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2010 will go down in the history books as one of the greatest recoveries the semiconductor industry has experienced. Contributing to this recovery was the fact that the industry underinvested prior to the downturn. In addition, the fears and uncertainty surrounding the length and depth of the recession and its impact on electronics sales resulted in an overreaction by the supply chain which stripped inventories to near zero. As it turned out, electronics is one of the segments that has fared the best during this recession. As a result the supply chain has been in a catch-up mode for the past year.

Housing continues to languish with foreclosures, falling prices and restricted banks loans. The automotive industry has made some nice recoveries yet is still well below production levels from just a few years ago. The new consumer is different. They are younger and two things are apparent. One, cars are not the highest priority for these consumers. Two, buying a house is also not high on the priority list. What is a priority is the ability to have access to social networking, games, videos, pictures and music. These priorities drive consumers to upgrade their smart phone, iPod, tablet/iPad and notebook. These products are priced such that they do not require credit and are considered a necessity in today's world.

IDF ended last week and the message as always is that Intel has the technology for the future today.  The company continues to deliver ever increasing performance and features at lower price and that it delivers on its promises on time. Intel is also trying to expand its reach beyond the traditional computing market.  Computing is still the cash cow for the company, so it still garners a lot of attention.  But Intel needs to broaden its markets in order to continue growing.  The company showed off technology that covers the gamut from high end computing (data centers and cloud computing) to mass market consumer (smart phones, TV, etc.) and even embedded control. In his keynote speech to kick off the event, Intel CEO Paul Otellini presented the “three pillars of computing” for Intel.

September 14, 2010

Right now I am sitting in a technical session, “How to Build an Intel Atom Processor Based Tablet PC or Innovative Netbook”.  Looking around the Intel Developer’s Forum it is clear that netbooks are still a strong and viable market for Intel.  I just wrote a Semico Spin challenging the view that tablet PCs will eat up the market for netbooks.

At IDF Intel is actively marketing solutions for both netbooks and tablet PCs.  There are demos from OEMs for both featuring Intel Atom of course. Many Atom tablet PCs will ship in 4Q 2010.  This technical session clearly shows that internally there is little difference between the two products.

The differences come down to touch screen, keyboard, and OS.  One can also say that the applications that end users want to run will be different.  When the subject of tablet PC vs netbook first came up my immediate response was that over time the form factors would evolve and likely merge to form a hybrid design.  At that point I would likely dovetail the two separate lines in my forecast into one and call it “ultra-portable.”

It has been reported lately that tablet PCs, namely Apple iPads, are having a significant impact on notebooks and netbooks.  Are the tablet PCs cannibalizing netbooks and low-cost notebooks?

It should be noted that what is cited is consumer sales in the US.  Let us keep in mind that the US represents less than half of the world wide PC market and that consumer is about half of the US market.  Late last year it was anticipated that PC sales would be driven mainly by corporate sales in 2010.  Many companies had delayed PC upgrades in 2009 due to economic conditions.

We heard the same thing about netbooks cannibalizing notebooks when they first emerged.  Netbooks did cannibalize some of the low end of the notebook market, but it also established a new market segment which added new users to the total computing market.
Semico’s forecast for netbooks from a year ago already showed that netbook growth would slow down in 2010 (even before the iPad emerged) just because it would become mainstream very quickly.

Total iPad shipments are 3.27 million at the end of 2Q 2010.  Assuming additional growth each quarter and the introduction of competitors in 4Q 2010, the tablet PC is expected to reach 12 million units in 2010, Semico's forecast.  Netbooks will reach 38.5 million, so tablet PCs will be less than 1/3 the size of netbooks.  Notebooks are projected to hit 175 million in 2010.

I had the opportunity to try out the Kinect device for the Xbox at the new Microsoft store in Scottsdale's Fashion Square Mall this weekend.  I highly recommend visiting the store if you live in the Phoenix metro area, San Diego, Mission Viejo, or Denver metro area.  There was no one watching the Microsoft store employee playing with the game (prominently located right in the window for maximum exposure), but by the time we left there was a crowd of people around, and a line of people waiting to play.  The employee was playing a driving game that actually looked quite complicated in terms of the motions he had to use to drive the car. 

However, for us to demo Kinect, he pulled up the bowling game (what was odd is that he had to turn the system off and then back on before doing so).  My 6-year-old was first, and easily picked up the directions on how to play (stand in a certain spot, raise your right arm straight out to "pick up" the ball, then throw like you normally would).  We all got a turn, and the Kinect seamlessly transferred from one of us to the other, even though there was three feet difference in height from the shortest to the tallest of us. 

As a handheld console, the PSP in North America is on its last leg.  It has been losing market share to smart phones, Apple products, and the NDS.  But this doesn’t mean the PSP is out for the count.  As Sony recently said, “the PSP has life left in it yet.” Sony claims that right now their main market is the children’s arena, and their game line-up seconds that claim.  Its true of most handhelds, but especially for the PSP, that they are great entertainment devices while on the road.  A parent can pick up a PSP, games, and movies and be set for the entire road trip.  They might even appropriate the PSP for one of their own long trips because the screen is so perfect for viewing movies.  But only if they don’t already have a notebook, or netbook, or portable dvd player, or iPod, or smart phone, etc. And that’s part of the problem.  When the PSP first came out, it was the most advanced handheld device on the market.  Those days are long since gone.  According to Steve Jobs, the iPod Touch is now a more popular gaming device than both the PSP and NDS.  The market has dramatically changed.

On Wednesday, September 1, 2010, GLOBALFOUNDRIES will be hosting its inaugural Global Technology Conference in Santa Clara. Attendance should be high as we all try to find out what GLOBALFOUNDRIES has up their sleeve to woo new business.

These technology forums are a great way to get broad audience coverage but all the big foundries are targeting the largest and the most advanced semiconductor manufacturers. As I prepare my next foundry report, I can see why big customers are so important. In 2009, TSMC reported that their 10 largest customers accounted for 53% of their total net sales. Back in 2000, TSMC’s five largest customers comprised 30.6% of their total sales. UMC’s top 10 customers account for 65.3% of total revenues and SMICs five largest customers account for 60% of their total sales. In 2008, Chartered Semiconductors top five customers comprised more than 63% of their total sales and with the combined sales of GLOBALFOUNDRIES that percentage is even higher now.

The 2010 Flash Memory Summit wrapped up last week in Santa Clara, CA.  Three days of breakout sessions, technical discussions, tutorials, flash exhibits and keynote speakers provided attendees with ample opportunity to gather intelligence related to the future of flash memory architectures.

Inevitably, most who attended are likely to come to the same conclusion; Denali’s reputation for throwing great parties is well deserved.  Wait, that’s not what I meant to write.  What I meant to write was… the gigabyte rules.  While there were numerous relevant points discussed over the three day event, let’s focus momentarily on a story told by Ed Doller, VP Micron Technology, which best illustrates both the state and future of flash memory.

Ed spoke on Thursday, August 19 to a packed theater on the topic of “Flash Memory—The New Technology Driver”.  He cited a number of technology advances over the last several years including the rapid adoption of social networking sites like Facebook and Twitter.  While it’s easy for many within the industry to focus on delivering improved performance by enhancing a number of technical capabilities consumers desire, it all boils down to memory.

All of the interesting gizmos get the attention of the mainstream media and even the industry press.  The various smart phones, IPTV, iPads and other devices that connect to the internet, especially via wireless, generate a great deal of excitement and sales.

However, these devices need an infrastructure to support them. As more devices come into use and the bandwidth demand increases to support advanced apps, the service providers are under pressure.  They need to deliver quality service at an acceptable price and still make a profit.  The concern over running out of internet addresses for all of these devices has been raised recently.  This is IPv4 which uses 32-bit address.  The industry is moving to IPv6 which uses 128-bits.  However, the deployment for IPv6 is still very low.

In recent weeks two companies have made significant product announcements to address the needs of the communications infrastructure.

In July 2010 NetLogic Microsystems launched the NLX321103A, a three chip set that handles a broad range of packet-processing functions at speeds up to 40Gbits/sec.  This comes out of the acquisition of RMI Corp. (June 2009).  The NLX321103A includes RMI’s 8-core, quad-threaded XLR processor.  This is a MIPS64 based design for which the company holds an architectural license.  NetLogic’s solution will enable platforms, such as mobile infrastructure, to reduce the bill of materials (BOM) and increase performance.  It also supports IPv6.

Apple reported in its last financial results that as of June 26, 2010 it has shipped 3.27 million iPads.  This is the first quarter of availability for the iPad.  It is shipping at the rate of about 1 million units per month.  However, keep in mind that there was a large amount of pre-orders prior to its April launch.

The question is can Apple ramp up production to meet demand?  Apple’s Steve Jobs has stated since its launch that demand for iPad has been stronger than expected.  Apple has been rolling out iPad to markets outside the US in select countries at different times rather than an all out world wide blitz.  On May 28 Apple made iPad available in Australia, Canada, France, Germany, Italy, Japan, Spain, Switzerland and the UK.  On July 23 Apple extended this to Austria, Belgium, Hong Kong, Ireland, Luxembourg, Mexico, Netherlands, New Zealand and Singapore.

This steady roll out may help Apple manage its supply issues.  Recently, the supplier of the iPad’s display, LG said that it was unable to keep up with demand.  Apple has signed on Samsung as a second manufacturer.  Flash memory is an important component for iPad.  There has been strong demand for Flash for many devices.  Apple’s iPad has to compete for this supply.