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    VLSIinsiders' Cloudside Chat — January 13, 2021

      Jan 13, 2021
    • The Outlook – What insiders are saying about the 2021 semiconductor market
    • Whisper number on WFE growth
    • Auto IC shortage
    • Materials shortages – especially packaging
    • Intel’s new CEO

    About VLSIinsiders: Every week our analysts have a cloudside* chat to discuss current events and key issues of concern, while sharing what they’ve heard over the past week from the semiconductor industry insiders.

    * cloudside chat: A fireside chat without the fire and is across the clouds of the internet

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    Transcript

    VLSIinsiders' Cloudside Chat — January 13, 2021

    DAN HUTCHESON: Welcome to this week's VLSIinsiders. This is Dan Hutcheson.

    ANDREA LATI: I am Andrea Lati

    JOHN WEST: I’m John West.

    RISTO PUHAKKA: And Risto Puhakka.

    DAN HUTCHESON: So, how's it going this week, guys? Andrea, you were spoken ISS. What do you think some of the highlights were?

    ANDREA LATI: Well, it was good actually being in a conference and seeing some people, even though it was still virtual. I mean, you know, that'd be much better over there in person, but it was a pretty good conference actually, well, lots of information. A lot of optimism about the year. Of course, as you know, our forecast is quite optimistic for this year, especially on the IC side. But looking at what we're seeing also on the equipment side, things are looking very strong. And overall, I think we have a lot going on this year as far as drivers. But of course, as you all know, there have been a lot of supply chain issues across the board, especially in automotive markets, and which I think is going to make for a very interesting year, right? Because anytime you get these disruptions, you know, the buying patterns change and the forecasting becomes a little bit more difficult, especially if you're doing that quarterly. So, but overall, even with those disruptions that we're seeing, I still think that we're setting for a pretty good year for both ICS and also equipment.

    DAN HUTCHESON: Yeah, so what were you saying in terms of the total WFE?

    ANDREA LATI: We have WFE growing about 5 to 6% for this year which it's a little bit slower than last year, because last year we do about 17%. But again, we are seeing a lot of momentum getting into the year. So that 5-6% actually could turn out to be on the low side. But again, it's a long year. But as of now, that actually seems to be kind of conservative forecast.

    DAN HUTCHESON: Okay, so tell me about the whisper number because lots of people we're saying we’re too conserve.

    RISTO PUHAKKA: Yeah, the whisper number and you know, ISS would have been really perfect to test it out. And because of the virtual format, we couldn't, but that the phone calls I had with the equipment OEMs over the last week or two, actually, since the new year was, you know, there is really strongly emerging the whisper number of 70 billion of WFE. And you know, it's about 2-3 billion higher than our forecast. But that will push the growth rates to double digit. And that was definitely one of the scenarios we were actually, Andrea, you remember, we were having this conversation back in early December when you were finalizing your forecast and what are the likelihood to get to double digit number and WFE and the interesting thing is that I don't think anybody's publicly committing to it. It’s going to be interesting to see on that earnings calls, if anybody is projecting that 70 billion WFE. But certainly, that all of them all that marks at the beginning of the year are there for really strong year. I rarely see January be stronger than we see right now.

    DAN HUTCHESON: Of course, that assumes that we can actually ship stuff because as we've seen with the auto IC shortage, our industry can stop an entire industry moving forward. In fact, you know, when you look at where chips are in the world today, especially now with the COVID, forcing everybody on zoom, it’s our semiconductor technology that's going to determine whether if the economy grows or not in any given year in the future.

    RISTO PUHAKKA: That’s so true. Yeah.

    DAN HUTCHESON: So, I know we talked about this yesterday, the last couple of days, and we've got the auto IC shortage graphic that came out of Semiconductor Analytics that shows how the auto companies just shut down buying and then they came back. And when they came back the IC makers were just sort of, you know, we love you but we're seeing somebody else sort of that's what I told…

    RISTO PUHAKKA: Yeah, and you know, Dan, you're, I mean, I used your charts, you know, yesterday with a couple of our customers and you know. When you look at the data, it's pretty clear it that the challenge is to pay attention to that data. You know, and if the data was there actually already for two months, then we are heading a pretty strong auto power analog cycle in the coming quarters and it's just happened to after holidays to blow up in the sense that the car companies realize that they actually don't have this lot.

    DAN HUTCHESON: Yeah, one of the things that really surprised me about the car companies was when you look at the media reports, a lot of the reporters were talking to people that were attorneys in the auto industry. And you know that tells you right there that the auto industry is extremely risk averse because is one of our favorite companies in the semiconductor industry likes to call them the legal part of the company is the business prevention department right? And, you know, so they're just really caught up on this. The other issue you see here that I see is really big is, you know, the bifurcation of market between foundry OSAT, you know, and the and then the fabulous suppliers are the fab light suppliers. A lot of those auto companies are fab light and

    that has to be an issue. So, John, a lot of those companies are in your space and in your part of the world and Europe. I guess Britain is not quite Europe anymore, but tell me what you've been hearing from the from some of the IC suppliers over there.

    JOHN WEST: Yeah, essentially, I hear a lot of frustration. And you think that no, in these parts of long lead time, and they should have at least set some inventory ready, but they really just didn't, they just depleted the inventories. And I think some of them are truly shocked that when it comes to buying a new equipment to increase their existing capacity. They're at the back of the line, you know, behind Micron, TSMC, Samsung and Intel. I mean they are way back in the line and same got a foundry partner again that you know, they're quite a way down the pecking order. So, they're having to wait. So yes, I think that's been quite a shocker. I think the other one as well is just talking generally about subsystems that go into the equipment to make the chips is that anger last year was over suppliers were coming out last year really strong positions, strong sales. And that momentum has continued right away into January. And a lot of these companies, I believe, they were hoping that some of the COVID restrictions would go away, like the social distancing, which would free up some additional capacity. But that hasn't happened because infection rates are still pretty high. So, you know, I have this fear that we're going to find the odd bottleneck coming out somewhere where some of the substitute suppliers or consumable suppliers are running flat out. And then again, they've been caught short because they haven't thought ahead to increase capacity. So interesting times, not the order was probably the first one you might start see shortages coming elsewhere.

    DAN HUTCHESON: And to some extent, you know, I've also heard from people that laminate some of the packaging materials is sort of the classic thing, no one ever thinks about packaging. There's been this huge shift since last year towards heterogeneous or disaggregated, whatever you want to call it to chip less type production and the auto companies have been doing that for a long time. You know, everything, the modules are pretty well separated and now they're kind of hung up. And so even though if you could get the wafers through, you can't get it through packaging. And that's the other hang up. It's like supply chain management went on holiday last year.

    RISTO PUHAKKA: Yeah, they seem to be really focused on some other parts. But the interesting outcome of this is that now everybody's going to be double or triple ordering. So just you're trying to fulfill their needs, so it's going to be pretty hard semiconductor year, quarter actually, to deal with all those orders and everything else.

    DAN HUTCHESON: Yes. Speaking of all that, the funny thing is it looks like if you're an IDM, you actually have an advantage right now. Whether you're watching auction IC’S or you're an Intel and Intel got a new CEO. That was an interesting turn of event today.

    RISTO PUHAKKA: Yeah, that was a very interesting news, Pat Gelsinger. I mean, you known him from your work in previous decades. Dan, you know, can you tell us a little bit about that?

    DAN HUTCHESON: Yeah, well, I think Pat’s the, it’s an amazing choice and he's really probably the only choice for Intel because Intel is the last IDM at the leading edge of logic. And, Pat, in order to be a CEO of Intel, of an IDM, you really need to understand not only your device architecture, but how you leverage your process technology with your architecture to have a competitive advantage. Otherwise, there's no reason to have your own fabs and to do your own manufacturing. So, Pat understands that I mean, he was the architect of the 46. He grew up at Intel, he's kind of coming home. This was really a homecoming event for him. And I mean, he started Intel when he was a teenager, he was 18 years old. And then he progressed up through the ranks to run the 46 programs. He ran a whole bunch of NPU programs, and then he wound up as the CTO of Intel before he left, eventually winding up at VMware. VMware has been all about data center and architecture of data center virtualization how you optimize that. So, it's hard for me to think of anyone else who would be a better CEO, especially since in these days, the kind of the pendulum has swung from the Andy Grove days of process centricity to architecture centricity with a support from process. So, I think Pat's really the right guy.

    RISTO PUHAKKA: Yeah.

    DAN HUTCHESON: It's an amazing choice.

    RISTO PUHAKKA: And then also his background with the Intel he I would say, understand he's tremendously respected with an Intel in with all his work previous work so that puts him in a very nice position as well.

    DAN HUTCHESON: Yeah, I've been getting tons of emails and texts today about how everybody is so glad to see him.

    RISTO PUHAKKA: Okay.

    DAN HUTCHESON: It's like all of a sudden, the lights are back on at Intel. So, that's, it's quite an event. So…

    RISTO PUHAKKA: Yeah.

    DAN HUTCHESON: Well, anyway, anyone else have anything to say about that?

    RISTO PUHAKKA: I'm just goanna say this is a pretty unique start for the year. I mean, this pretty much tops of my, almost 30 years, in the industry in how the January's unfolding. So, we'll see what the year brings.

    DAN HUTCHESON: Yeah. I have to say, I haven't seen anything like this on the positive side.

    RISTO PUHAKKA: I that's exactly yeah. When it was really on a positive side. Yes.

    DAN HUTCHESON: We've seen some ugly storms in January coming. Never seen this kind of a, you know, a huge surge, where people come out of the holidays that are just super happy. So, thanks, everyone.