Airbus Promotes Its U.S. Links On Boeing's Turf

http://www.manufacturing.net/news/2013/10/airbus-promotes-its-us-links-on-boeings-turf?et_cid=3559583&et_rid=490548696&linkid=http%3a%2f%2fwww.manufacturing.net%2fnews%2f2013%2f10%2fairbus-promotes-its-us-links-on-boeings-turf

WASHINGTON (AP) -- Airbus, headquartered in France, is pitching its value to the U.S. economy as it takes its battle for dominance in the global airplane market onto rival Boeing's home turf.
This week for the first time Airbus is holding its annual meeting with its suppliers from around the world in Washington instead of at home in Toulouse. It's the company's way of underscoring that 42 percent of its procurement spending — about $13 billion in 2012 — goes to U.S. companies.
Earlier this year, Airbus broke ground on a $600 million assembly plant for its popular A320 airliner in Mobile, Ala., the company's first such facility in the U.S. A poster at the company's offices only a few blocks from the White House promotes the A320 as made in America.
Airbus currently claims less than 20 percent of the U.S. commercial airplane market, but is aiming for 50 percent — roughly the same as its market share worldwide, Airbus CEO Fabrice Bregier said in an interview Thursday.
"There is room to maneuver to do better in the United States," he said. "We care about this country, we have extremely good partners here, we are competitive and we want to grow with them."
Airbus is having some success with its campaign for the U.S. market, Bregier said, noting that Delta Air Lines and JetBlue have ordered A320s.
"This is first of all because of the quality of the product, but also because we are seen as a U.S. citizen and assembling our aircraft here in the United States," he said.
Boeing officials, however, scoff at Airbus' attempts to emphasize their value to the U.S. economy, noting that Boeing employees 160,000 workers across the country, about half of them involved in commercial airplanes and the rest mostly in the company's defense business.
"Their starting up of one very small plant in Mobile versus our 160,000 employees in the United States, it's a significant difference," said John Wojick, senior vice president, global sales & marketing, for Boeing Commercial Airplanes.
Both companies draw on many of the same suppliers scattered all over the world. A significant portion of Boeing's 787 parts, for example, are made in Japan. The company also has suppliers in Europe.
The U.S. is the world's largest airplane market, but it is a "mature" market and not growing nearly as fast as Asia, Wojick said.
Boeing reclaimed the title of world's largest airplane maker from Airbus last year, delivering 601 planes in 2012 to Airbus' 588 deliveries. But earlier this month, Airbus secured its first ever order from Japan Airlines, a deal that undermines Boeing's long-held dominance of the Japanese aviation market.
So far this year, Airbus has sold slightly more planes than Boeing, but both companies "are having a very good year," Wojick said. Boeing will again deliver more planes this year than Airbus, he predicted.
Bregier said he anticipates Airbus will regain the lead on deliveries around 2017 or 2018, when the company ramps up production of the A350, a family of long-range, two-engine, wide-body jet airliners due to come into service next year.
The contest between the two aircraft makers is about a lot more than bragging rights. Boeing forecasts that over the next 20 years the global demand for new airplanes will exceed 35,000 aircraft valued at $4.8 trillion.
The two companies are also challenging each other in legal arenas. They are locked in an international trade dispute at the World Trade Organization in Geneva, each claiming that the other receives illegal state subsidies.

Samsung to cut chip investment

http://www.koreatimes.co.kr/www/news/tech/2013/10/133_144910.html

By Kim Yoo-chul

Samsung Electronics, the world’s top supplier of memory chips, plans to cut its investment in components by as much as 30 percent next year.

The company doesn’t plan to build any more plants to make memory chips because the industry is undergoing rapid structural change.

Industry officials at Samsung's local primary parts suppliers say that aggressive investment does not guarantee high returns anymore due to industry consolidation as well as rising uncertainty surrounding technology and sluggish demand.

“Investment in chips will be cut by 30 percent next year, at least, because we believe Samsung doesn’t have plans to build new fabrication facilities. Total investment in components will remain under 10 trillion won throughout 2014,” said a senior executive at one of the company’s suppliers by telephone.

“It is unlikely that the industry will see cash-burning business projects in chips next year as complexity is increasing because the market is approaching scaling limits.”

Samsung planned to invest 13 trillion won this year. So far it has spent 4 trillion won to transition its Texas plant toward processors, 3 trillion won to build the first line of its NAND flash chip plant in Xian, China, and 2.3 trillion won to build its 17th processor assembly line in Hwaseong.

The remainder will be used for maintenance, technology migration and equipment, said industry sources.

“Samsung’s primary target for its semiconductor business is to churn out advanced flash memory chips including V-NANDs in a strategy to actively meet the industry’s demand for NAND-intensive digital devices such as smartphones, tablets and solid state drives. It may invest more in flash chips. However, the factory expansion, if it materializes, will cost less than 1 trillion won from next year’s tentative investment budget,” said an official from another partner of Samsung.

“Next year’s key issues are how to operate new factories and expanded lines, effectively.”

Strategy change

Samsung’s “golden pricing strategy” encouraged heavy investment in chips in an attempt to gain a larger market share, regardless of the market’s volatility.

“As a new order prevails, you don’t have to invest heavily in chips. Samsung is sourcing conventional DRAM chips from its strategic partners such as SK hynix and Micron Technologies. Rather than building new factories, Samsung can secure enough chips via cross-licensing deals with them,” said a fund manager at a U.S.-based investment bank in Seoul.

Its earlier investments in the 17th processor assembly line and the U.S. plant were aimed at supplying processors to major clients such as Apple.

“Samsung’s factory in Xian will be tasked to sell NAND chips to be used in corporate servers and to leading technology solution majors such as IBM and Apple,” said a Samsung source asking not to be identified.

The company’s in-house solid-state drives with flash chips are used in Apple’s MacBook Air, said the suppliers.

“Samsung will continue to improve semiconductor earnings as it gains more share in non-memory areas including foundries and processors. The company will enhance earnings from NAND as the market continues to grow rapidly, powered by smartphones and solid state drives. In addition, the company plans to improve DRAM margins and share as the DRAM industry moves towards a profitable oligopoly,” said Sanford C. Bernstein in a recent note to clients.

SIA reports semi sales up

http://news.techeye.net/chips/sia-reports-semi-sales-up

According to the latest statistics from the Semiconductor Industry Association (SIA), there has been a six percent quarterly boost in sales, topping the expected industry forecast.

Quarterly sales reached $74.65 billion for Q2 2013, up from the first quarter's $70.45 billion. The SIA claims this is the largest quarterly increase in three years. Global sales for June 2013 were $28.8 billion, a 2.1 percent increase compared to the same time last year and 0.8 percent higher than May. Sales in the Americas grew 8.6 percent in June 2013 compared to last year.

These were higher than predictions by industry group the World Semiconductor Trade Statistics, which expected quarterly growth of 4.6 percent globally and 3.4 percent for the Americas.

Total year to dates sales were at $145.1 billion, above the WSTS' expected $144.1 billion, and in June were 1.5 percent higher than the same time in 2012.

For the month of June, compared to May, there was sales growth in the APAC region of 0.4 percent and a dismal 0.1 percent in Europe, and a 0.9 percent decline in Japan. But this was still 5.4 percent and 0.8 percent growth for APAC and Europe, respectively.

Though together the results are strong enough, individually some SIA members may have reason to worry. Take Intel - its net profit in the quarter ending July 2013 dipped 29 percent , down 5.1 percent year on year and way below market estimates. AMD, meanwhile, posted a loss.

CEO of SIA, Brian Toohey, commented positively, saying in a statement: "There's no question the global semiconductor industry has picked up steam through the first half of 2013, led largely by the Americas.

"We have now seen consistent growth on a monthly, quarterly, and year-to-year basis, and sales totals have exceeded the latest industry projection," Toohey said, adding that memory products sold particularly well.

How money and markets are shaking up semiconductors

http://www.usatoday.com/story/tech/2013/08/05/semiconductor-industry-minyanville/2618625/

For every dollar they earned in the first half of 2013, Intel and Taiwan Semiconductor Co. spent $1.40 in capital investments. That's a lopsided number, and a sign of how competitive the semiconductor industry has become. At one time, TSMC dominated the independent foundry business, churning out everything from graphics cards to smartphone chipsets. In recent years it has become a three-horse race, with Samsung Electronics and Globalfoundries carving out large portions of the market, and Intel threatening to open things up even further with a move into mobile processors.
Both TSMC and Intel hope that, by throwing enough money at the problem, they can distance themselves from the competition. For Intel, this might be true. "Chipzilla" has a fat wallet, and a position in the PC industry that guarantees a decent return on its investment. TSMC has neither advantage, and may struggle to get ahead in the rapidly evolving mobile industry.
For both companies, costs are rising.
Gartner estimates this growth at 7%-10% annually, and predicts that by 2016, a capex budget of $8-$10 billion will be de rigueur for chipmakers like TSMC. Intel is naturally happy about this, and former CEO Paul Otellini speculated last year that new technologies -- such as 450mm wafers, which are expected to be more cost-effective than today's industry-standard 300mm, and EUV, or "extreme ultraviolet lithography," an up-and-coming technology that Intel hopes will allow it to further miniaturize its processors -- would cut the competition by half. "We've got [a] transition to 450mm [wafers] at some point; we've got a transition to EUV at some point," he said. "Both are going to be expensive, and are going to require scale."
Scale that Intel – which generated $19 billion in cash last year, and holds net working capital of $17 billion – can easily afford. Despite high capital expenditures and soft earnings in the first two quarters, the company still generated free cash flow of more than $4 billion. TSMC, on the other hand, had to tap debt markets to the tune of $3 billion as free cash flow turned negative. With working capital of less than $4 billion, and plans to maintain its current level of capital spending in 2014, the manufacturer is going to accumulate debt quickly. Samsung and Globalfoundries are spending less, but they have deep resources to draw upon, and aren't going anywhere.
TSMC's investments need to pay off soon, and in a big way – but this is a certainty that only Intel can count on. With its virtual monopoly in personal computers, and control over both chip design and production, Intel can force the adoption of new manufacturing technologies. Customers generally want these improvements, and are willing to pay for them. New processors typically account for one-third or one-fourth of the price of a new machine. Notwithstanding the dismal PC market, prices have held steady for both computers and processors, and with sales declines leveling off in the US – a leading indicator – it looks as though Intel's investments will pay off, regardless of its success in smartphones and tablets.
Taiwan Semiconductor faces a tougher road in the consumer device industry. Here, processors generally account for 2%-3% of the final product's retail price, and large improvements often go unnoticed by customers. There's small demand for a high-performance chip, and with long battery life already the norm, competition has focused on price. IDC estimates that smartphone prices have fallen 17% since the beginning of last year, and that's a potential problem for TSMC, which makes $9 on a high-end smartphone but only $4 on a low-end unit. To be practical, new factories need to lower costs – and Nvidia doesn't see this happening. Last year, the long-time TSMC customer complained that the new few generations of fabs will do little to cut costs.
That could end up being a moot point, if supply issues prevent customers from taking advantage of a new technology in the first place. Last year, shortages forced Qualcomm to second source its chips – to have some of them made by an alternative supplier, in this case Samsung. In the second quarter conference call, TSMC CEO Morris Chang was candid about his approach to customers. "We don't always put in the amount of capacity that a customer requests…. We have not and will not always follow the customer's estimates for their capacity need."
This obviates any technological advantage Taiwan Semiconductor might have, by forcing customers to design chips that can be moved between suppliers. TSMC expects to have a 20nm fab ready for mass production next year, but if Samsung and Globalfoundries are still at 28nm – in this industry, smaller is better – then Qualcomm has good reasons to stick with the older technology. TSMC might have solved this problem in the near-term by signing a deal with Apple, but without a change in philosophy, the new client probably won't end up any happier than the previous ones.
It's easy to underestimate the value of a strong balance sheet, or the security of a mature market. Intel can probably buy its way into the future, while Taiwan Semiconductor probably can't. On the other hand, neither one is likely to reinvent the industry through massive capex budgets. As smartphones and tablets continue to fall in price, it will become harder for TSMC CEO Chang's "grand alliance" – the ecosystem of chip designers and independent foundries – to push the envelope on performance, and just as difficult for Intel to compete with them on price. Change is the rule in any market; but it may be that the more the semiconductor industry changes, the more it stays the same.

U.S. Manufacturing Grows At Record Pace

http://www.manufacturing.net/news/2013/08/us-manufacturing-grows-at-record-pace?et_cid=3399825&et_rid=490548696&linkid=http%3a%2f%2fwww.manufacturing.net%2fnews%2f2013%2f08%2fus-manufacturing-grows-at-record-pace

WASHINGTON (AP) -- U.S. factory activity expanded in July at the fastest pace in two years, fueled by surges in new orders, production and hiring The gains show manufacturing is rebounding and should provide a spark to growth in the coming months.
The Institute for Supply Management said Thursday that its index of factory activity jumped to 55.4 in July, up from 50.9 in June. A reading above 50 indicates growth.
A measure of employment rose to its best level in a year, an encouraging sign ahead of Friday's July employment report. And a gauge of production soared 11.6 points to 65, the highest since May 2004.
Stronger growth at U.S. factories could aid a sluggish economy that has registered tepid growth over the past three quarters. And it could provide crucial support to a job market that has begun to accelerate but has added mostly lower-paying service jobs.
Manufacturing had struggled in first few months of the year, held back by weaker global growth and steep government spending cuts. And slower production led factories to slash jobs from March through June.
But those trends have started to reverse. Europe's economies have shown signs of life in recent months. That likely contributed to a healthy gain in U.S. exports in the second quarter.
Businesses also spent more on equipment in the April-June quarter and have boosted orders for four straight months. As those orders are filled, factory output should increase.
Auto sales are also supporting factory output and will likely remain strong this year. July sales figures will also be released Thursday. Auto sales topped 7.8 million in the first six months of 2013, the best first-half total since 2007.
The Federal Reserve will likely take note of the manufacturing gains because the ISM index is one of the earliest signs of how the economy is performing in the second half of the year. Fed policymakers slightly downgraded their assessment of the economy in a statement, but said they expected growth to improve later this year.
The economy grew at a lackluster 1.7 percent annual rate in the April-June quarter, the Commerce Department said Wednesday. That's better than the 1.1 percent rate in the first quarter, which was revised sharply lower. But it's still far too sluggish to quickly reduce unemployment.

The Fatal Shame Of Russia

http://www.strategypage.com/htmw/htlead/articles/20130706.aspx


July 6, 2013: Russian prosecutors have finally completed their investigation and prosecution of those responsible for one of the most notorious cases of military corruption in Russian history: the use of obsolete and counterfeit parts in Russian warplanes built by Russian manufacturers. The last act of this prosecution was to give a suspended sentence to one of the corrupt officials who cooperated with the prosecutors and provided information on who was involved and how the scam worked. It all began in 2007, when Algeria told Russia that it was cancelling the recent $1.3 billion purchase of 28 MiG-29 fighters and returning the ones already delivered. Algeria insisted that there were quality issues and that some of the aircraft were assembled from old parts. At first Russian officials refused to believe the Algerians a year later, and after actually looking into the situation Russia agreed to reverse the sale. The government then bought the 28 MiG-29s from the manufacturer to prevent the MiG Aircraft Corporation from going bankrupt. At the same time the government began an investigation of the aircraft industry. Within two years several aviation company executives were tried and convicted for passing off defective, or used, aircraft parts as new. Many of these parts made their way into MiG-29 jet fighters that were sold to Algeria.
The MiG-29 has been in service for three decades and stocks of Cold War era spare parts are still around, and it was first thought that some were put to use to build the Algerian aircraft. The Algerian MiG-29s were supposed to be "new," but some of their components were definitely not. Some MiG employees were very unhappy with the corrupt practices involving aircraft parts. This sort of crime often extends to parts for airliners. The MiG employees felt personally responsible for any defective aircraft leaving their plant and didn't want to be flying in an airliner containing fraudulent parts either. Russian prosecutors, already involved in an anti-corruption program underway for several years, jumped on the allegations and quickly found senior executives presiding over widespread fraud in the aircraft components industry. Some of these officials managed to avoid jail but not because they agreed to cooperate. But several others did go to prison and lost their personal wealth to pay heavy fines.
The publicity this scandal received caused the government to look more intently into the counterfeit or defective aircraft parts situation. Russian aviation officials were alarmed when, upon inspecting 60,000 aircraft parts, they found that nearly a third of them were counterfeits. While most of the substandard fake parts came from neighboring countries, many were made in Russia. China wins first place when it comes to stealing technology and producing counterfeit goods, but Russia is solidly in second place, turning out about a third as many counterfeit goods as China. Russia's neighbors, many former parts of the Soviet Union, have the same bad habits. But Russia and China together produce about 80 percent of counterfeits. Using old and now substandard parts was just one variation on the crime of selling bad (cheap) parts as good (much more expensive) stuff.
Western nations would like to get both Russia and China to crack down on the counterfeiting. That has not been easy. In both countries the counterfeiting is a multi-billion dollar a year industry, run by guys who know how to bribe the right politicians. The counterfeiters have another incentive to keep the prosecutors at bay, counterfeiting kills. Phony medicines and aircraft engine parts have both been linked to deaths in Africa and Asia, where the imitation goods are often sold. If brought to justice, Chinese and Russian counterfeiters would likely be executed.

Shortages Surface in NAND Flash

http://chipdesignmag.com/display.php?articleId=5164

By Mark LaPedus

Spot shortages - and possible price increases - for NAND flash have suddenly surfaced in the market amid recent production cuts by major memory suppliers.
The shortfall in NAND emerged this week, when solid-state drive (SSD) vendor OCZ Technology Group Inc. lowered its quarterly forecast. OCZ disclosed it could not obtain enough NAND parts for its SSDs.
Other OEMs are expected to see similar NAND shortages in the market, especially small- to mid-sized companies with no secure source of supply. On the other hand, Apple may be able to get an ample supply of parts.
The NAND shortfall is somewhat predictable. Micron, Samsung, SK Hynix and Toshiba have recently cut NAND production amid lackluster demand.
Besides supply for NAND, there are also some pricing issues for these parts. Prices for NAND hit $0.31/GB in June, but they went back up to $0.36/GB in August, according to Jim Handy, an analyst with Objective-Analysis, a research firm.
“We believe ASPs thus far in the quarter have been flattish versus the significant declines in 1H ‘12. Both 64-Gbit MLC and 32-Gbit MLC are declining flat to 5-7% thus far in the quarter,” added Vijay Rakesh, an analyst with Sterne Agee.
OCZ feels the pinch
Meanwhile, at OCZ, the shortfall of NAND impacted the company’s  Vertex and Agility line of SSDs. OCZ itself expects preliminary revenue for the second fiscal quarter of 2013 to be approximately $110 to $120 million, compared to the previously guided revenue range of $130 to $140 million. This preliminary revenue range compares to $113.6 million for the first fiscal quarter of 2013 and $78.5 million for the second fiscal quarter of 2012.
"Despite achieving bookings in excess of our expectations for our second fiscal quarter, we were not able to meet our previously stated revenue guidance due primarily to constraints in NAND flash supply," said Ryan Petersen, CEO of OCZ Technology.
“OCZ is not the only company that is affected by the supply shortages,” he said during a conference call. "While we believe that the situation will resolve itself, subject to market conditions, we plan to hasten our transition to new process nodes in order to help ease these supply constraints."
Hans Mosesmann, an analyst with Raymond James & Associates, said OCZ’s NAND shortfall involves select parts. “The shortages were primarily in 25nm MLC or consumer focused NAND, which OCZ partially resolved by using SLC or enterprise NAND at the expense of gross margins. Despite using SLC, the company depleted its inventory and expects to be 30-50% short on its NAND orders through November,” Mosesmann said.
OCZ blamed the problems on recent NAND production cuts at Micron, Samsung, SK Hynix and Toshiba. But OCZ may have also dropped the ball, as the company apparently failed to secure a steady source of NAND parts.
“The company's lack of a strategic NAND deal is clearly being negatively felt as volatility in the NAND market continues to challenge independent vendors, especially a vendor focused on a high-volume business through the channel,” said Alex Kurtz, an analyst with Sterne Agee.
“Looking forward, visibility remains challenging on the NAND front as OCZ believes the reported iPhone 5 launch is sapping supply out of the market and that transitioning to the Barefoot 3 controller, which uses a lower node flash with better availability, will also help address this issue,” Kurtz said.
The Barefoot 3 is a SSD controller, based on the SATA-2 interface. It was designed by Indilinx Co. Ltd. In 2011, OCZ acquired Indilinx, a fabless provider of flash controller semiconductors and firmware for SSDs.