Market News
Industry experts have cast their predictions at the commence of each yearly cycle. But for analysts like Malcom Penn, when the mood changes and the predictions turn a different course how should the industry react especially when the focus is steered away from expectation. What does the change in Penn’s recent forecast mean for the industry for ensuing months?
Penn predicts patience
The last few years has seen Malcolm Penn of Future Horizons make beginning of the year predictions that have been very different to other analysts. Despite the negative feedback, Penn has steadfastly refused to back down from his predictions. Instead as the year progresses it has been the competitors constantly changing their predictions, often moving towards the Penn prediction, despite previously suggesting it as outrageous. Future Horizons recently gave their halfyear update and this time Penn did change the outlook.
Despite dropping his yearly forecast by 6%, Malcolm Penn remains at the top end of industry forecasts. While it could be said that Penn has lowered his prediction to be more in line with other analysts, it needs to be noted that most of them have just raised their predictions from the beginning of the year. This puts the industry average around 11 – 12%, still below the optimistic Mr. Penn at 14% growth for the year.
Optimistic he may be but Penn has proven over the last few years that he is very good at reading market fundamentals to predict the overall year. The problem Penn faces, as well as his peers, is that the industry has diversified so much that whatever the figure provided, it tells very little about the true state of the industry. Analysts are going to have to break down the information into segments that provide real data. Future Horizons have begun this but it is still a long way to go.
A great example of this is recent statistics from iSuppli that look at inventory excesses in the industry. A quick breakdown shows that Intel is the major cause and when you take their figures out of the equation, then the industry does not have such excessive inventory. A breakdown of most industry figures will show anomalies that break up the bulk figures.
Penn stated the company remains optimistic about the long-term future of the industry with no sign that manufacturing demand has run out of steam either geographically or in terms of products. Nor is the industry maturing despite the hopeful cries of some industry pundits. Penn agrees that some sectors have matured but not the industry as a whole.
One of the key factors that changed the Penn forecast also highlighted the lack of maturity.
That was the flash price wars as well as the AMD and Intel price battles. Events Penn admits he did not see coming. These fiscal flare ups are ensuring that the ASP of microelectronics have not risen as the industry once hoped.
Penn expects the remainder of 2006 to stay robust with some potential for capacity shortages and optimistically predicted that ASPs would enter a recovery period.
He still feels 20% is possible but highly unlikely considering the problems some manufacturers are facing. Penn also revised his 2007 prediction, dropping 3% to a prediction of 19% for the year 2007.
