Semiconductor Industry Set for Soft Landing in 2011
Article by Ken Arch
According to the electronics market research firm iSuppli Corp., although the semiconductor industry in 2011 will not repeat the blowout performance anticipated for this year, growth will continue because of the ongoing recovery in the global economy and electronics market.
Global semiconductor revenue in 2011 will reach 7.4 billion, up a modest 5.1 percent from 2.0 billion projected for this year. The slight uptick cannot compare to the torrid 32.0 percent increase the industry saw in 2010. However, since the worst of the recession behind us, revenue will continue to climb steadily after this year. Semiconductor revenue will rise to approximately 7.4 billion in 2014.
“Despite the resumption of growth in the semiconductor markets, enthusiasm is muted at best as the ghost of the recent economic downturn continues to haunt the industry,” opines Dale Ford, Senior Vice President (Market Intelligence) at iSuppli. “Several factors bearing witness to the wretched effects of the recession–among them stubborn unemployment, tight credit availability and the lack of recovery in the housing market–are hindering consumer spending, the largest contributing factor to the U.S. Gross Domestic Product.”
Furthermore, starting in the fourth quarter and continuing through the first quarter of 2011, there are indications that softening demand will take hold in some segments.
“Already, semiconductor revenue growth in the second half of 2010 is slowing compared to the more vigorous first half, and a slight sequential contraction in the fourth quarter is now projected,” Dale Ford said. “Visibility for OEMs and semiconductor suppliers also has become limited for the end of the year, iSuppli semiconductor findings show.”
Just the same, revenue has recovered and is back in 2010 to pre-recession levels in almost all sectors. And with each quarter experiencing sequential growth, the normal seasonal pattern of a weak first quarter followed by strong growth accruing over the remainder of the year–a pattern interrupted this year–will return in 2011.
Data processing leads in electronic equipment revenue
With the semiconductor industry in 2010 rebounding from the dismal performance of 2009, revenue is at its highest level in at least seven years, exceeding even the previous 2007 peak of 4.2 billion.
Among the various markets that consume semiconductors, the data processing segment comprising computer systems and peripherals will represent the largest application in 2010, accounting for 40 percent market share, according to iSuppli’s electronic equipment forecast. With shipments up 22.8 percent from the same period in 2009, the PC business in particular delivered an amazing performance during the first half of 2010.
In second place among the categories, iSuppli findings show that with 20 percent share of market, is wireless communications, which also will display stronger-than-average growth in the next five years.
Closely trailing wireless communications is the consumer electronics industry, in third place with a 19 percent share of market for 2010. But while growth for the segment was solid during the first half of the year, economic conditions threaten to cast some doubt on second-half prospects. Not only are consumer confidence levels falling, inventory buildup is also likely to lead to a reduction in Average Selling Prices, hampering revenue growth in the process. The LCD-TV in particular segment will see some weakness during the last two quarters of 2010, given the rising inventories in North America and China.
The remainder of the end-equipment market reliant on semiconductor consumption is split among three remaining segments, each with single-digit market share. Wired communications and industrial electronics are tied at roughly 9 percent share of market each, with automotive electronics bringing up the rear at 6 percent.
About the Author
iSuppli
