A feeble global economy and the poor performance of key powerhouse semiconductor suppliers combined to zap the industrial electronics market of vigor last year, driving overall revenue into decline, according to an IHS iSuppli Industrial Electronics market tracker report from information and analytics provider IHS.
Industrial electronics semiconductor revenue finished 2012 at $30.5 billion, down 2.8 percent from $31.4 billion in 2011. The year-end contraction confirmed what had initially been projected as very soft growth for the space, and it was also a reminder of how far the market had fallen after a robust 36.5 percent surge in 2010 and a strong 9.7 percent expansion in 2011.
After a turbulent year, however, prospects will improve in 2013 as demand strengthens and some recovery is expected in the second half of 2013. Continued expansion is expected in the years ahead, with the compound annual growth rate from 2011 to 2017 equivalent to 6.3 percent. By 2017, revenue will reach some $45.3 billion.
Both semiconductor companies and original equipment manufacturers (OEM) suffered headwinds last year after initial optimism petered out and consumer sentiment turned wary. Earlier in the year, a broad-based downturn occurred in segments such as manufacturing and process automation, energy generation and distribution, test and measurement, and building and home control—pulling down the overall performance of the industrial electronics semiconductor market. Then a shaky global economy did the rest, causing semiconductor growth to stall in the second half of the year.
By the third quarter, several markets that appeared to have solid sales growth potential in their favor instead found themselves dealing with disappointing results. The more optimistic third-quarter industrial electronics demand predicted by major suppliers did not materialize, while leading semiconductor suppliers were reporting decelerated sales growth in the Americas due to concern from the fiscal cliff.
The weakness of the third quarter led, in turn, to uncertainty during the fourth. By then, several companies across the industrial market supply chain had issued a cautionary warning about what would be fourth-quarter softness. Among those companies were Fairchild Semiconductor, Maxim Integrated, NXP Semiconductors, Xilinx, Analog Devices Inc., Infineon Technologies, Avago Technologies, Thermo Fisher and Honeywell.
A few of the besieged suppliers have since gone on to project continuing uncertainty in 2013. Already, Infineon is planning to cut planned 2013 investments by 100 million euros due to a darkened outlook and the worsening condition of its industrial clients. Many more semiconductor firms have pessimistic views about short-term industrial sales prospects, indicating that near-term visibility at present has been the cloudiest ever.
Only two segments—light-emitting diode (LED) lighting and commercial avionics—enjoyed robust growth and will continue to do so. Third-quarter LED sales for Philips and Samsung LED climbed in the double digits from a year earlier, and other LED suppliers like LG Innotek, Toshiba and Seoul Semiconductor had high single-digit sales increases. The LED market is expected to peak next year, when annual LED sales grow more than 30 percent to $5 billion.
Commercial aircraft sales also had a phenomenal third quarter as both EADS and Boeing, the Top 2 suppliers, enjoyed double-digit growth. Other notable OEMs, such as UTC and Honeywell, saw similar big sales in the third quarter, driven by large air transport, as well as by business jets and helicopters.