IHS downgrades semiconductor forecast within positive territory

November 21, 2011 — IHS has reduced its global semiconductor market forecast for 2011 to 1.2% growth, a slight revenue increase over 2010 owing to continued growth in the third quarter. This is down from the 2.9% growth IHS forecast when it looked at the numbers in September.

The global semiconductor market expanded in Q3, with revenue rising by about 3.5% from Q2. Revenue is projected to decline by 2% sequentially in Q4. While down from the September forecast of 4.8 percent growth, revenue expansion during Q3 means that growth for the entire year has been salvaged, IHS reports. In order for the full year of 2011 to wind up in negative territory, overall semiconductor revenue would have to fall by 7% or more in the fourth quarter.

Figure 1. Preliminary annual global semiconductor market forecast. SOURCE: IHS iSuppli November 2011.

The nearly neutral growth numbers for 2011 are positive, considering the "worsening economic environment and growing pessimism in the electronics supply chain, said Dale Ford, senior vice president, electronics market intelligence for IHS. An increase, rather than the anticipated decline, casts a "much more optimistic light on market performance for the year."

Intel, Samsung, Renesas, Qualcomm, and AMD all project solid Q4 growth. Other major semiconductor suppliers are projecting fourth-quarter revenue declines that average in the high single digits. These camps will balance each other to limit the overall market decline, IHS says.

Microprocessors, image sensors and NAND flash memory segments are each expected to grow by more than 15% for the year. Sensors and actuators, application-specific logic integrated circuits and discrete components will see more than 5% growth. The primary market weighing down the semiconductor market is memory. DRAM, SRAM, NOR Flash memory — along with digital signal processors (DSP) — will see revenue declines of 15% or more in 2011. The memory market will not see any relief in 2012, as all segments including NAND flash memory are projected to decline.

In terms of application markets, the strongest increases in semiconductor demand in 2011 is coming from the automotive electronics, industrial electronics and wireless equipment segments, with growth in chip demand around 7.3-9.1%.

Figure 2. Preliminary 2011 quarterly global semiconductor market forecast. SOURCE: IHS iSuppli November 2011.

Japan earthquake: Many major Japanese semiconductor companies suffered damages in and after the March 11 earthquake and tsunami off Sendai, Japan. This brought the semiconductor market down by 2.5 percentage points or more in Q2. The Q3 rebound experienced by these same companies as they moved with aggressive recovery efforts added more than 2% to market growth.

Thailand flooding: Hard disk drive (HDD) shipments will drop 30% in Q4 due to the floods’ impact. The HDD shortage will indirectly weaken semiconductor sales in Q1 2012 via PC shipments. Full PC production will not resume until flood damage is either repaired or supply chains diverted.

Weak economic conditions are forecast to persist into 2012 as worldwide GDP growth is projected to remain flat at 3.0 percent compared to 2011. The weak economy will continue to depress consumer spending, the foremost driver of electronics and semiconductor market demand. As a result, IHS forecasts 2012 semiconductor revenue growth will amount to an anemic 3.2 percent. A return to stronger growth will not begin until 2013. However, any forecast for growth is cautious in nature as a number of factors threaten to drive the economy back into recession, which would push the semiconductor market into a double dip.

Tepid growth in electronics OEM revenues of only 6.5 percent is expected in 2012. Rising downward price pressures due to an imbalance between supply and demand and higher inventory levels will combine with weak economic conditions to limit any growth in semiconductor revenue to the low single digits in 2012.

iSuppli provides comprehensive semiconductor market research. The Semiconductor Value Chain portal at iSuppli provides deeper insights into semiconductor manufacturing and supply (pure play foundries, global silicon forecasts), semiconductor inventory, OEM, ODM & EMS semiconductor spend analysis, electronic systems design activity, power management components, ASIC/ASSP devices, and analog ICs. Learn more at www.isuppli.com.

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