December 29, 2012 – Industry watchers have been lowering their outlooks for 2013 over the past few weeks, but there’s one set of opinions that still see optimism for an industry rebound in 2013 — chip industry executives themselves.
In its annual study, KPMG found three quarters of semiconductor executives polled believe they will see revenue growth in the next fiscal year — that’s up from 63% in last year’s survey. Two-thirds expect to hire more workers (vs. 48% in 2011), and 71% say annual industry profitability will increase in 2013. Overall their sentiment is for a recovery that builds up steam especially heading into the second half of the year.
KPMG’s Global Semiconductor Survey, conducted in September, surveyed 152 semiconductor industry business leaders (primarily senior-level execs) at device, foundry, and fabless manufacturers, half of whom have annual revenue of $1 billion or more. Overall, its "Semiconductor Business Confidence Index" climbs to 57, stepping across the 50/50 threshold into optimism vs. the index of 46 recorded a year ago. Among its other findings:
— More activity, inside and out. Seventy-three percent of respondents expect to increase capital spending over the next fiscal year, up from 51% a year ago — and 24% expect to increase spending by 10% or more, vs. 10% of respondents in late 2011. Just 6% of respondents expect capital spending cuts, s. 18% a year ago. Similarly, 77% of execs expect semiconductor-related R&D spending to increase in 2013, up from just 65% a year ago. And two thirds of execs expect more merger and acquisition deals in fiscal 2013, up from 62% a year ago looking into 2012’s crystal ball.
— The US is tops again. Execs placed the US ahead of China in the most important geographic markets for semiconductor revenue growth three years out — for a third consecutive year, fewer see China as their most important market. Next in priority are Europe, Korea, and then Taiwan — which two years ago was ranked 2nd and slightly ahead of the US, but might be losing favor due to exposure to softer Japanese and Chinese economies, according to Gary Matuszak, global chair of KPMG’s Technology, Media and Telecommunications practice. Also, "significantly" fewer chip execs viewed China as a top-three hiring market in 2013; it’s still in first place, but the US and Europe are gaining favor.
— Consumer is king, redux. Consumer applications are officially the most important revenue driver, as viewed by the chip execs over the next fiscal year; computing now ranks third, behind wireless. "Unlike past recoveries, this one won’t be driven by wireless handsets and wireless communications alone," said Matuszak. Other revenue-driving apps — industrial, medical, automotive (with many sub-applications in body electronics, communications convergence, and safety), and power management (a big feature in wireless devices) — were emphasized by more chip execs in this year’s survey than in the past three years. That’s a clear indication how semiconductors have proliferated beyond traditional wireless and computing applications, such as mobile commerce and various automotive functionalities, added Ron Steger, global chair of KPMG’s Semiconductor practice. Also getting a big push from semi execs: "renewal energy" such as battery technologies, listed by 53% of execs as an important revenue driver over the next three years, up from just 36% a year ago.
Percentage of survey respondents who expect their company’s semiconductor-
related capital spending to increase over the next fiscal year. (Source: KPMG)