - MOS 200mm & 300mmWafer Fab Capacity Utilisation(Percent Of Total)

40%

50%

60%

70%

80%

90%

100%

1Q-99

1Q-00

1Q-01

1Q-02

1Q-03

1Q-04

1Q-05

1Q-06

1Q-07

1Q-08

1Q-09

200mm Utilisation % 300mm Utilisation % Full Capacity


As already mentioned, the fall in Q4-08/Q1-09 utilisation rates was the result of

the massive order cancellations and demand collapse triggered by the September

2008 Lehman Bros collapse and was much faster and deeper than the 2001 dot-

com driven recession. The Q2/Q3-09 bounce back reflected the start of the

inevitable correction from this massive over-reaction, aided and abetted by a

fundamental lack of overall capacity.

Given the significant cutbacks in cap ex since mid-2007, we expect to see

utilisation rates remain at these levels throughout the first half of 2010, tightening

still further during the second half of the year. For utilisation rates to be so high atthe beginning of the recovery cycle has no historic precedent.

2009s Cap Ex spend remains at ludicrously low levels with no significant

increase anticipated until mid-2010. That means capacity will be tight through at

least mid-2011. We have said it before and we say it again. There will not be

enough 2010 capacity in place to meet demand, 2011 will be even worse this is

a serious fab shortage about to happen. It will kill the fashionable - but

fundamentally flawed - fab lite strategy stone dead.

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December 2009


World Economic Round Up

World Economy

The worlds developed economies emerged from recession in the third quarter.

The Organisation for Economic Co-operation and Development (OECD) says

growth and recovery are expected in 2010 in just about all world regions. For its

30 member countries, rich nations including the US and UK, it has more than

doubled its growth forecast to 1.9 percent for the next year, from 0.7 percent.

However, the OECD warns progress will not be a smooth ride.

The main danger for economic recovery among rich nations is highunemployment. Experts predict unemployment may continue to rise within the

European Union until 2011, whilst in America it is only slightly better news with

people predicted to lose their jobs at a faster rate than they are created until

sometime in the first part of 2010. The OECD has warned governments reducing

stimulus too early may be costly later.

However, there is a very different outlook for emerging nations; Asia is leading

the recovery with India boasting a GDP of 7.9 percent. Brazil and South Korea

are set to rebound and expand by 5 and 4.5 percent in 2010. The International

Monetary Fund (IMF) has urged the world to mitigate flaws in the dollar-based

global monetary system by reducing demand for dollar reserves and exploringalternative reserve assets.

There is an international call for China to appreciate the Renminbi. China has

kept the currency stable since summer 2008 but its link to the falling dollar has

left it acutely undervalued giving Chinas export sector an unfair trade advantage.

Long dated oil prices have risen to near US$100 a barrel in a sign that investors

expect high prices to return after the recession.

Lastly, worldwide investors have been left on edge following Dubais

announcement that its state-controlled holding company Dubai World would need

a six-month moratorium on its debt payments.

UK

The UK is the last G20 nation still in recession with the economy having

contracted for six consecutive months. Experts predict the economy will grow by

2.1 percent in 2010 and 4 percent in 2011. The Bank of England (BoE) forecast

growth to be slow hindered by weak bank lending and the governments need to

slash spending. October saw inflation rise to 1.5 percent. Inflation is predicted to

hit its 2 percent target, and growth will return in the medium term, signalling the

economy is ready to be weaned off its stimulus.

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December 2009


At the end of October, public sector net debt stood at 829.7 billion. This jump in

inflation allowed the sterling to hit a two-month high vs euro. House prices are

currently rising at their fastest rate since 2006 and the number of mortgage

approvals rose for the 11th month in a row. In October, new car sales recorded

their biggest increase so far this year, helped by the car scrappage scheme.

Unemployment is still rising, although at a slower rate. There are now 2.46

million people without a job in the UK. Youth unemployment rose to 19.8

percent, a record high and 1.64 million claimed unemployment benefit in October.

Local authorities in Englands most deprived areas have been given 40 million in

attempt to tackle unemployment. Consumer borrowing through bank loans andhire purchase fell in October, signalling people are paying off loans rather than

saving during a time when interest rates are low.

Growth in British manufacturing activity slowed unexpectedly in November

leaving question marks over the longer-term outlook and the possibility of a

double-dip recession. However the Purchasing Managers Index for the service

sector rose in October to the highest level since before the credit crunch began.

Retail sales rose 5.9 percent in October compared to a year earlier. Interest rates

will be kept at the record low of 0.5 percent.

North America

The US economy grew at a seasonally adjusted 3.5 percent annual rate in the third

quarter from the previous quarter. Growth is expected in the fourth quarter at 3.1

percent but economists believe high unemployment, insignificant wage rises,

weak job growth and low consumer spending will make the US recovery weak

and erratic. Unemployment hit a record high in October at 10.2 percent, its

highest since 1983. The rate fell back to 10 percent in November as the economy

shed the fewest jobs since the recession started two years ago.

However the US has a long way to go before they start growing jobs and getting

Americans back to work. The Federal Reserve (Fed) affirmed its plan to keep

interest rates low for an extended period and purchase mortgage backed

securities in order to spur growth. The rest of the world are challenging these policies warning that the zero-percent fed-funds rate were flooding Asia with

excess dollars, causing asset bubbles and undercutting global growth.

Meanwhile October saw new home sales unexpectedly climb. Sales of single-

family homes increased 6.2 percent and consumer spending, a key growth

indicator, bounced back to rise 0.7 percent. Added to this, unemployment benefits

declined by 35,000 to 466,000 in November, which was the lowest claim figure

since September 2008. In a sign that the economy remains sluggish, demand for

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December 2009


long-lasting goods unexpectedly fell in October and a barometer of capital

spending by businesses tumbled. Manufacturers orders for durable goods

decreased 0.6 percent along with demand for military goods.

The US has regularly expressed their desire for a strong dollar but it seems they

are doing nothing to arrest its slide. The dollar is likely to remain weak and

economists believe that if the value of the dollar was raised, the Fed would also

need to raise rates, thereby increasing the return investors get on dollar assets.

However, that could hurt the economys recovery, which is threatened by

weakness in the labour market and tight bank lending.

Europe

The Eurozone economy has emerged from recession after a modest growth of 0.4

percent between July and September (third quarter), marking an end to five

quarters of recession. Recovery will be slow with expansion predicted at just 1

percent in 2010. Powering the rebound are Germany and Italy, who saw GDP rise

by 0.7 percent and 0.6 percent respectively. Austria and Slovakia also emerged

from recession in the third quarter but France and Germany grew by less than

expected.

Rising unemployment, the end of government stimulus measures and the strong

euro are set to weigh on Europes recovery in 2010, although it is unlikely they

will fall back into recession immediately. The Eurozone recovery out of recession

will be patchy, for example the UK is on track to shrink 4.6 percent this year and

expected to grow 0.9 percent in 2010 and again 1.9 percent in 2011 outpacing the

Eurozone, whilst countries such as Spain and Ireland are forecast to remain in

recession until 2011.

Eurozone industrial production rose 0.3 percent in the third quarter, although

lower than expected it still points to strong production gains overall. Industry

experts warn unemployment in the Eurozone may continue to increase after the

economy recovers. Brussels have called for 13 members of the European Union

to get their budget deficits back in line. EU requirements mean they should not

have exceeded 3 percent of GDP, however since the financial crises mostcountries have broken this rule.

The euro climbed past US$1.51 in November with economists warning that this

could cause exports to suffer, especially if demand outside the currency zone

softens as expected. The European Central Bank are keeping Interest rates at 1

percent. Inflation appears to be settling at around an annual 0.5 percent in the near

term, but experts believe it will rise in 2010.

India

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Indias economy grew at a faster-than-expected rate of 7.9 percent in the three

months to September (the predicted rate was 6.3 percent), compared to the same

period last year. The growth was helped by government stimulus spending, a

boost in manufacturing, services and agriculture output. However this does not

take into account the poor monsoon season. This growth will allow India to ease

back on its stimulus efforts in 2010.

Octobers inflation rate was 1.34 percent and experts believe it will climb to 6.5

percent by March 2010. Due to the droughts, prices of food have climbed and

prices of manufactured goods have inched up as the global economy has found its

footing. India has cut its interest rates to 4.75 percent in the last year, keepingIndias factories and mines busy as the low interest rates and stimulus packages

have stirred demand for automobiles, steel and cement. Exports have pulled out

of their slump and overseas investors-drawn by Indias strong economic

fundamentals have poured billions into the countrys stock market.

Japan

Japans economy rebounded in the third quarter by 1.2 percent in the three months

from July to September. The growth was fuelled by government stimulus

measures and exports to their rapidly growing Asian neighbours. Stimulus

measures were credited with lifting consumer spending and capital spending rose

but analysts say growth will slow as wages stay low and jobs remain scarce.

Japanese companies capital expenditure fell at a faster than expected rate of 24.8

per cent from a year earlier in the quarter ending September. A rising yen and

signs of deflation prompted managers to hold off on new investment. This is

predicted to cut Gross Domestic Product (GDP) from its previous 4.8 percent

figure. Deflation tends to weigh on capital spending and Japans financial

minister has commented that deflation is getting very severe. During the third

quarter, the domestic demand deflator (a measure of changes in prices of good and

services except exports and imports) fell 2.6 percent, its fastest pace since 1958.

Japan has a history of struggling with deflation; the 1990s is referred to as

Japans Lost Decade because of its ten year struggle with deflation. This returnof deflation, the first time since 1996, will dampen confidence. Japan has agreed

to a 7.2 trillion yen (US$81 billion) stimulus plan to prevent the countrys

economy slipping back into recession and combating deflation.

Yet many economists are sceptical whether the stimulus package will be effective

in doing so. The yen recently hit a 14 year high against the dollar, making

Japanese exports more expensive in the US and global markets. The Bank of

Japan (BoJ) kept interest rates unchanged at 0.1 percent.

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China

Chinas economy is ending the year on a strong note laying the foundations for a

solid expansion in 2010. They have largely recovered from the global downturn

thanks to aggressive pro-growth measures adopted a year ago. Economists believe

China is on track to reach the forecasted 11 percent Gross Domestic Product

growth.

Manufacturing is gaining greater steam and experts predict Chinese domestic

product to grow by more than 10 percent this quarter compared with a year earlier.

Although exports were down 13.8 percent in October from a year earlier, this was

a smaller decline than the 15.2 percent in September. Economists predict exportswill increase further in December and expand more than 8 percent in 2010.

There is also good news for the employment market and November 2009 figures

show employers demand for workers rising 14.2 percent in the third quarter from

a year earlier, the first increase after four straight quarters of decline. Economic

data also suggests that industrial production grew year on year at a level faster

than expected. Retail sales also rose by more than analysts had predicted, while

consumer prices continued to fall.

China needs to concentrate on boosting domestic demand for products its factories

manufacture, as it is unlikely to be able to rely on US consumers in the years

ahead in the same way it could before the financial crises. Finally, there is

pressure on China from the US, Europe and the IMF to allow its currency to

strengthen as a way to get Beijing to boost domestic demand and to rely less on

exports, they argue such rebalancing is necessary to produce more sustainable

global growth.

Asia Pacific

Rising inflation is posing a threat to South Asia. In the third quarter of 2009,

inflation in South Asia, comprising of India, Pakistan, Nepal, Bangladesh,

Afghanistan, Sri Lanka, Bhutan and Maldives, hit an average 10.9 percent

compared to just 2.9 percent in Latin America and the Caribbean. It appears thesituation is most worrying in the Maldives where a foreign currency black market

has emerged and their budget deficit is predicted to be 33 percent by the end of the

year. Indias economic stability and growth will be hampered by its widening

budget deficits.

Dubai who placed itself as a trading and tourism hub with global ambitions has

said it would have to delay repaying some of its debt, asking creditors of the state-

owned Dubai World and Nakheel to agree to a standstill on billions of dollars of

debt as a first step towards restructuring.

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December 2009


The result was the Dubai main stock markets falling at least 7 percent, a decrease

in both Asias and Europes share markets and the biggest underlying fear is that

Dubais problems could reignite the financial turmoil of the credit crisis. That

would lower global demand for a whole range of commodities, including oil.

On a more positive note, Singapore has declared its recession over after two

straight quarters of growth. Singapores economic outlook for 2010 will be

closely linked to global conditions.

Russia/CIS Down In The DumpsThe ex-communist economies have not collapsed, but finding new ways to catch

up with the West will prove difficult. Even at the height of the ex-communist

countries boom in 2006, almost half of their citizens felt that living conditions

were worse than in 1989. Despite this, the glum verdict on 17 years of

liberalisation, privatisation and stabilisation was tempered by another finding.

Most of those polled by the World Bank and European Bank for Reconstruction

and Development (EBRD) said they were optimistic about their childrens

prospects.

The worry is, that the global economic crisis has dented confidence in the future

and intensified gloom about the present. Fast growth eased dissatisfaction withcorrupt politicians and bossy bureaucrats but at least it offered the chance of better

health care and education, which lags far behind western standards. The average

decline in Gross Domestic Profit (GDP) during 2009 is a huge 6.2 percent and

recovery is expected to be slow. East Europeans face higher taxes, bigger debts,

less public spending, lower pay and fewer jobs. They do not have the same shock

absorbers as in the west - which is where, in the eyes of many, the crisis

originated.

That could prove a toxic mix, yet so far the fallout has been limited. After initial

hesitation, support from the European Union, the IMF and other lenders was

unprecedented in size, scope and speed. Tens of billions of dollars of outsidersmoney staved off a catastrophe and so far, no currencies have collapsed; no

country has defaulted; no banks have faced runs or been cut adrift by foreign

owners. Politicians preaching protection, state control or other charlatanism have

remained on the fringes. In its latest annual transition report, the EBRD says

reform has largely stalled, but not reversed. In countries such as Latvia and

Hungary, governments have shown a masochistic delight in following IMF

prescriptions for fiscal tightening, even at the cost of likely electoral oblivion.

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It makes little sense to talk of the ex-communist countries as a single region.

Resource-dependent economies such as Russia and Kazakhstan have one set of

problems, such as diversifying and spending export revenues wisely. Open

manufacturing economies such as Hungary and Estonia have another, chiefly,

maintaining competitiveness. Poland, bolstered by strong domestic demand, will

be the only economy in the EU to grow during 2009, although the worry here is its

rising public debt. Two ex-communist countries, Slovenia and Slovakia, have

already adopted the euro and Estonia may be next. Countries to the east and south

tend to be poorer, more miserable and not as well run.

For those in, or close to the EU, growth came from strong exports of goods andservices and big inflows of capital. The net effect was beneficial but the

disadvantages are now apparent with heavy dependence on single industries, e.g,

cars in Slovakia, and on west European demand. Foreign capital inflows may

have been too big or too quick, leading to a consumption and construction splurge,

which then fuelled reckless lending to firms and households, often in foreign

currencies. Inflows of money from abroad have fallen dramatically, or in some

cases even reversed. The volume of syndicated loans going to the region has

fallen to roughly a sixth of the pre-crisis level. Restarting these capital flows is a

high priority - preferably with more prudent rules for the credit market.

Running alongside this problem is another, which is finding a way to share the

pain of restructuring private-sector debts among governments, borrowers and

bankers. Dealing with the product of past excesses causes policymakers much

thought searching. Debt overhangs of over 100 percent of GDP in some countries

will curb growth in future years, which will hurt everyone.

Outside support has headed off a vicious circle of falling exchange rates, lower

investor confidence and failing banks, although that may still loom in Ukraine,

where vote-hungry politicians have just shredded a deal with the IMF. Many

states face another grim outcome, years of low growth caused by uncompetitive

exchange rates and sluggish productivity. That is what happened to Portugal after

it joined the euro in 1999. For ex-communist countries in the euro, pegged to it or

hoping to adopt it soon, the Portuguese example merits careful study.

The ex-communist economies competitive advantage may have reduced, but it is

still a big asset. Cutting costs in Western Europe may produce more outsourcing

to the east but some also hope to find new niches based on brainpower and

creativity, while also making their countries work better. According to the EBRD,

four areas stand out.

Firstly will be improving the legal system. Slow and unpredictable justice is a

turn-off for foreign investors worried about contracts and property rights.

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December 2009


Secondly, better regulation. Despite improvements from EU membership,

businesses still battle with profit-choking red tape. Thirdly there would be a better

social safety net. A feeling that life is unfair and precarious sharpens the divide

between winners and losers and risks political upsets. Fourthly is competition.

Informal barriers to entry and old networks of communist-era pals still keep bits of

the economy off limits to outsiders, at huge cost to efficiency.

Getting state institutions to function better is easier to discuss than to accomplish.

It has long been clear that intangible factors to do with national culture and levels

of social trust play a bigger role than explicit rules in ex-communist countries

fortunes. The EBRD highlights values, attitudes and practices in determiningwhat constitutes acceptable behaviour within a firm or by government officials.

Economics offers little guide to this.

Economic Case Study Brazil: From Ruin To Reform

Brazil is the largest national economy in Latin America and is the largest country

by geographical area, occupying nearly half of South America. It is the fifth most

populated country in the world (192 million) and has the worlds tenth largest

economy at market exchange rates and the ninth largest in Purchasing Power

Parity (PPP) which reflects the purchasing power of the same currency in differentcountries.

Although Brazil is a developing country it offers great opportunities for

investment, partnerships and commerce. Like most growing countries it naturally

faces difficulties, yet economists believe that providing it is able to hold its current

position of economic stability, it has the potential to become one of the worlds

five biggest economies by the middle of the century.

There is no denying Brazil has had its fair share of problems in the past. 1825 saw

Brazil become independent from Portugal bringing in a sudden flood of

manufacturers who intended to take advantage of this emerging market. Despite

this influx, real income per person remained stagnant throughout the 19th century.

The early 20th century did not prove to be any more fruitful. Inflation hit 2,489

percent in 1993, productivity growth went into reverse, and the country was left

with huge foreign debt. Crime therefore increased causing Brazil to be likened to

Nigeria.

The turnaround for Brazil came in 1994 with the Finance Minister, Mr Cardoso,

introducing a new currency, the Real. Within just one year the Real had curbed

price rises. 1999 saw the abandonment of the exchange-rate peg and the currency

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December 2009


was allowed to float, allowing the central bank to concentrate on managing

inflation.

These reforms also brought about discipline to the governments finances, forcing

them to live within their means. It allowed them to pay off the majority of their

dollar-denominated foreign debt that caused instability every time the economy

wobbled. Inflation has always, and still is to an extent, been Brazils biggest

problem, however in 2006 they saw GDP outpace inflation for the first time in

over 50 years.

Despite the global economic melt down, Brazil has many good things going for it.

Fernando Henrique Cardosos reign from 1995-2003, created a stable and predictable macroeconomic environment in which business could flourish. New

President Luiz Incio Lula de Silva has kept these reforms whilst adding some of

this own. Whilst the rest of the world was on the brink of collapse, Brazil was

able to cut interest rates and inject money into the economy. The economy shrank

for only two quarters and is now growing again, and Foreign Direct Investment

(FDI) is 30 percent up on the year before compared to 14 percent in other global

countries.

Exports are also booming, creating a new generation of tycoons. Major export

products range from sophisticated aircraft to coffee, and from to steel to corned

beef. The country has been expanding its presence in international financial andcommodities markets, and is regarded as one of the group of four emerging

economies called BRIC (Brazil, Russia, India and China). The biggest investment

boom in history is under way. In 2007 Brazil launched a four year plan to spend

US$300 billion to modernise its road network, power plants and ports, which will

help make future importing and exporting easier. In 2007 Brazil discovered a

large amount of offshore oil, likely to make them a big oil exporter by the end of

next decade.

Today Brazil has a well-developed organisation of science and technology. They

have both public and private research institutes allowing Brazil to become

involved in some very interesting projects e.g. plans are in the pipeline to build thecountrys first nuclear submarine. Brazil has become a research hub to companies

such as Motorola, Samsung, Nokia and IBM, who have all built large R&D

centres there.

Brazils relatively low costs and highly sophisticated skills of technical manpower

are indeed an attraction to setting up Research & Development and Investment.

More significantly is the Informatics Law, which exempts companies from certain

taxes of up to five percent of the gross revenue of high technology manufacturing

companies in the fields of telecommunications, computers and digital electronics.

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With global warming high on the worlds agenda, Brazil has the opportunity to

become a large ethanol supplier to developed countries who are looking for

alternative forms of fuel to reduce pollution. Brazil is currently producing dual

energy vehicles running on petrol or alcohol, or even a mixture of both. This

market is forecast to grow rapidly in the next few years, and Brazil more than any

other country, has exceptional conditions to become a large world supplier, as it

can make use of available land and highly developed technology in the sector.

Conversely, social and economic problems prevent Brazil from becoming an

effective global power. Despite its recent success in exporting, Brazil still views

free trade with suspicion. Its faith in Government intervention in business is high,even if it gets in the way of profit making and creating jobs. They are constantly

plagued by high interest rates and have a disinclination to save.

The volatile decades, which followed the 1970s oil shock, are still seen today in

the form of crime, poor education and health care and a dysfunctional legal

system. Interest rates are currently 8.75 percent, a rate higher than anywhere in

the world. Productivity growth is slow and if the government wants a long-term

loan in its own currency, it still has to link its bonds to inflation, making debt

expensive to service.

Other challenges include:

Brazils size usually requires exporters to develop a regional strategy

There are additional Brazil costs i.e. a Merchant Marine tax of 25 percent of

international freight

Poor infrastructure

Customs clearance in Brazil can be very time consuming

Despite these challenges, Brazil has made real progress. Regardless of being

criticised for having the highest global interest rates, rates have actually fallen

from an average of 764 percent between 1990-1995 to below 9 percent in 2009.

There is still a lot to be accomplished in terms of infrastructure, decreasingdeprivation and consistent government investment in policing and education.

Yet, Brazil presents unlimited business opportunities for domestic and foreign

investors. It has enormous economic potential, a diverse economy, and a huge

domestic market. Its natural commodities such as its large tropical forests, the

worlds biggest freshwater supply and extremely fertile land, all help to place

Brazil as one of the principal emerging countries to attract foreign direct

investment.

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Market Trends - WiMax Mobile, Running Out Of Time?

Mobile Wireless data access is already with us in the form of mobile, or cellular,

phones. Higher speed access is available using EDGE, W-CDMA and

developments of CDMA2000 1x. 3G has been evolving with higher data rates

available from High-Speed Download Packet Access (HSDPA) and High-Speed

Uplink Packet Access (HSUPA) was available in some areas during 2008 with

increasing availability in 2009. Further developments in the pipeline include LTE

and 4G, which will further increase bandwidth. These mobile phone based

technologies offer competition to WiMAX in the mobile broadband arena as

opposed to fixed line broadband replacement options.

WiMAX was originally designed for fixed wireless access and is based around a

new standard IEEE 802.16, it is also known as the WirelessMAN air interface.

This technology is to be used in the last mile in a Metropolitan Area Network

(MAN), and will deliver wireless performance comparable to cable, DSL and T1

wired connections. IEEE 802.16 is one of a hierarchy of standards that has been

created by the IEEE for the interoperability of wireless systems, Figure A1.

Uncertainty still remains on the suitability of WiMAX as a mobile technology.

Mobile radio technologies such as WDMA-HSDPA, LTE, CDMA EVDO,

IEEE802.20 or improved wireless LANs such as IEEE802.11n (in buildings) may

well give good broadband access and better mobility, Table A1.

Table A1 Wireless Mobile Broadband Technology ComparisonWiFi (N) WiMAX CDMA-HSDPA & EV-DO LTE

Data Throughput* 140 Mbits/second 20 Mbits/second 14 Mbits/second 50 Mbits/second

Rollout 2008-2011 2007-2012 2007-2010 2010-2014

Spectrum Unlicensed Licensed and Unlicensed Licensed Licensed

Voice Use

Medium (except

with QOS) Good with QOS

Good (medium using

packet)

Good (medium using

packet)

Deployment Cost Low near fixed lines Medium High High

Subscript ion Yes by use and flat Yes by use and flat fee Yes by use and flat fee Yes by use and f lat fee

Availability

Limited range from

base-station

Kilometres f rom

basestation

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Figure A1 Introduction of WiMAX into 4G Plans

Source: PicoChip/Future Horizons

Despite WiMAX infrastructure roll-out in South Korea, India, and the Middle

East, there has been delay following delay in the USA. The last but one delay was

instrumental in the US Sprint/Clearwire partnership breakup.

In other areas, such as in Europe, other projects are underway including the

PIPE/.Freedom4 rollout in the UK but with very sparse coverage compared to

other mobile broadband solutions. There are also concerns that there is little

spectrum available in Europe for additional mobile allocation. WiMAX

equipment suppliers including Alcatel Lucent and Samsung have had more

success in the Far East (Korea, Japan, Taiwan, and Vietnam) and Africa rather

than in Europe and the USA.

Any delays in WiMAX deployment leaves a gap to be filled by improvements to

existing mobile broadband technology. Deployments of HSDPA are well

underway and it looks like LTE will be following closely on its heels during 2010.

The main argument for mobile WiMAX is that it would be cheaper and easier to

deploy. This has not proved to be true at least for deployment worldwide.

Spectrum is also needed for any mobile broadband technology (licensed or

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unlicensed) and there is little sign of many incumbent mobile operators with

available spectrum taking up the WiMAX option.

However, WiMAX is not yet dead despite these negative signs and we expect

WiMAX to grow through the next five years even though the next eighteen

months will be a testing time for this technology. Figure A2 shows the Future

Horizons unit production forecast for WiMAX consumer access boxes from 2004

to 2013. Production depends on increasing deployment by mobile operator

incumbents as well as new entrants to the mobile telecommunications business.

The economic downturn seen in 2008 and 2009 will delay higher growth till 2010.

Figure A2 Worldwide WiMAX Consumer Box Production, 2004-2013(Millions of Units)

0

5

10

15

20

25

30

35

40

45

50

WiMAX Cons Box M.Units 0.35 0.55 1.20 1.55 3.10 4.65 9.30 16.12 29.01 44.96

2004 2005 2006 2007 2008 2009F 2010F 2011F 2012F 2013F

Source: Future Horizons

Semiconductor Spotlight - Semiconductor LEDs

LEDs have now become commonplace in backlighting for notebook PCs and TVs

replacing fluorescent backlighting in many cases. The use of these has grown from

about 8 percent to an estimated 29 percent this year. The popularity of the smaller

netbooks with smaller screens has been a key factor. LED use will spread to

larger screen formats and will represent the majority of backlight in these

applications during early 2012.

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December 2009


In addition to these applications other LED lighting applications have also been

growing, especially in the last two years. As a response to this demand, Cree has

upped production capacity and staff this year. Other companies involved in LED

production include SemiLEDS, Philips Lumileds in Europe and Seol

Semiconductor of Korea.

LED lamps are now available that can replace incandescent or even fluorescent

lighting in some cases. It is already seen in flashlights, decorative lighting, traffic

lights, supermarket shelf lighting, automotive lighting and architectural displays.

Daytime Running Lights (DRLs) are likely to be more widely adopted by the

automotive industry. Canada and Scandinavia have been early adopters of DRLsand there is increasing evidence that DRLs are saving lives. Because of this,

DRLs may soon become law in other countries. In the drive to save energy,

customised LED DRLs will grow over the next few years and add to the other

lighting uses of LEDs in automotive applications.

Approximately twenty percent of global electricity consumption goes on lighting.

By 2020 at least half of this will be reduced by eliminating incandescent light

bulbs and their replacement by LED or fluorescent lamps as well as improved

lighting control. Summits like the current Copenhagen climate conference are

likely to strengthen this trend. The good news for the semiconductor industry is

that additional LED and semiconductor production will be needed to meetdemand.

Another application for LEDs is in test, measurement and medical applications.

The main use of LEDs in these equipments is in sensing, detection and analysis.

A common medical application for LEDs is in a sensor that attaches to a finger to

measure oxygen saturation levels in the blood.

LEDs can be made with either inorganic or organic semiconductors. The most

common LED is the inorganic type. White LEDs are made of an InGaN-GaN

structure that is covered with a yellowish phosphor coating. Since yellow light

stimulates the red and green receptors of the eye, the resulting mix of blue and

yellow light gives the appearance of white. These products are continuouslyimproving with several novel techniques being patented for high brightness and

ultra high brightness LEDs by the main competitors in the market, namely GE,

Osram and Philips.

Organic LEDs (OLEDs) are lighter in weight than inorganic equivalents, and

polymer LEDs have the added benefit of being flexible. OLEDs are used in

lighting and displays on curved surfaces such as lamps and wall decorations.

OLEDs are also found in mobile phones and multi-media players. Fully self-

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December 2009


illuminating displays are available that use an OLED matrix and these are

currently available in some small screen TVs produced by Sony but these displays

are very expensive and require complex driver circuitry.

The brightness of an LED depends on its forward current, and this has to be

controlled tightly to avoid damage or severe reduction of lifetime. To meet this

requirement, there is a growing market for LED driver/current controllers supplied

by a number of companies including Cypress, Intersil, Maxim, Linear Technology,

National Semiconductors and Texas Instruments.

Although the LED market is growing, one of the barriers to wider adoption is

price. Despite the very high efficiency of LEDs in converting electrical energy tolight, they are currently four to five times the cost of an equivalent fluorescent

lamp. However, reducing costs of production in the future are almost certain if

the normal path of semiconductor development and competition holds true.

The current drive to save the planet will also help boost development and

uptake. On a more seasonal note, many more Christmas decorations supplied in

retail outlets this year, including Christmas tree lights, have LEDs instead of

incandescent lamps. In many senses of the word LEDs are, indeed, lighting the

way.

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December 2009


Sign Up Now For IFS2010Future Horizons Annual Industry Forecast Seminar

IC ASP Growth Rate Transitions, 1978-2007IC ASP Growth Rate Peaks & Troughs, 1978-2007

$0.75$1.00

$1.25

$1.50

$1.75

$2.00

$2.25

$2.50

$2.75

$3.00

Q1-78

Q1-79

Q1-80

Q1-81

Q1-82

Q1-83

Q1-84

Q1-85

Q1-86

Q1-87

Q1-88

Q1-89

Q1-90

Q1-91

Q1-92

Q1-93

Q1-94

Q1-95

Q1-96

Q1-97

Q1-98

Q1-99

Q1-00

Q1-01

Q1-02

Q1-03

Q1-04

Q1-05

Q1-06

Q1-07

Q1-08

Q1-09

-35%-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%ASP YoY %

IC ASP Growth Rate Transitions, 1978-2007IC ASP Growth Rate Peaks & Troughs, 1978-2007

$0.75$1.00

$1.25

$1.50

$1.75

$2.00

$2.25

$2.50

$2.75

$3.00

Q1-78

Q1-79

Q1-80

Q1-81

Q1-82

Q1-83

Q1-84

Q1-85

Q1-86

Q1-87

Q1-88

Q1-89

Q1-90

Q1-91

Q1-92

Q1-93

Q1-94

Q1-95

Q1-96

Q1-97

Q1-98

Q1-99

Q1-00

Q1-01

Q1-02

Q1-03

Q1-04

Q1-05

Q1-06

Q1-07

Q1-08

Q1-09

-35%-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%ASP YoY %

IC ASP Growth Rate Transitions, 1978-2007IC ASP Growth Rate Peaks & Troughs, 1978-2007 IC ASP Growth Rate Transitions, 1978-2007IC ASP Growth Rate Transitions, 1978-2007IC ASP Growth Rate Peaks & Troughs, 1978-2007IC ASP Growth Rate Peaks & Troughs, 1978-2007

$0.75$1.00

$1.25

$1.50

$1.75

$2.00

$2.25

$2.50

$2.75

$3.00

Q1-78

Q1-79

Q1-80

Q1-81

Q1-82

Q1-83

Q1-84

Q1-85

Q1-86

Q1-87

Q1-88

Q1-89

Q1-90

Q1-91

Q1-92

Q1-93

Q1-94

Q1-95

Q1-96

Q1-97

Q1-98

Q1-99

Q1-00

Q1-01

Q1-02

Q1-03

Q1-04

Q1-05

Q1-06

Q1-07

Q1-08

Q1-09

-35%-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%ASP YoY %

$0.75$1.00

$1.25

$1.50

$1.75

$2.00

$2.25

$2.50

$2.75

$3.00

Q1-78

Q1-79

Q1-80

Q1-81

Q1-82

Q1-83

Q1-84

Q1-85

Q1-86

Q1-87

Q1-88

Q1-89

Q1-90

Q1-91

Q1-92

Q1-93

Q1-94

Q1-95

Q1-96

Q1-97

Q1-98

Q1-99

Q1-00

Q1-01

Q1-02

Q1-03

Q1-04

Q1-05

Q1-06

Q1-07

Q1-08

Q1-09

-35%-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%ASP YoY %

Now in its 12th year, Future Horizons annual forecast seminar is a vital link inour charter to provide industry with high quality, cost effective, market research.

Whether a seasoned veteran or industry newcomer, this seminar is invaluable to

executives from the semiconductor, electronics and related industries. The

analysis presented at our previous industry briefings has proved both accurate and

informative, and this years event promises to be no exception.

Seminar Programme Includes:

2010 Market Forecast The Key Factors Analysed

2011 Industry Outlook Blue Skies Or Stormy

Industry Application Drivers IC Content & Forecast

Market Outlook 5-Year Regional & Product Forecasts

Supply & Demand Wafer Fab Capacity Trends

Jan 26, London, England / Jan 27, Geneva, SwitzerlandFor more details and on-line registration visit: www.futurehorizons.com

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December 2009


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 - 2009 Exchange Rate Trend(Euro vs. US$/UK)

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

Jan0

6-09

Jan2

7

Feb1

7

Mar0

9

Mar3

0

Apr2

0

May11

Jun0

1

Jun2

2

Jul13

Aug0

3

Aug2

4

Sep1

4

Oct0

5

Oct2

6

Nov1

6

Dec0

7

Dec2

8

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

1.40

1.45

1.50

1.55

1.60/Euro $/Euro

Figure R2 - Exchange Rate History, 1999-To Date(Euro vs. US$/UK)

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

Jan1999

Jul

Jan2000

Jul

Jan2001

Jul

Jan2002

Jul

Jan2003

Jul

Jan2004

Jun

Jan2005

Jul

Jan2006

Jul

Jan2007

Jul

Jan2008

Jul

Jan2009

Jul

Dec28

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

1.60/Euro $/Euro

Source: Financial Times/Future Horizons

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December 2009


Tired Of Over Paying For

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

hyped-up name for ad hoc/multi-client reports. NOR do we hold our clients

to ransom by the age-old technique of bundling up products to lock out

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

spending curtailed, the time for change is long overdue Future Horizons is

proud to be at the forefront of this change. This is no dream, just a win-win

situation for us both. You save substantially on your valuable market research

dollars, and the more you support us, the more we can help you.

Market Research Reports - Covering The Basic Industry Statistics

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Founded in 1989, Future Horizons offers the highest possible standards in all of its

activities, be it industry reports, consulting assignments, engineering support

services, or industry symposia. Our current range of research reports includes:

Global Semiconductor Update Report (12 issues p/a)

Penn On Paper Newsletter (12 issues p/a)

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Annual Semiconductor Report

Semiconductor Application Markets Report

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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December 2009


Summary Of Key ReportsBrochure 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-

user/site licenses are required for additional users and/or posting on company Intranets.

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 theimpact 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.


This two-volume report provides market analyses and forecasts of the worldwide and European

semiconductor market (Volume 1), as well as a detailed analysis of the key semiconductor end-user

applications and industry market drivers, collectively accounting around 90 percent of the total IC

market (Volume 2). This value-added bundle is a must-have for anyone interested in the global

semiconductor market and European detail.

Semiconductor Application Markets Report(Previously called the Key Market Drivers Report)

Volume 2 of the Annual Semiconductor report is available separately as the Semiconductor

Application Markets Report. Individual chapters 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 ascompanies 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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December 2009



Updated Annually - 820 Pages - Despatched As Two Volumes:

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

Key End Market Applications Reviewed

5 Year History Plus 5 Year Forecast

Vol 1 Product & Geographical Markets (370 Pages / 350 Figures & Tables)

Vol 2 Semiconductor Application Markets (450 Pages / 325 Figures & Tables)(Vol 2 Available Separately As A Stand-Alone Report)

- ThereISNo Better Value-Added Package -

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December 2009


Semiconductor Application

Markets ReportUpdated Annually - Over 450 Pages / 320 Figures & Tables

Digital TVHDD

Mobile

Phone

Navigation

DigitalStill Camera

Amusement

STB

H/PC

PDA

10:30

DigitalTV

DVD Player

SOCSOC

EngineEngine

Annual Analysis & Forecast Of The Top

Semiconductor Applications For The

Worldwide Electronics & SC Industry(Previously Called The Key Market Drivers Report)

Topics Include (30 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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December 2009


European Fabless

Semiconductor ReportUpdated Annually - Over 320 Companies Analysed

BoardChip

4 Mbit

DRAM

2 Mbit

DRAM

2 Mbit

DRAM

DISP

CPU

I/F

Graphic

Engine

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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December 2009

SMU-2009-12 Dec

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