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Tuesday, December 22, 2009

After Health Care, Good Luck Energy Policy

Immediately following the Copenhagen climate change summit, former governor of Alaska Sarah Palin effectively used Twitter’s 140-character limit to ridicule climate change legislation:

"Copenhgen=arrogance of man2think we can change nature's ways.MUST b good stewards of God's earth,but arrogant&naive2say man overpwers nature," said Palin to the world.

In a recent Op-ed for the Washington Post, she was more specific:

"The last thing America needs is misguided legislation that will raise taxes and cost jobs – particularly when the push for such legislation rests on agenda-driven science," Palin wrote. "Without trustworthy science and with so much at stake, Americans should be wary about what comes out of this politicized conference. The president should boycott Copenhagen."

I don’t want to enter into ideological debates in any country, with any faction, with any member, on any issue. And, I’m not an expert on current US politics and the legislative process. I care about policy--and these comments by Palin illustrate to me why any meaningful and effective energy policy in the US for the foreseeable future will be impossible.

This isn’t good news for SEMI PV Group members serving the solar industry. It isn’t good news for high-technology companies in Silicon Valley and other areas looking to transition from semiconductors, biotechnology, materials sciences, IT, and a host of other segments into Clean Tech. In my opinion, it isn’t good news for higher education, for job creation, US growth stocks, and US innovation.

I presume that energy policy will follow much of the same course as the recent health care legislation. Republicans will fight any comprehensive bill attempting significant change in fossil fuel demand or government spending on renewable energy. They will do so whether or not they agree that reducing reliance on foreign oil is a good thing, whether they believe climate change is a reality, and whether the possibility that US technology companies can lead the world in emerging Clean Tech markets.

Republicans will fight major energy legislation primarily because the dysfunctional political environment forces them too. Because leaders like Sarah Palin make it impossible for them to support solar power and renewable energy (except biofuels, of course). Tragically, good policy is always the first victim of bad politics.

The fact is there is a global renewable energy industry rapidly developing. Leaders in this industry will invariably come from countries that have developed an aggressive public-private partnership supported by appropriate renewables demand incentives in the local market. It’s no surprise that leaders in wind energy come from Denmark, and leaders in solar power and PV equipment often come from Germany. One can argue from a philosophical perspective on the value of free-markets and limited government, but the reality is that companies from Europe and Asia are getting a head start on an industry that likely will be among the fastest growing, lucrative industries of the next generation. While the rest of world is thoughtfully investing in the future, the US is pouring trillion of dollars into classic 19th century industries like banking, agriculture and war.

For those US companies fortunate enough to have reached scale in the past two years (many taking advantage of European subsidies), congratulations, you probably have a great future ahead of you. For those emerging, transitioning and other US companies who will need to leverage a local market and competitive developmental infrastructure to survive on the global stage, best of luck. Maybe policies in states like California can help close the gap.

Health care reform took nearly 50 years to accomplish—and there were easy benchmarks to follow in every developed country in the world. There are also good benchmarks to follow in renewable energy (see the PV Group position paper on solar power). But effective renewable energy policy--with its guaranteed costs, uncertain outcomes and long-term justifications—seem unlikely to emerge from Congress in the next year.

And by then, well, we’ll see…

Wednesday, December 16, 2009

Video Interview on Solar Policy

I recently had an interesting interview with an website called Etopia News on our Solar Policy White Paper that was conducted via webcam over the Internet. The interview was surprisingly easy to conduct and capture. I wish I was more articulate (have to work on that), but I am glad for any opportunity to push our message.

Marketing on the Rebound

Investment analysts have always liked the semiconductor materials and equipment industry because of its stock volatility. The boom and bust cycles that periodically afflict the industry create great trading opportunities. Whether up and or down, you need a stock to move to make a quick return on the stock market. It may be hard to predict a market turn on the Dow, but many smart people think they can correctly estimate the swings in the purchasing behavior of foundry’s and IDM from industry stats like the SEMI Book to Bill.

The volatility of the semiconductor market also creates market share opportunities for the players. In many product areas, market share gains and losses occur on the market upswing, as capacity is constrained, and on the downside. Share gains when fab or OSAT capacity reaches high level offers opportunities for price leaders, second sourcers, “me-too” products, and sometimes for anyone who can simply ship an order. Market share gains during the downswing can come from aggressive price cutting, preference for stable market leaders, missteps in sustaining service levels, or sustained product competitiveness.

At this time, during the upswing, technology buys typically lead the rebound. Through our World Fab Forecast product, we have been seeing investments in advanced 32nm and 45nm technologies pick up throughout the last quarter. Technology-driven markets inherently provide an opportunity for market share gain; offer what no else has or be the first to deliver what people need, and voila, orders will appear. But chasing advanced technology—especially during this slump when staffs are thin and money is tight—can lead to mistakes, expensive ones. TSMC has reportedly suffered yield problems after the rollout of its 40-nm process. The company promises a resolution by early 2010. Will the fix include a change in preferred vendors? And, will competitors including Chartered, IBM, Samsung, Toshiba and United Microelectronics learn from TSMC in the rollout of their 45-/40-nm processes?

Increasingly, the semiconductor equipment and materials market is characterized by segment specialization: memory, logic, microprocessor, analog/mixed signal, discrete, and opto increasingly move to their own step with unique requirements and buying patterns. Share gains can be had by segment specialization and product introduction timing. Samsung recently announced that it will invest 5.5 trillion won in memory chips in 2010 (up from 4 trillion won this year). Discrete lines are shifting to 6-inch and 8-inch wafers. LED chip output will grow over 75% per year.

Capacity buys have not yet appeared with virtually no capacity growth from 2008 to 2010, but they are right around the corner. Some reports have fab utilization rates at 93% in 4Q09. Many expect semiconductor revenue growth of 10% to 22% in 2010, so chips prices will rise and capacity shortfalls will happen soon. While there are no new fabs planned for 2009, new fab construction may mushroom quickly to meet the need for more capacity in 2011 and beyond.

With the upswing taking shape, there is renewed, intense pressure on sales teams to bring home orders. To support an aggressive sales effort, astute companies are restoring marketing budgets to 2008 and 2007 levels and more. It’s a race to sell on the upswing and those companies who are unable or slow to respond to the specific and lucrative opportunities for market share gains will lose in an increasingly narrow marketplace. Some firms are still paralyzed by the dramatic industry slump, unable to pull the trigger on marketing and new product plans. They may think that marketing no longer plays a prominent role in their business plans, that the industry has entered a new era where “marketing is dead.” They may think that simple customer roadmaps and key account planning is all that’s required to ride the upturn back to prosperity.

Successful marketers are already executing programs to aggressively sell on the upswing. They have technology statements and segment plans. They are getting ready to aggressively support capacity buys that will grow throughout the next two years. They are planning to gain market share and they smell their competitors’ blood. It’s no longer about survival; its about winning, its about growing.

Saturday, December 05, 2009