IHS has reduced its global semiconductor market forecast for 2011—but still predicts a slight rise in revenue compared to 2010 because of continued growth in the third quarter. Global semiconductor revenue in 2011 now is expected to rise by 1.2 percent compared to 2010, according to a preliminary forecast. This is down from the previous IHS forecast of 2.9 percent issued in September.
Despite major economic headwinds, the global semiconductor market managed to expand in the third quarter, with revenue rising by an estimated 3.5 percent compared to the second quarter. While down from the September forecast of 4.8 percent growth, revenue expansion during the period means that growth for the entire year has been salvaged.
“Although the forecast of 1.2 percent revenue growth in 2011 is just barely positive, an expansion of any magnitude is significant from the standpoint of market psychology,” said Dale Ford, senior vice president, electronics market intelligence for IHS. “Given the worsening economic environment and growing pessimism in the electronics supply chain, many market forecasters had projected third-quarter revenues would decline, and pull down the results for the full year of 2011. Even the prospect of marginal growth casts a much more optimistic light on the market performance for the year.”
While third-quarter revenue increased, conditions have been worsening in the last three months of the year. Revenue is projected to decline by 2 percent sequentially in the fourth quarter.
Many major semiconductor suppliers are projecting fourth-quarter revenue declines that average in the high single digits. However, a number of major semiconductor suppliers—such as Intel, Samsung, Renesas, Qualcomm and Advanced Micro Devices—have projected solid growth in the fourth quarter that will limit the overall market decline. In order for the full year of 2011 to wind up in negative territory, overall semiconductor revenue would have to fall by 7 percent or more in the fourth quarter.
The electronics supply chain impact from the Japan disaster earlier this year played a notable role in influencing quarterly growth in the second and third quarters. The combined revenue collapse of many major Japanese semiconductor companies that suffered damage to their facilities in the disaster pulled the semiconductor market down by at least 2.5 percentage points in the second quarter and resulted in an overall market decline during that period. The rebound experienced in the third quarter by these same companies as they moved with aggressive recovery efforts added more than 2 percent to the growth to the market, pushing it comfortably above a 3 percent increase for the overall market in the third quarter.
The Thailand flooding catastrophe is forecast to reduce hard disk drive (HDD) shipments by 30 percent in the fourth quarter. This will cause PC shipments to fall short of expectations, indirectly exerting a negative impact on the semiconductor market in the first quarter of 2012. Limitations in PC production are expected to hit in the first quarter of 2012 when HDD inventories will be depleted, and full production levels will not be restored as drive manufacturers continue to recover from the damage from the flood.
Microprocessors, image sensors and NAND flash memory represent the bright spots in the semiconductor market in 2011, with revenue in each segment expected to grow by more than 15 percent for the year. Sensors and actuators, application-specific logic integrated circuits and discrete components will outperform the overall market with more than 5 percent growth. The primary market weighing down the semiconductor market is memory. DRAM, SRAM, NOR Flash memory—along with digital signal processors—will see revenue declines of 15 percent 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 ranging between 7.3 percent and 9.1 percent.
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.