Analyst: Slow recovery in semiconductors

August 31, 2009 – The electronics industry has generally followed the same script as the overall economy in that companies up and down the supply chain have dumped inventory in an effort to conserve cash, reports analyst firm Henderson Ventures.

Reductions in inventories during a time of falling prices help to buff up both P&L statements and balance sheets. But recently improved electronic equipment orders have created a rush to restock depleted semiconductor stocks, thereby creating a short-term surge for chip bookings. However, consumers and corporations have adopted more conservative spending philosophies, which will undercut potential equipment purchases. And so will more-restrictive credit standards being applied to a wide spectrum of potential information technology customers. (See Editor-in-Chief Pete Singer’s take on chip orders and R&D in “The end of innovation? Not possible.”)

A restrained economic recovery, sluggish equipment markets and weak chip pricing will undercut the achievable heights of a semiconductor rebound, Henderson asserts. In fact, it will not be until after 2011 that market values will exceed those of 2008. During the next two years, ROW markets, dominated by non-Japanese Asian countries, will continue to grow more rapidly than the other regions, as shown in the accompanying charts.

Similarly, the memory market will outstrip the other product categories during 2010 and 2011 after trailing them in 2008 and 2009. Overall, Henderson predicts that global semiconductors markets will grow by 8.0% in 2010 after a gut-wrenching 18.1% plunge this year. A 10.6% gain is slated for 2011.

The Henderson Forecast Summary is published by Henderson Ventures,


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