This has been something that has been concerning me for a while - life is good for the semi guys, but history shows the downturn will come, and it comes from unexpected places.
Traditional theory would predict that the new generation of 12in fabs with 45nm and 32nm coming through in 2009 would create over-supply of chips, driving down the average selling price and causing recession in the industry. But a close eye is kept on this to avoid the problem.
Instead, the problem will come from an unexpected direction - those 8in fabs. The semiconductor industry will face a glut of capacity in the next two years that will fundamentally change the way systems are designed, says the president of the consumer LSI division of Samsung Semiconductor, the second largest chip maker in the world.
"By 2010 the 8in fabs will become severely underutilised, by around 30%, and product pricing will be continuously slashed," said Oh-Hyun Kwon. "That creates a vicious cycle of no investment to how to utilise the fabs is a key point."
This is where the oversupply will come and where the prices will crash.
That oversupply of 130nm and 90nm capacity should be used for devices that don't shrink well such as analogue, RF, sensors and micro machined devices, he said. These are then combined with digital devices made in 45nm and 32nm in system in the same package, rather than integrating all these elements into a single chip.
But this will migrate to chips that are built with the different technologies on the same die in 3D layers, and will change the way chips are designed and packaged, with system-in-a-package becoming much more important.
"We are moving to 45nm circuits at 45nm and then to 3D transistors at 22nm, and we need on chip 3D analysis tools for 3D LSIs," he said.