Electronics IP Industry – A February 2010 Updateby Dr. Russ Henke Henke Associates
Henke Associates had arbitrarily selected eight (8) publicly-traded companies originally (called the "Group-of-8" or "G8"), as representative of the then-current financial state of the Electronics IP industry. At the end of 2004, ARM completed its acquisition of Artisan Components, Inc., thereby reducing the "G8" to "G7". In August 2009 Mentor Graphics completed its acquisition of LogicVision, thereby reducing the “G7” to “G6”. Accordingly, in this February 2010 Commentary, the financial performances of the "G6" Electronics IP vendors for the fourth quarter of 2009 will be considered. Current Group-of-6 ("G6"): For the “G6” companies above, it is assumed that all of their revenues are Electronics IP sales and/or directly related IP services. News Highlights:Positive Economic News - Finally: Some welcome news appeared on January 29, 2010, when the US Government released an estimate of GDP in Q4 2009, a robust figure of 5.7%, the fastest pace in more than six years. Q4's GDP increase followed a 2.2% increase in Q3 2009. Also, on February 5, 2010 the US Labor Department said that the nation's unemployment rate dropped in January 2010 to 9.7%. More specific to the Electronics IP Industry, on February 1, 2010 the Semiconductor Industry Association (SIA) reported that worldwide semiconductor sales in 2009 were $226.3 billion, a decline of 9% from 2008 when sales were $248.6 billion. Total sales for 2009 surpassed the SIA forecast of $219.7 billion. December sales were $22.4 billion, an increase of 29% from December 2008, when sales were $17.4 billion. December sales declined by 1.2% from November when sales were $22.7 billion. (All monthly sales numbers represent a three-month moving average). “2009 turned out to be a better year for the global semiconductor industry than expected,” said SIA President George Scalise. “A strong focus on inventories throughout the supply chain mitigated the impact of the worldwide economic downturn and positioned the industry for growth as the global economy recovers. Sales in the final quarter of 2009 were supported by healthy demand in a variety of end markets including PCs, cell phones, and consumer electronics. In 2010, unit sales of personal computers and cell phones - which account for approximately 60% of total semiconductor consumption - will grow in the low-to-mid teens, providing a solid platform for chip sales. Consumer electronics are expected to grow in the mid-single digits,” Scalise continued. “We are also seeing the effects of recovery in the enterprise sector and we believe this trend will continue,” Scalise noted. The SIA expects a return to normal seasonal patterns, which suggests a modest slowdown in the first quarter. China and India, two key emerging markets, are also driving demand. In addition to purchasing consumer items such as handsets and computers, both regions are continuing to invest in wired and wireless infrastructure. These investments in infrastructure create demand for a broad range of semiconductor products. “Advances in technology are continually enabling development of new products, such as netbook and tablet computers,” said Scalise. “Attractive price points for these products are creating new market segments that hadn't previously existed, and they are adding to overall semiconductor demand.” “With improving consumer confidence and signs of economic recovery around the world, the semiconductor industry is well positioned for growth in 2010,” Scalise concluded. About the SIA Global Sales Report: The SIA Global Sales Report (GSR) is a three-month moving average of sales activity. The GSR is tabulated by the World Semiconductor Trade Statistics (WSTS) organization, an independent, non-profit organization established by the global semiconductor industry to compile industry statistics. The moving average is a mathematical smoothing technique that mitigates variations due to differences in companies' financial calendars. About the SIA The SIA is the leading voice for the semiconductor industry and has represented U.S. semiconductor companies since 1977. Collectively, the chip industry employs a domestic workforce of approximately 200,000 people. The semiconductor industry is America's second-largest exporting industry. More information about the SIA can be found at www.sia-online.org . On January 28, 2010 Gabe Moretti reported on his web site “Gabe on EDA” that Jay Vleeschhouwer had recently joined Ticonderoga Securities as Senior Software Analyst and has started covering the EDA Industry for that firm. One of Jays' comments in his first report for 2010 was, “We expect that this [EDA] industry, which serves the semiconductor and electronics markets, declined by about 10% in 2009 to $4.15 billion, after having declined 11% in 2008; we expect 3%-4% growth in 2010.” Gabe provided other details form Jay's report, details which may be recounted in the next quarterly EDA Industry Commentary due out in March 2010. (By the way, on January 19, 2010 Gabe Moretti began alternating with the author of this Electronics IP Commentary in posting EDA Weekly articles every two weeks in EDAcafe.com. This author’s first EDA Weekly article appeared on November 09, 2009, entitled. “ The Role of Business Planning ” .).
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