Penn pointed out that some top line capital expenditure budgets recently announced for 2021 are eye-wateringly large amounts for individual companies – up to $30 billion from Samsung and $28 billion from TSMC (see US fab part of TSMC capex surge to $28 billion). But added that overall the industry needs to spend $80 billion to be in-line with the long-term average of 15 percent of sales, which is the new normal.
The fact is that at both the leading-edge and in more mature manufacturing processes the industry has underspent in recent years and as a consequence is now sold out. This partly reflects the diminishing influence of IDMs and the growing importance of foundry manufacturers and their concentrated and tighter control. It also means that chip supply will effectively be sold out for the whole of 2021 as little new capacity will come online before 2022. Something that automobile makers are finding to their cost.
Collapses in ASPs due to oversupply tend to be rapid while recoveries in ASPs tend to be slow, argued Penn. This means that alongside sold-out manufacturing capacity, prices will get jacked up by vendors gradually. "2019 saw the start of the cyclical ASP recovery. Watch for the graph to turn up in 2021," he said.
This all led to Penn giving his 'bull', 'bear' and 'Goldilocks' forecasts for 2021.
Bull, bear and Goldilocks forecasts for sequential quarterly and annual percentage growth of the global semiconductor market. Source: Future Horizons.
Penn said the semiconductor market will grow an annual basis by between 11 and 24 percent with 18 percent as the 'Goldilocks' number. Given the limited ability to expand capacity in the short-term the market increase will driven by shortages of supply and rising chip prices, particularly in the second half of the year. This is a long way above the forecast of World Semiconductor Trade Statistics (WSTS) from December 2020 (see WSTS raises chip market forecast for 20/21) of 8.4 percent.
There are some caveats Penn puts forward that might reduce or change the numbers. There is still a lot of uncertainty in the world: not least in the tension between an incoming US administration and China; uncertainty in the economics and the unwinding of the fiscal support provided during lockdown. Finally, there is the uncertainty around delays or hiccoughs while returning to post-pandemic normality. Any of these could have a negative or in some cases a positive impact.
But Penn concluded apart from the economic uncertainties the other factors – horsemen – are all strong. The balance of risks to semiconductor growth are more on the upside than the downside, he said.
And whatever, is achieved in 2021 will probably be exceeded in 2022, Penn added. "But don't worry; it'll crash in 2023! Because that will be the end of supercycle."
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