Chip industry set for turmoil

That is according to analyst Future Horizons, which makes the claim in its semiconductor monthly update report for November.

According to Future Horizons, 71 out of 72 publicly quoted semiconductor companies suffered a reduction in their collective revenue in the third quarter. However the non-publicly quoted companies grew their collective revenues by 5.2 per cent.

“There is clearly a different set of market dynamics at play, favouring the newer, non-public, firms at the expense of the more established incumbents. The stage is being set for a massive industry shake-out, of a magnitude not seen since the ’70s and ’80s. There will be a lot of blood spilt on the roads lying ahead,” said the report.

This consolidation is not the result of slowing growth, said the report. “On the contrary we are convinced that the market growth potential is massive,” it claimed.

An early brake was applied to capacity spending and demand is holding up. But Future Horizons sees a major dislocation in the technology, and the fragmentation of markets, as the precipitating factors for the shake-out.

The technology dislocation comes from the twin effects of declining project cycles and declining product life-times; the market fragmentation comes as some market segments grow while others decline.

In the equipment market the going will be tough, reckons Future Horizons. This is backed by a recent report from Gartner Dataquest, which estimated that 20 to 40 per cent of semiconductor production equipment makers will fold. 

www.futurehorizons.com