Analogue market stabilises but 'recovery distant'

Although conditions in the global market for analogue semiconductors and transistors are stabilising due to rising demand and slowing price erosion, a real industry recovery is still far away, according to iSuppli.

“Analogue semiconductor and transistor suppliers are reporting that demand now has returned after a virtual halt in new orders in the fourth quarter of 2008 and first quarter of 2009,” said Marijana Vukicevic, senior analyst for power management at iSuppli. “This has caused pricing to stop falling at alarming levels.”

The average worldwide contract price for analogue-monolithic semiconductors will decline by 3.9 per cent in the second quarter, compared to 7.8 per cent in the first quarter and 4.6 per cent in the fourth quarter of 2008. Prices in the third quarter are expected to rebound slightly, rising by 0.7 percent, as demand continues to rise due to the arrival of the pre-Christmas build season.

Average pricing for transistors is set to decrease by 3.8 per cent in the second quarter, a sharp reduction from a 9 per cent decline in the first quarter and a 7.3 per cent reduction in the fourth quarter. The rate of transistor price erosion will dwindle to 0.2 per cent in the third quarter and to a mere 0.04 per cent in the fourth quarter.

“Because transistors and analogue-monolithic semiconductors are generic parts that can be used in all kinds of electronic products, sales of these devices can serve as a barometer of larger electronics industry trends,” Vukicevic said. “Thus, these events could be interpreted as a positive sign for the electronics industry as a whole. However, pricing trends for these parts also are influenced by factors within the transistor and analogue-monolithic market.”

One major factor influencing pricing in the industry is the level of inventory, which had swelled to excess in 2008. Despite the poor demand situation in the first quarter, the electronics supply chain managed to reduce its stockpiles significantly in the first quarter. The inventory reductions were regarded as a positive signal by the investment community because stockpiles will have to be increased again as demand begins to rise, boosting demand and stabilising prices.

Compared to many other semiconductor products, analogue-monolithic semiconductors and transistors cannot be reduced to rock-bottom levels. With demand visibility severely limited right now, most suppliers must maintain relatively high inventory levels in order to respond quickly to any increase in demand.

“While demand is rising, the analogue-monolithic semiconductor and transistor industries still have a long way to go before their sales recover to the levels seen before the fourth quarter of 2008,” Vukicevic said. “Analogue and discrete suppliers are reporting improvements in book-to-bill ratios, but the overall order visibility remains low – anywhere between two and three weeks depending on the customer and the end product.”

With analogue and transistor revenue rising, utilisation rates at fabs producing these products are increasing as well. Utilisation rates for analogue and transistor fabs in the first quarter were in the low 40 per cent range. In the second quarter, utilisation is expected to increase to the 60 per cent level. Rising utilisation is expected to contribute to stabilised prices and even an increase in analogue-monolithic in the third quarter.

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