The recovery for semiconductors is now entering its second year. Accounting for seasonal fluctuations the best comparison is a pro-forma year-on-year silicon shipment comparison. To account for the differences in wafer sizes the industry uses MSIE (million square inch equivalents). Although 2287 MSIE is a marginal 1% reduction from the previous quarter it is up 3.3% vs. the first quarter of 2010. Note: these figures do not include silicon wafers for the solar market.
The second quarter will likely show an uncharacteristic fall off due to the earthquake in Japan. Approximately 25% of the global wafer supply comes from Japan. But, expect this recovery to bump the second half of 2011. What remains to be seen is what part of that demand is unrecoverable. Also, wafer inventory will partly offset some of the second quarter supply issues.
The earthquake was undoubtedly a human and economic tragedy. One effect we will likely see on the market is a bit of support for average selling prices (ASP). The memory market was expected to see a significant ASP drop in the second half as supply was projected to exceed demand. This seems to be a perpetual cycle in this industry as capacity increases tend to over-shoot the market and cause price erosion for commodity Flash and NAND. But, with a tighter supply ASPs may have a bit more support in the second half. This will bode well for Samsung, Toshiba, Micron and the many Taiwanese memory manufacturers.
Whatever happens in the quarters to come the semiconductor industry remains a great case study in technology meets economics.
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