With many of the major GaAs devices manufacturers reporting calendar Q2 results, the GaAs market revenue picture is beginning to sharpen. There is both good news and bad news, so let's start with the good news: it appears the overall GaAs market is managing to eke out growth in the 2% range for the first half of 2012. A small gain, to be sure, but I think the still uncertain global economy has put thoughts of double-digit GaAs device growth to rest.
The bad news is this growth appears to be narrowly-based, at least at the top tier of GaAs device manufacturers. GaAs device lmanufacturer Skyworks and pure-play foundry WIN Semiconductors both seem poised to strengthen their leads with strong growth. Avago has reported overall revenue growth in the first half of 2012, but their products and technologies are so varied that more scrutiny is needed to tease out the GaAs content from these top-level results. After these three, many of the other top GaAs device manufacturers, like RFMD, TriQuint, ANADIGICS and Hittite have reported year-over-year revenue declines for the first half of 2012. IT's also interesting that the companies that are doing well seem to have found the "formula" because their outlook for the rest of 2012 is relatively optimistic and they expect to continue to see revenue growth. As a positive note, many of he companies that have been mentioned also see brightening market prospoects in the second half of 2012, but many still seem to be forecasting year-over-year revenue declines. I'll be monitoring this to sort out these developments.
The drivers for GaAs, data consumption and increasing smartphone/feature phone penetration and GaAs content are still firmly in place, but there are challenges for GaAs on the horizon. The uncertainty in the economy, especially in Europe is dampening enthusiasm at operators to spend money on network infrastructure and with consumers to buy or upgrade to the latest gadget. There continue to be great strides made by silicon-based technologies into functions previously dominated by GaAs prosucts. The GaAs industry considers the calendar Q3 as it's best as consumer electronics manufacturers ramp up for the holiday season, so the performance during the next quarter will go a long way to clarifying the overall picture for 2012.
I'll leave you with a great visual tool that a colleague of mine uses. She calls the chart linked below a "pressure curve". It represents performance of a data point versus a moving 4-quarter average for a particular metric. In this case, I've plotted a representative pressure curve of a sample of GaAs device manufacutrer revenue since the midway point of 2009. If a point has a value of "1", it is exactly the same as the average of the preceding 4-quarters. Fromn the graph below, it is easy to see the big revenue ramp that closed 2009 and held through most of 2010. We can also see that even with growth in the first half of 2011, the rate was lower and we see the peak in Q3 and subsequent decline. Now, one quarter does not define a trend, but as we come to the close of what has historically been a growth quarter, we can perhaps be a bit optimistic that the GaAs insustry will manage to hold onto and hopefully expand the gains we've seen in the first half.
Pressure Curve.png (60.88 kb)