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Industry is polarising into 'haves' and 'have nots', says Penn

Sales of semiconductors are predicted to grow by 8% in 2014, according to Malcolm Penn, chairman of industry analyst Future Horizons, who added the upside could see sales growing by 14% compared to those of 2013. He added that 2015 could see sales grow by a further 18%.

Making his predictions at the International Forecast Seminar 2014, Penn said he is concerned about the level of investment in capital equipment and by the growing gulf between the 'haves' and 'have nots' of the semiconductor world.

"Capex, as a percentage of sales, is decreasing and is now down to around 10%," Penn noted. "The problem is that sales and investment are in sync. But capex should be leading so the production capacity is in place when it's needed. This tells us there will be shortages." He is also worried that five companies are responsible for 80% of the industry's investment in new capacity.

Penn also noted his concern about the growing domination of the industry by a small number of companies. "The middle ground now starts at STMicroelectronics," he claimed, justifying his statement by saying a market share of 3% has always been his 'critical threshold'. "Now, there are only seven companies with a market share of more than 3% and the industry is consolidating around them." Those with a lower market share, said Penn, will be under 'huge pressure' to reinvent themselves or they run the risk of being acquired or simply withering away.

The 10:100:20 plan being championed by European Commission vp Neelie Kroes is a potential lifeline for companies like ST, Penn believes. However, the plan is reliant upon the European Leadership Group of company leaders to come up with a plan. "But it's a huge task," he said. "Getting Europe's semiconductor market share to 20% can't be done by ST alone; it needs something in addition. There will be conflicts of interest between the vision of Europe and the duty of ceos. Neelie Kroes is asking industry to meet her challenge, but company shareholders will have to sign up."

Meanwhile, the advent of 450mm wafer based manufacturing has the potential to put Europe in a strong position, he said. "450mm at imec gets Europe back in the game. It is a key provider of technology and is in a fantastic position. The world is reliant upon imec technology in some way and it's likely to be running the first 450mm fab, although it will be a pilot line."

Graham Pitcher

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