Supply Shortage Crimping LED Lighting Market

March 24, 2010

Broad shortages of LED chips used in the latest flat-panel TVs, laptop screens and high-efficiency lighting could turn a dangerous situation into disaster by the end of the year.

Products are already in tight supply as manufacturing capacity is running at full-bore. Analysts predict that unless new plants are brought online by the fourth quarter, severe LED rationing may hit vendors like a holiday season tsunami.

LED lighting is finding itself battling with LED TVs for precious manufacturing capacity.

The LED lighting industry could be most vulnerable. The industry uses the brightest, highest quality LEDs – the hardest to produce – and is seeing capacity already shifting to more mainstream applications, particularly TVs.

Producers are trying to respond. Aixtron of Germany and Veeco Instruments of the U.S. are rushing to double their manufacturing by the fourth quarter. Sensing the unmet demand, LED lighting maker Cree also anticipates doubling its production capacity. The company is building the world’s largest LED manufacturing plant at a site in China.

But questions remain whether this will be enough. LED designer Bridgelux says production capacity around the world for lighting chips is tight. “I want more and I can’t find it,” says CEO William Watkins. The short supply isn’t yet hurting the company, “but we can’t cut prices as fast as we might.”

The constraint also is hampering negotiations. “Right now, it doesn’t allow us to negotiate good prices on our LEDs,” adds Watkins.

Principal Analyst Jagdish Rebello at the research firm iSuppli says demand for all types of LEDs continues to outstrip supply. Sales came to 63 billion units last year and are projected to increase at a double-digit pace this year. That could bring them perilously close to the world’s production capacity of 75 billion units.

“A drastic under supply situation could occur,” warns Rebello.

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Posted by Mark Boslet

Unsold Solar Cells Piling Up In Warehouses

July 27, 2009

The woes of the solar industry continue and are likely to get worse.

Once in short supply, polysilicon wafers for solar cells are in abundance and prices are falling

Once in short supply, polysilicon wafers for solar cells are in abundance and prices are falling

With demand having collapsed at the start of the year and new factories continuing to come on line, unsold solar cells and modules are piling up in warehouses.

The industry’s only salvation may be a price collapse, making solar cells as cheap as optical bandwidth at the depths of the dot-com washout.

At that point, the dynamics of the industry could change dramatically. Until then, companies will have an increasingly difficult time making money.

In a sign of the continuing troubles, inventories of solar gear, including silicon wafers, soared 64 percent in the first quarter, according to iSuppli.

The glut added 1.5 months of supply to an industry already producing more goods than the market is able to absorb. Prices have suffered and will decline further.

ISuppli believes that the “spot” market price for a kilogram for polysilicon, a foundation material for solar cells, will fall to $50 by December from $180 a kilogram at the start of the year. It is a startling decline.

Companies such as REC, Yingli, and SolarWorld have felt the brunt of the inventory excess because they are involved in all stages of solar cell production, from the polysilicon to wafers and cells. Inventories for these integrated manufacturers rose to more than 161 days from 86 days in the first quarter of last year.

ISuppli expects inventories to continue swelling into 2010 –with the woes facing producers mounting.

Source: iSuppli

Source: iSuppli

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Posted by Mark Boslet

Chip Forecast Reverses Course And Sees A Worse 2009

July 9, 2009

After weeks of more upbeat forecasts for semiconductor market, one research firm has reversed course and predicted a worse 2009 than previously anticipated.

ISuppli said it now sees semiconductor sales falling 23 percent this year with the weak automotive market a primary culprit for the deteriorating outlook. The firm in April had projected sales would tumble 21.5 percent.

“Conditions appear to be worse than previously expected,” says Senior Vice President Dale Ford. “The decline of worldwide automobile sales, particularly in North America, has had a major impact on overall electronic equipment shipments.”

In recent weeks, a number of research firms had raised their outlooks for the year citing greater business stability and a sharp draw down in semiconductor inventories. When inventories get too low, manufacturers replenish them by ordering more products.

So against that backdrop, the iSuppli reversal could be viewed as something of a warning – a canary in the silicon factory.

Yet, the research firm’s revision, release late Wednesday, did not paint a consistently dull canvas. Japanese chipmakers, which experienced a sharp reduction in first quarter production, have now reduced excess inventories and resumed production, it said.

This should contribute to global chip revenue rising 10.4 percent from the second to the third quarters and another 4.9 percent in the fourth quarter. Such an increase would be noticeable improvement from earlier this year.

Next year, chip sales should expand a healthy 13.1 percent, iSuppli added, suggesting a steady rebound will take hold. Let’s hope the firm is right this time.

Chip sales should reach $199 billion this year. Source: iSuppli

Chip sales should reach $199 billion this year. Source: iSuppli

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Posted by Mark Boslet

Intel Loses Market Share To AMD

June 10, 2009

It is a surprise seeing Intel lose microprocessor market share to Advanced Micro Devices.

After a year of market share loses, AMD treads on Intel

After a year of market share loses, AMD treads on Intel

But that is exactly what happened in the first quarter, according to iSuppli. Intel’s share slipped a substantive 2.5 points to 79.1 percent from 81.6 in the fourth quarter while AMD gained about as much to hold a 12.8 percent share.

ISuppli says AMD had a strong performance in desktop, server and particularly in notebook. But it is hard to believe the company’s competitive position has been strengthened that much in the past several months.

More probably, the PC market paused to digest the gains Intel has made since coming out with an improved lineup of chips more than a year ago.

With better products in the market, Intel gained share in each of the previous four quarters, its market dominance rising from a 78 percent share to the fourth quarter’s 81.6 percent, iSuppli data show.
This is in part due to the release of the Atom processor, which became the computer brains in a first generation of netbooks. But it also is linked to the Core 2 Duos Intel has been fielding with better power management and performance.

The company has been manufacturing with 45-nm technology and the nano-sized circuits give it a cost advantage.

Anyway, the winning streak came to an end during the first three months of 2009 as the microprocessor market declined 20.6 percent to $6.9 billion in size. Don’t expect it to continue.

(Oh, by the way, do expect the market declines to continue. ISuppi expects full year microprocessor revenue to be down 15.8 percent to $28.6 billion.)

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Posted by Mark Boslet

LCD TV Prices Rise As Internet Access Comes To Market

June 4, 2009

The average price for 40-inch and larger LCD flat-panel televisions rose 3 percent in April as manufacturers sought to improve profitability by delivering more fully featured products.

Samsung introduced several back-lit LED models

Samsung introduced several back-lit LED models

The increase runs counter to long-standing trends that for years have brought lower prices to the market. It also appears to contrast with the current consumer desire to spend less, not more, on discretionary items.

According to iSuppli, the price rise came as top-name makers added features to their products. Samsung, for instance, added several back-lit LED models to its lineup. Other makers introduced Internet connections and the ability to play Internet video.

Prices are likely to hold their ground in coming months, except on low-end models, where competition is fierce, predicts iSuppli.

On the low end of the market, premium brands are competing actively with value-priced brands such as Vizio. Cut-rate pricing helped Vizio rise to the top spot in the U.S. and Canadian LCD-TV market in April, iSuppli said.

The lowest price for a 40-inch flat-panel model in the month was $615.

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Posted by Mark Boslet

[Analysis] Palm Pre: Hype Precedes Reality, Time Is Running Out

April 30, 2009
Spray and Pray. Thats how I would describe Palms hunt for real reviewers. As Dells Andy Lark pointed out recently, its easy to identify the influencers. Just start Googling!

Spray and Pray. That's how I would describe Palm's hunt for "real reviewers". As Dell's Andy Lark pointed out recently, it's easy to identify the "influencers." Just start Googling!

Pressure is mounting on Palm as it gets closer to launching its new Pre smartphone, rumored to be just a couple weeks away, in mid-May.

For Collins Stewart analyst Ashok Kumar, Palm may be facing much more challenges than it can bear.

Pre faces multiple software and hardware issues

In a report this morning, Kumar writes about multiple hardware and software issues that forced Palm to dramatically reduced its production orders for the Pre; calling Wall Street’s expectation of Palm shipping 1+ million smart phones in 2H09, highly unrealistic.

Palms future depends on the Pres successful launch

Palm's future depends on the success of its Pre smartphone

Pre must sell at or below $199

For Kumar, if Sprint does not match or beat AT&T’s subsidized iPhone price of $199, which translates to a subsidy in excess of $200, the Pre is Dead On Arrival.

According to a virtual teardown done by analyst firm iSuppli, the material cost for the Pre is $170. iSupply expects Palm to charge Sprint $300 for the Pre, which in turn would subsidies the device to reach the iPhone level.

Running out of cash… again!

Kumar said that Palm’s cash burn was about $90 million last quarter, which should increase significantly with higher marketing cost associated with the launch of the Pre platform.

With only $220 million in the bank, time runs out in two quarters, Kumar notes.

But Palm might found a way to reduce its marketing “spend” by recruiting “Real Reviewers” of Palm phones including the Palm Pre. Every reviewer, will receive for free, a current model Palm phone and a data plan for six months. The only requirement is to regularly post about the Palm phone on blogs and social networks.

It’s smart for Palm to try to target “influencers” (journalists, bloggers, soccer Moms…). A strategy that was highly recommended at yesterday’s PRSA event on “PR Secret Strategies For Success” by PR pros from Dell, FICO and Sun. For the bloggers, it’s a double-edge sword: get an early access to the Pre, but risk selling your soul or at least the perception of it.

We already played with the Pre at CES, last January. The keyboard is nice – similar to the Palm Treo Pro – but the rest of the experience (features, applications) will need time to get use to it. We’ll stick with our iPhone, Blackberry and soon Google G1 for now!

Still, no takers, for Palm

Finally, Kumar does not believe that Palm is an attractive take out candidate.

“Their crown jewel is the operating system, but the smart phone industry is migrating away from closed to open platforms. As such PALM is on the wrong side of the fence,” writes the financial analyst.

While I agree that in this distress economy, Palm is an expensive and risky buy – which generally does not go well together – Palm’s WebOS is a much more “open” system than the highly successful iPhone.

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Posted by TechPulse 360

The $359 Kindle 2 Costs Amazon $186 To Build

April 22, 2009

Nice markup, ehh?

According to a product tear down by iSuppli, Amazon’s new Kindle 2 has a 48 percent gross profit on its material and manufacturing costs.

The Kindles E Ink display module costs $60, or 42% of the total

The Kindle's E Ink display module costs $60, or 42% of the total

The popular ebook is constructed from parts costing $176.83, and its manufacturing and battery add another $8.66, bringing the total to $185.49.

Not included are costs for intellectual property, licensing fees – and, of course, sales efforts, marketing, shipping, etc.

The markup still is attractive given the normally slim margin retails operate with.

About $60 of the material costs go to E Ink for the display module at the heart of the product. The display uses an electrophoretic bistable technology that allows it to show an image even when it’s not drawing power, said Andrew Rassweiler, principal analyst at iSuppli.

The next most expensive component is the wireless broadband module from Novatel Wireless at $39.50. Qualcomm supplies a baseband processor priced at $13.18.

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Posted by Mark Boslet

Tough Times Continue For Solar Industry

April 17, 2009

Solar prices are down and utilities can’t get the financing to build large-scale solar installations.

A change in Spainish tariffs have slowed the market

A change in Spainish tariffs have slowed the market

Times have never been tougher. Solar-cell producers have responded by reining in growth projections and cutting production.

One big reason for the industry’s turn of fortune is the Spanish market. Spain soaked up about 50 percent of worldwide solar demand in 2008. But a change in tariffs has slowed the market.

As a result, there is excess inventory – despite better incentives in the U.S. and Japan. France and Italy also have attractive investment climates.

ISuppli on Friday offered a projection for the troubled market. It estimated the average price per solar watt will fall 12 percent this year and revenue generated by photovoltaic systems will fall 40 percent to $18.2 billion.

That’s a sharp contrast to the $30.5 billion in 2008.

That means globally the industry will install 3.5 gigawatts in 2009 compared with 5.3 GW last year. That’s a 32 percent decline.

The number of new suppliers will fall and the addition of new production capacity will slow, says Senior director Henning Wicht. It will be a little like the PC market shakeout of the mid 1980s, when the industry excess disappeared.

The question is whether this will lead to a more stable and mature market in the years to come. Don’t count on it.

Photovoltaic projections from iSuppli

Photovoltaic projections from iSuppli

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Posted by Mark Boslet

Smart Phones Are A Bright Spot In A Dull Year

March 4, 2009

Mobile handset sales will plunge 10 percent or more this year, but smart phones, like Apple’s iPhone, will prosper.

Bucking the magnetic effect of the downturn, smart phone sales measured by units are expected to rise as much as 11 percent, says iSuppli.

For growth to reach this level, network operators must cut fees for data services and offer aggressive reductions in phone prices, said Tina Teng, a senior analyst.

If they don’t, and if consumer confidence continues to erode, then sales would rise 6 percent.

In any event, between 183.9 million and 192.3 million units will ship in the year, says iSuppli. That would represent between 16.6 percent and 17.4 percent of the overall market.

Growth could increase in 2010.

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Posted by Mark Boslet

DRAM Forecast Falls As Chips Continue To Sell Below Cost

February 9, 2009

The unsustainable DRAM memory chip market trudged through the fourth quarter with prices falling a sharper than expected 38 percent and shipments unchanged with the third quarter.

In other words, the typically strong fourth quarter turned into a bust. Even normally resilient market share leader Samsung lost share and posted a loss, said iSuppli.

Oversupply of this chip used in computers is likely to continue those losses into the first quarter.

The big winners of the quarter were Micron Technology, which gained share as its revenue decline was the smallest among major players, and Hynix, which also increased its share. Elpida lost share.

DRAM suppliers have been selling below cost since the fourth quarter of 2007, iSuppli said. That may not change soon. Total operating losses in the fourth quarter were $2.6 billion, more than for all of 2007.

The research firm cut its 2009 forecast. It now projects sales will fall 15 percent this year to $20 billion. Average selling price per megabyte will fall 31 percent.

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Posted by Mark Boslet

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