The notoriously bullish Penn is convinced that the prolonged lack of capital spending on manufacturing capacity is going to produce shortages and that after a difficult decade average selling prices for chips are at last turning round. This together with the world's almost insatiable demand for electronic equipment which drives units upwards at about 10 percent per year on average is producing an "almost perfect recovery storm," said Penn, speaking at a one-day seminar on the prospects for the global chip market.

"We are entering 2010 with the four horsemen of the apocalypse aligned and headed in a positive direction. There's a recovering global economy; strong unit demand with no excess inventory; tight fab capacity and past underinvestment; and ASPs are in the early stage of recovery," Penn said.

"In 2009 the chip market was the victim, not the cause, of the recession. And ASPs did not blink during the latest decline."

Penn concluded that the chip industry cannot put any significant production capacity in place in 2010 and probably will not even decide to until September, which would delay the impact to mid-2011. "There are two years of very strong sales growth in prospect. It doesn't get much better than this."

Penn said that whereas ASPs have declined on average by 2.8 percent per year over the period 2005 to 2009 they are now set to increase at a CAGR of 4 percent.

Penn kept his forecast for the 2010 chip market at 22 percent market growth but emphasized repeatedly that it is almost inconceivable to him how the market could come in any lower, unless there was some sort of major global catastrophe similar to the economic downturn that hit the world in 2008 and 2009.

"There's no downside and we could go through the 30 percent roof next year.

While acknowledging that his own forecast numbers are imprecise Penn offered a five-year look forward. Following a 22 percent growth in 2010 based on current momentum and modest quarterly growth, Penn thinks things will be even better in 2011 at 28 percent. This will be the peak of the cyclical boom but could stretch into 2012 if chip makers are slow to build out capacity. 2012 could be 18 percent based on a normal cyclical market correction starting in the second half of 2012, which would produce a 3 percent market growth in 2013. 2014 at 12 percent would be the start of the next market cycle.

However, Penn pointed out that the precise timing of the cycle is almost impossible to predict and a slip of a quarter or two completely changes the numbers.

By: DocMemory
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