There's an old saying: Forecasting an electronics outlook is like trying to drive a car blindfolded and following directions given by a person who is looking out the back window.
Still, that's never stopped us before, so let's gaze into the crystal ball for a bit.
The big question for 2014, I think, is not how the industry is going to fare but how fundamentally different it is than in years past.
In the old days, there was some predictability: We boomed and we busted, with wild supply-demand swings hitched to a particular, large industries: mil/aero, computing and so forth.
Electronics Outlook: Foggy?
Today, the picture is foggier.
Steve Luczo, chairman and CEO of Seagate Technology, said, during a call with analysts, "We are in a world that has limited visibility."
Why? Because the end markets have blossomed in recent years. In fact, in its annual survey of the semiconductor industry, consultancy KMPG noted that eight applications markets were rated as the most important revenue drivers by more than half its respondents. In 2011, only three were named.
What are those markets and what percentage of survey respondents have identified them?
- Mobile technology (69 percent)
- Consumer (66 percent)
- Computing (63 percent)
- Alternative/Renewal Energy (63 percent)
- Industrial (62 percent)
- Automotive (60 percent)
- Medical (55 percent)
- Wireline Communications (55 percent)
That expansion is a very good thing, according to Ron Steger, KPMG Global Semiconductor Practice leader.
"The broadening of applications markets can lead to more diverse revenue sources and lower likelihood of feast or famine cycles," he said, in an overview of the survey results.
Jim Feldhan, founder and president of Semico Research, sees this trend in part driving a robust year for silicon sales. Freshly returned from the Consumer Electronics Show in Las Vegas, Feldhan said he sees wearable electronics, automotive and medical electronics as the most intriguing applications at the event.
Recovering PC Market
And, importantly for overall industry growth, he sees a rebound in the personal computing sector.
In an interview, Feldhan said:
"It's also analogous to the automotive market for a number of years. they said it was dead. But automobiles wear out and people get tired of fixing the car. From the IT biz perspective, they've lacked in upgrading their own computer systems. We'll see more of that next year."
Feldhan attributed some of the rapid decline in notebook sales in recent times to a friction between users and PC manufacturers. The manufacturers, he said, wanted to charge customers for features like inertial sensors and touch screens, but with the rise of that functionality in mobile phones, consumers expect that functionality in their notebooks now and aren't willing to pay a premium.
In addition, the wider adoption of NAND flash for solid-state memories is leading to vastly lighter, more energy-conservative devices that are catching the consumer's attention.
Feldhan recently bought a Sony Vaio Duo, a hybrid tablet/laptop that weighs 2.9 pounds (a little more than a MacBook Air) and he used it at CES for two days without a charge.
Taiwanese companies are forecasting 20 percent growth for notebook sales this year, Feldhan said, describing that as an "aggressive' forecast. Semico is forecasting 3.9 percent growth in that sector.
Topline Industry Growth for 2014
As for the overall growth of the semiconductor industry, Feldhan sees 9-10 percent growth, compared with 5.6 percent for 2013.
He added:
"We've been saying for a couple of quarters that on the macroeconomic side,things are going to get better in 2014. The recovery is driven by the U.S. and Japan, whereas in the past it's been emerging markets."
Feldhan sees the move to FinFETs and 3D ICs giving the industry, at least at the leading edge of design, some pricing power. He sees the industry bifurcating into high and low and those at the leading-edge nodes (20 and 16/14nm) will see a flattening in the traditional reduction of cost per transistor.
He said:
"There's a debate on whether that will continue. Will engineering community figure out how to get (back) to declining cost-per-transitors. If we can't it'll be hard to see prices decline. If we can't make it cheaper, that's going to push the move to 450mm wafer manufacturing, because that would bring down the per-transistor cost. I'm voting for the engineers."
Feldhan's relatively bullish outlook for 2014 is tempered elsewhere, however - KMPG, in the survey referenced earlier, said the outlook calls for "muted optimism."
Longtime supply-chain industry observer Bolaji Ojo, writing on Electronics Purchasing Strategies, sees low or negative growth ahead. He wrote:
"...while almost nobody is trotting out the dreaded ‘downturn' word yet, concerns are building up in the industry over signs end-of-year sales could be sluggish in addition to the poor visibility into medium and long-term demand at end markets."
Cycles or no, no one in the industry seems to be waiting around to see what happens; they're taking action - and have been for several years - to restructure around a new paradigm. Ed Sperling, editor of Semiconductor Engineering, sees the industry organizing itself around cost because that's "the one point that everyone agrees upon."
"It appears that EDA tools and IP are not sticking points for any of these approaches. In fact, many of the tools-individually and collectively as integrated flows-have been enhanced or revamped to take advantage of all three approaches. So the real issues for chipmakers don't revolve around whether the tools can do the job. It's how to achieve the best economies of scale for particular markets..."
Whether 2014 goes to the bulls or bears, it seems clear that the industry has laid the groundwork for healthier, more stable years in the next decade.
Brian Fuller
Related stories:
--CES 2014: Past Is Prologue for Electronics Design
--2013: Quickening the Pace of Electronics Innovation?