2012 Semiconductor outlook and its impact to semiconductor manufacturing in Malaysia

Year 2011 started with East Asia political unrest, especially in Egypt, Libya and Yemen that caused oil price surge. EU sovereign debt crisis in Iceland, Greece and Portugal that needed IMF to bail-out. Sluggish US economy and weakening US dollar causing high import and export difficulties Latest, Japan 311 earthquake and Tsunami caused disruption in semiconductor supply chain. Japan lowered GDP due to reduced spending in auto and electronic products. China and rest of Asia observed increase of inflation rate that caused consumers to reduce spending. Second half of 2011, forecasted to be neutral. Recent foundry news from UMC and TSMC is that the reduction in the average wafer selling price (ASP) by at least 10% ins inevitable. TSMC is more flexible in the pricing and reduce loading due forecast expectation of weak demand in PC market. Other new players like Promos and Powerchip from DRAM are now entering foundry business increasing competitiveness in the foundry market. Big players like Samsung, Intel, Hynix, TSMC, Globalfoundries, UMC, Micron, and SMIC continue to invest in capital expenditure (CAPEX) in year 2011, with projected spending aboveUS$40B. Year 2012 is expected to have over capacity situation in 65nm 12” wafer size segment and the ASP is expected to erode rapidly beyond 8” wafer pricing. This will make CMOS processes available 8” wafers to be less competitive and customers will start qualifying on 12”. What will be our strategy to survive in this situation? We will discuss on what we have planned to ensure continued success and survivability of Silterra and wafer manufacturing in Malaysia.