Current Annual
Unrealized
Average  
OFR*
 [1]  
  Equipment Forecast Growth Eq Demand Visibility   High Low  
    ($B) (%) ($B) (Months)   (%) (%)  
  1998 27.0 -24.7% 4.2 1.7        
  1999 34.5 27.8% 4.9 1.8        
  2000 60.7 76.0% 79.8 15.4        
  2001 39.6 -34.8% 17.7 3.9   30% -25%    
  2002 30.5 -22.9% 2.2 0.9   50% -30%    
  2003 34.7 13.5% 4.7 1.6   50% -20%    
  2004 54.0 55.6% 38.0 8.6   80% -5%    
  2005 51.7 -4.3% 19.8 4.7   30% -30%    
  2006 61.2 18.0% 57.7 11.6   50% 0%  
  2007 62.8 2.7% 28.9 5.5   30% -20%  
  2008 68.1 8.4% 20.7 3.7   40% -10%  
    * Operational Flexibility Requirement (as measured in revenue growth)      
             
    Current Annual OFR*   Realized  
  Chips Forecast Growth
High
Low   Capacity Utilization  
    ($B) (%) (%) (%)      
  1998 109.1 -8.8%     1998 79.9%  
  1999 130.2 19.4%     1999 89.1%  
  2000 176.9 35.9%     2000 95.9%  
  2001 118.5 -33.0% 20% -20%   2001 77.6%  
  2002 120.5 1.7% 40% -20%   2002 84.3%  
  2003 140.0 16.1% 45% 0%   2003 87.7%  
  2004 178.8 27.7% 40% 10%   2004 90.4%  
  2005 192.8 7.8% 35% -10%   2005 89.4%  
  2006 209.5 8.7% 30% -5%   2006 92.1%  
  2007 220.9 5.4% 30% 0%   2007 89.8%  
  2008 237.4 7.5% 30% 0%   2008 88.9%  
    * Operational Flexibility Requirement (as measured in revenue growth)   TCI 71112  
  Text Box: The 2007 equipment forecast did not change significantly in this update. The forecast is broken down as follows: IC equipment, $56.6B (+6.6% from 2006) and Display equipment, $6.2B (-23% from 2006). The display equipment business has seen some improvement since our last update. For chips, the sales forecast for 2007 was slightly upgraded.

VLSI downgraded the 2008 forecast for both chips and equipment sales as we expect the sluggish economy to put a damper on electronics sales.  VLSI predicts the following sales growth: +7.5% for Chips, +7.3% for IC equipment, and +18% for display equipment.    -- Aida
 
      Last Update: 22-Oct-07  
       
       
       
       
       
  RESTRICTED DATA: for access and use only within your company.Copyright © 2007 by VLSI Research Inc.All rights reserved.    
       
       
       
       
       
       
       
     
     
     
     
     
     

[1]
Dan:
Operational Flexibility Requirement (OFR) is the range of uncertainty manufacturers need operating flexibility for.It is the range of demand fluctuation they need to plan for based on past forecast errors.Since we know no one uses just one source, OFR includes typical forecast error ranges of the leading public forecasters as well as internal forecasts made by companies in the industry.The actual calculation of the range is based on historical ranges of forecast error, as well as historical business variance.Then it is narrowed judgmentally based on where we are in the cycle and how the cycle is differing from those past.

We started work on OFR back in the late spring of 2000 after business blew by all historical measures of growth.I had kept getting questions typically prefaced with the resignation that you must build your companyís business model around this businessís crazy volatility.The first question that arises out of this is what is that volatility and how does it vary against forecast.†† We did a review and found that forecast accuracies below 10%, which used to be achievable one year out, were now only achievable one quarter out.

We started working on that measure, but at the same time, we didnít want to be like those forecasters who waffle by never giving a hard number, just ranges, or worse probabilities of a turning point.This really lets the forecaster off the hook, because both an upturn or downturn fall on either side of the probability ranges.VLSI Research Inc had always given a number and only a number.In the world of forecasting, to paraphrase Jerry Saunders, real men give numbers, not probabilities.Youíre either right or youíre wrong.But, several customers said this policy too macho for the current times and they wanted our expertise applied to what the range is.So, at the risk of being called a wimps, we came out with OFR.No one called us wimps and many find it very useful because OFRís very name tells them how to deal with the variances.
[2]
Dan:
Operational Flexibility Requirement (OFR) is the range of uncertainty manufacturers need operating flexibility for.It is the range of demand fluctuation they need to plan for based on past forecast errors.Since we know no one uses just one source, OFR includes typical forecast error ranges of the leading public forecasters as well as internal forecasts made by companies in the industry.The actual calculation of the range is based on historical ranges of forecast error, as well as historical business variance.Then it is narrowed judgmentally based on where we are in the cycle and how the cycle is differing from those past.

We started work on OFR back in the late spring of 2000 after business blew by all historical measures of growth.I had kept getting questions typically prefaced with the resignation that you must build your companyís business model around this businessís crazy volatility.The first question that arises out of this is what is that volatility and how does it vary against forecast.†† We did a review and found that forecast accuracies below 10%, which used to be achievable one year out, were now only achievable one quarter out.

We started working on that measure, but at the same time, we didnít want to be like those forecasters who waffle by never giving a hard number, just ranges, or worse probabilities of a turning point.This really lets the forecaster off the hook, because both an upturn or downturn fall on either side of the probability ranges.VLSI Research Inc had always given a number and only a number.In the world of forecasting, to paraphrase Jerry Saunders, real men give numbers, not probabilities.Youíre either right or youíre wrong.But, several customers said this policy too macho for the current times and they wanted our expertise applied to what the range is.So, at the risk of being called a wimps, we came out with OFR.No one called us wimps and many find it very useful because OFRís very name tells them how to deal with the variances.