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Forecasting Wafer Demand: Technology Migration, Bottlenecks and Confetti

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

The challenges arise when market variables are considered.  There are thousands of semiconductor products which do not always move in concert.  In 2012, wafer demand for NAND flash products will increase by over 30%, while DSP wafers will experience a decline.  The industry’s wafer manufacturing facilities utilize over four different wafer sizes and numerous process technologies.  When leading companies attempt to grab market share, often times the result is the creation of inventory gluts and shortages.  Add supply chain bottlenecks into the mix, technology and product migration, and capacity planning becomes a nightmare.  Although silicon revenues were up, SEMI reported silicon area shipments down by 3.5% in 2011 compared to 2010.

Figure 3: Wafer Demand by Product

Source: Semico Research Corp. Wafer Demand Model

Intel is ramping its 22nm product lines, and the foundries are filling their 32nm/28nm capacity.  At the same time we continue to see growing demand for mature capacity for MEMS, image sensors, power management, discretes and opto chips.  One line may look easy to forecast but the confetti in Figure 3 makes the life of a forecaster very…colorful.  It’s the detail that provides the meaningful insight.

For more information on Semico’s Wafer Demand Data, please contact Jim Feldhan at or visit Semico’s website at

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