If you cover a long enough time period, the small ups and downs of a graphed line can look very smooth. Semico’s semiconductor wafer demand data goes back to 1991. When graphed from 1991 to 2016, wafer growth appears to have a very steady upward trend with only a few minor interruptions. Wafer demand grows at a compound annual growth rate of about 8-9%. When graphed against semiconductor units it looks very tame. Looking at Figure 1 you may say to yourself, “The forecasting business can’t be that difficult.” What’s so difficult about forecasting wafer demand? Looking at the first graph, one might conclude that capital investment in fab capacity should be very successful if a company stuck with an 8-10% investment rate every year.
Figure 1: Semiconductor Unit Sales and Wafer Demand
Source: Semico Research Corp. & SIA
Reality sinks in when we look at the percent change in wafer demand since 1991. (See Figure 2) Wafer demand growth is anything but stable. There is almost a 50-point spread between the peak growth year to the worst year of decline. Even if we throw out the worst year (-23% decline in 2001) and the best year (25% growth in 1995) the change in wafer demand growth rates range from -2.7% up to 24.9%.
Figure 2: Percent Change in Wafer Demand
Source: Semico Research Corp. & SIA
