Two bellweather numbers – the semiconductor equipment Book-to-Bill and Intel’s revenue – are trending towards a slim slope growth curve. The former signals that the worldwide semiconductor industry buildout is slowing down a bit, although to be perfectly fair it’s been bumping along at about zero growth for the past six months right about at “1″ (Figure 1). A Book-to-Bill ratio greater than “1″ means that semiconductor equipment orders (bookings) exceed shipments (billings) – a sure sign that companies are creating backlog on their order books as the market grows. According to analyst firm SEMI of San Jose, CA, North America-based manufacturers of semiconductor equipment posted $1.46 billion in orders worldwide in June 2012″ which is 9.8 percent lower than the previous month.
What’s this mean overall? Not much, I believe, since semiconductor equipment is a huge CapEx for all IC companies, there are more suppliers worldwide than just those shipping out of North America, and most fabs, foundries and assembly houses are trending with the overall IC market of merely “fair” growth. So: they aren’t buying much right now. But the move to 3D transistors and 22nm geometries is heating up and everyone’s trying to catch up to Intel’s market-leading process technology. They’ll have to invest big to get there.
Intel still the one to beat
In a related announcement, Intel reported on July 17 quarterly Q2 2012 revenue of $13.5 billion along with net income of $2.8 billion. Revenue is up 5% from Q1, and 4% over last year (Figure 2), with average selling prices (ASPs) up 1%. Despite the company’s popular Second Generation and recently shipping Third Generation Core microprocessors (i3/i5/i7), the company reported “Microprocessor inventory levels…are healthy but…below historical averages”; the company cites “macroeconomic uncertainty ahead of Windows 8 operating sytem release.”
I disagree with that assessment, as no one outside of the tech industry knows diddy about Windows 8 (or the ARM-based version, Windows RT); in fact, most regular Joes and Jackies I know still run Windows Vista or even XP. They’re not holding off making PC buy decisions based upon Microsoft’s next touch/tablet-enabled Windows 8: they’re not even aware of what microprocessor choices they have from Intel or AMD.
In fact, I’m in the market for an Ultrabook (Intel) or Ultrathin (AMD) with either of those companies’ latest CPUs: Gen 3 for Intel or AMD A8/A10 APU, and I can’t find much selection in the stores or online despite the fact that both OEMs are shipping CPUs. I’m lucky if I find a clunky laptop with an Intel Gen 3 Core i7, but that’s a “last year” laptop design that guys like HP and Dell are only refreshing with new CPUs. I haven’t seen the sexy new Ultrabooks or Ultrathins equipped with new CPUs but I know they’re coming.
Besides, maybe people just don’t have the money to buy new PCs (which will most certainly be a laptop or thinner flavor, not a desktop), but are instead considering a newer smartphone – possibly switching from an iPhone 3GS or 4 to an Android-based Samsung Galaxy S III, and Intel doesn’t have a play (yet) in this part of the market. Or maybe consumers are hoping to replace an older laptop with a tablet computer of some kind.
Another big growth market is in worldwide LTE (“4G”) cellular buildout. With everything from smartphones to future automobile IVI systems relying on Internet access via cellular pipes, wireless bandwidth is critical. Carriers are investing in new LTE gear and backhaul channels as fast as you can say “40-gig Ethernet”. European wireless analyst Frédéric PUJOL of IDATE (hey, why just listen to the Americans all the time?) forecast in May 2012 that there would be 830 million LTE subscriptions worldwide by 2016 (37.2% in Asia-Pac, 23.8% in North America, and 16.9% in Western Europe).
With a promised 50-70 Mbit/s download speed cellular subscribers want those pipes to handle file, video, and “rich” content. And don’t forget that anything with an IPv6 address – from your blender to your smart meter – is going to be “M2M-ing” data across wireless nets.
So getting back to Intel, what does this mean? The company has a big play in cloud services, and the quad-core (and more) Intel Xeon microprocessors run routers and core servers (Figure 3). The company publicly announced earlier this year their packet-processing solution called Crystal Forest that aims to position Intel against popular niche NPU ASICs from Broadcom, Cavium and others. Therefore: Intel’s steering their fortunes towards growth markets beyond just PC-based microprocessors.
In other news, Intel just acquired IDesia Biometrics from Partech International. IDesia Biometrics is an Israel-based medical device company.
[Editor's note: Full disclosure - I'm a paid blogger for Intel in the company's Intelligent Systems Alliance, though this blog posting represents my own opinion and was not paid for nor endorsed by Intel.]