By some accounts, the semiconductor sector didn't get off to the best of starts in 2008. In March, analyst firm Gartner Group reported that excess inventories were pushing the industry into its 'caution zone' where the firm recommends chipset manufacturers start making serious cuts to their inventory. Gartner also slashed its 2008 IC forecast almost in half, from 6.2% growth this year to a mere 3.4%, citing slumping demand and falling chip prices.
Not too long after that, Intel announced it was trimming its margin forecasts because of falling prices for NAND memory chips. Then Texas Instruments dropped a bomb that it was lowering its own Q1 revenue and earnings forecasts due to weakening demand for its 3G chipsets - specifically, reduced orders from one particular manufacturer that TI didn't name, but a number of analysts (and stock market traders) suspect to be Nokia.
As usual, whether any of this is cause for pessimism for both the semiconductor sector in general, or the wireless semiconductor sector in particular, depends on who you ask and how much money they have riding on the answer. For a start, some analysts have credited TI's downgraded earnings to a change in Nokia's decision in Q3 last year to restructure its chipset supply chain and work with TI, Broadcom, Infineon and STMicroelectronics, according to a Dow Jones report. Others note that the semiconductor market, like the wireless business, is a big, diverse place, and is no stranger to up-and-down cycles. Indeed, even Gartner has said that the semiconductor industry could be out of its 'caution zone' by the second half of this year, and is expecting the IC market to rebound next year at a growth rate of almost 10%, and another 6.5% in 2010. It's also worth noting that much of the pessimism on Wall Street stems in part from fears of the US economy slipping into full-on recession, which would impact sales of many of the consumer electronics that have RF chipsets in them, from mobile phones to wireless-enabled game consoles, PNDs and other gadgets. Yet that hasn't prompted other chipset makers to revise their own forecasts.
Dominik Bilo, senior vice president and head of sales and group marketing of the Communication Solutions business group with Infineon, admits that growth rates from its mobile phone customers 'might not match the growth rates from the last [few] years', but the company has confirmed its Q2 forecast.
Qualcomm is even more bullish, having already boosted its 2008 fiscal year forecast at the beginning of the year.
'If there's a slowdown, we haven't felt it yet,' Terry Yen, head of CDMA Technologies marketing at Qualcomm, told Wireless Asia. 'Given our positioning the value chain, we're a 20-24 week leading indicator, and our current guidance was to ship 80 to 85 million chips this quarter, which is another record for us, and we're on track to do that.'
Such optimism might be a case of laughing in the face of grave danger, but it also stems from several other factors, from growing demand from high-volume emerging markets to technological innovations that will allow end users to leverage high-speed wireless services in cool and - ideally - lucrative new ways.
One commonly cited driver for the wireless chipset market in the next couple of years is the rapidly growing demand for mobile services in emerging markets like India, Indonesia, Malaysia, Bangladesh, Vietnam and parts of China.