TSMC founder Morris Chang forecasts L-shaped recession
Monday 23rd February 2009, 04:15:00 PM, written by Arun
Last week, EETimes.com reported that TSMC executives reached a consensus that this recession would be U-shaped, with a rapid rebound in the coming quarters. But Morris Chang, the founder and Chairman of TSMC, seems to have a very different opinion of what's going on. In a recent interview with the Wall Street Journal, he claimed that the recovery would be slow and that revenue would only return to 2008 levels in three years.
The difference, of course, is that Morris Chang is more likely to express his conscience than 'managers of the various business units' at 'an internal sales conference'. He's inherently less biased as he has much less to lose or gain personally, and is more likely to be realistic. However, you could also argue that he's less likely to look at inventory levels and the like on a daily basis than business unit managers, and the claims of 'rush orders' and apparent reductions in inventories seem realistic.
One case in point is NVIDIA's claim that GPU channel inventories have gone down from 2.5-3 months to 1-1.5 months and that it is therefore nearly impossible for them to drop any further. Certain companies in other parts of the semiconductor industry, or other parts of the economy in general, are likely to have less visibility on that front - and therefore, this could lead to a sudden increase of orders as their customers stop reducing inventory (i.e. their order rate matches their actual sales again).
This does not mean, however, that the market itself has improved or that consumer spending has recovered; it is exclusively related to inventory levels in the industry. Therefore, it is possible to imagine a scenario where there is a fairly rapid rebound as in an U or V-shaped recession, but it only lasts for a short period of time after which the economy starts to stagnate again because consumer spending isn't actually recovering much if at all. While not a pretty scenario for the industry or the world, it would still be less frightening than the Great Depression 2.0...
While nobody really knows how bad things are going to get, it would be hard to blame Morris Chang for not being able to imagine an event that would allow for a rapid consumer spending recovery. Given the massive amount of debt on personal balance sheets in the USA and beyond and individuals' apparent desire to deleverage, just getting the credit markets flowing again is unlikely to be a solution in itself - although it should at least prevent the worst.
The difference, of course, is that Morris Chang is more likely to express his conscience than 'managers of the various business units' at 'an internal sales conference'. He's inherently less biased as he has much less to lose or gain personally, and is more likely to be realistic. However, you could also argue that he's less likely to look at inventory levels and the like on a daily basis than business unit managers, and the claims of 'rush orders' and apparent reductions in inventories seem realistic.
One case in point is NVIDIA's claim that GPU channel inventories have gone down from 2.5-3 months to 1-1.5 months and that it is therefore nearly impossible for them to drop any further. Certain companies in other parts of the semiconductor industry, or other parts of the economy in general, are likely to have less visibility on that front - and therefore, this could lead to a sudden increase of orders as their customers stop reducing inventory (i.e. their order rate matches their actual sales again).
This does not mean, however, that the market itself has improved or that consumer spending has recovered; it is exclusively related to inventory levels in the industry. Therefore, it is possible to imagine a scenario where there is a fairly rapid rebound as in an U or V-shaped recession, but it only lasts for a short period of time after which the economy starts to stagnate again because consumer spending isn't actually recovering much if at all. While not a pretty scenario for the industry or the world, it would still be less frightening than the Great Depression 2.0...
While nobody really knows how bad things are going to get, it would be hard to blame Morris Chang for not being able to imagine an event that would allow for a rapid consumer spending recovery. Given the massive amount of debt on personal balance sheets in the USA and beyond and individuals' apparent desire to deleverage, just getting the credit markets flowing again is unlikely to be a solution in itself - although it should at least prevent the worst.
Tagging
tsmc ± economy
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