The Semiconductor Industry Association (SIA) announced that worldwide sales of semiconductors reached US$80.92bn during Q3’13, the industry’s highest-ever quarterly sales and an increase of 8.4% from Q2’13. Global sales in September 2013 reached US$26.97bn, the highest monthly sales and an increase of 8.7% compared to September 2012. The global semiconductor industry has built impressive momentum through Q3’13 largely due to growing strength in the Americas. Sales in the Americas increased by 24.3% YoY, which is much higher than global sales growth. Sales of memory products, specifically analog and logic products, have increased sharply compared to last year. They continue to be a major driver of industry growth.1
China’s domestic semiconductor design industry is set to reach US$39.84bn at the close of 2013, spurred by the extensive use of semiconductors by Chinese-based original equipment manufacturers (OEM) for both local consumption and exports. Chip revenue from China’s domestic design market is expected to rise by 4% this year. For the next four years, China’s design market is expected to grow between 3% to 6% and revenue is expected to reach US$47.8bn by 2017. China’s large domestic market will continue to be a great source of chip consumption, but the export market, especially to third-world countries, will also support growth. 2
The global NAND flash memory market slowed in Q3’13 as NAND loading in smartphones and tablets, which were its key drivers, declined. Demand for low-end smartphones, which do not use NAND flash memory as much as high-end devices where more flash memory is often needed in lieu of a microSD card slot, continues to rise. In addition, newly released flagship smartphones (like Apple’s iPhone 5, 5c and 5s; Samsung’s Galaxy series; and Sony’s Xperia series) have not added more NAND capabilities compared to their predecessor models. The decrease in NAND demand may also be attributed to the availability and use of streaming media and free cloud storage applications. NAND shipments were estimated to have grown by 8% in Q3’13, lower than the growth rate of 9% achieved in Q2’13. In Q4’13 NAND shipments are expected to increase only 5%, lower than Q3’13 performance and also much lower than the 16% rise seen a year ago.2
Intel reported modest growth in line with expectations in a tough PC environment, posting a YoY revenue increase of US$26mn, or just 1% growth in Q3'13. A 4% increase in average selling prices in their PC Client and Data Center Groups attributed to this gain. However, unit sales in both groups were down by roughly 4%. Gross margin decreased by US$101mn, or 1%, compared to Q3’12 (62.4% vs 63.3%). The decline was due in part to higher factory start-up costs for the next-generation 14nm process technology.
Worldwide semiconductor manufacturing equipment spending is projected to total US$34.6bn in 2013, an 8.5% decline from 2012 spending of US$37.8bn, according to Gartner. Capital spending is expected to decrease 6.8% in 2013, due to diminishing 28nm investment from a softening in the mobile market.3
The continued weak semiconductor market conditions generated downward pressure on new equipment purchases in Q3’13. However, semiconductor equipment quarterly revenue is beginning to improve, and positive movement in the book-to-bill ratio indicated that spending for equipment will pick up in the remainder of 2013. Spending will follow a generally increasing pattern in all sectors throughout the rest of the forecast period.4
In 2013, the wafer fab equipment (WFE) picture is one of continuous QoQ growth as major manufacturers come out of a period of high inventories and a generally weak semiconductor market. Early in the year, the book-to-bill ratio passed 1-to-1 for the first time in months, signaling that the need for new equipment is strengthening as the demand for leading-edge devices improves.