Semi sales rebounding, but capacity issues loom

"Psychologically, this will give everyone a shot in the arm", said company chairman Malcolm Penn. But he tempers his excitement: "The big question now is whether this is the start of the chip market recovery or is it merely a blip on the statistics radar screen." Claiming the figures represent a 'bit of both', Penn said the normal dynamics following any market collapse are: over reaction, cutting back production and inventories too far; a correction phase to rebalance over depleted inventories; and a resumption of demand driven build. "In the first phase, chip sales equal OEM requirement minus inventory burn, hence understating real demand. In phase 2, sales equal OEM demand plus inventory rebuild, thus overstating the actual demand. We are currently in Phase 2 of the recovery cycle." One issue which Penn does see as becoming increasingly important in the future is under investment in electronics manufacturing capacity. "We are already seeing the first signs of shortages – and for shortages, read ASP increases. It's inevitable, it's just a matter of time. Fabs will be looking to maximise the return on their costly and precious resources. Better to pay 5x the price and get the parts you need."