August 2, 2010 -- Dale Ford -- Already pumped up by bulging demand, the global semiconductor market in 2010 has been injected with a powerful dose of growth steroids, prompting iSuppli Corp. to raise its revenue forecast to a record level for the year.
iSuppli now predicts global semiconductor revenue in 2010 will rise by 35.1 percent to reach $310.3 billion, up from $229.6 billion in 2009. iSuppli’s previous forecast, issued on May 6, predicted growth of 30.9 percent this year.
With an $80.7 billion increase, 2010 will bring the largest annual expansion in semiconductor revenue in history in dollar terms. In comparison, semiconductor revenue increased by slightly less than $60 billion during the next best year for dollar chip growth: the dot-com-fueled year of 2000.
“The semiconductor market already was in for beefy growth in 2010 because of strong consumer demand for electronic products,” observed Dale Ford, senior vice president for iSuppli. “However, it’s now apparent that semiconductor sales are getting an infusion of growth hormone in 2010 because of a number of factors, including rising prices, inventory buildups and richer chip content in key electronic products like smart phones and advanced LCD-TVs. All this is causing chip revenue to bulge to awesome dimensions this year.”
Working Out with the Equipment
Robust semiconductor revenue growth in 2010 is based on a strong increase in the sales of electronic equipment. Factory OEM revenue for electronic equipment is projected to grow by $131 billion to reach $1.54 trillion in 2010, up 9.3 percent from 2009. The previous high for electronics OEM revenue was $1.53 trillion in 2008.
Shipment and revenue growth for electronics equipment is surpassing expectations in areas including PCs, cell phones, LCD-TVs and other semiconductor-rich products.
Pumped up Prices, Muscular Chips
However, percentage semiconductor revenue growth will vastly exceed the expansion of the end-equipment markets for a number of reasons, including pricing.
“Careful management of semiconductor inventories and tight controls on manufacturing capacity have resulted in an environment where supply is not able to match demand,” Ford said. “As a result, prices for many semiconductor segments are inflated.”
Furthermore, the adoption of innovative technologies both at the system and component level is resulting in rising sales of highly integrated semiconductors that capture a larger share of the value of electronics systems. These integrated semiconductors tend to command higher pricing.
Following deep cost and inventory cutting efforts in 2009, the semiconductor industry has been pushing to build up stockpiles across the supply chain to support the strong growth in demand for electronics. This also has enhanced semiconductor growth beyond what end demand would seem to dictate.
Bye Bye Bubble
While the growth of 2010 is being compared to that of the year 2000, it is important to note that the nature of this cycle is completely different from the 2000 period. The booming growth of 2000 followed a strong expansion in 1999 and was driven by an unsustainable bubble of demand. That bubble popped in 2001 with a collapse of 28.6 percent. In contrast, the 2010 growth represents a recovery from a collapse in the prior year of 2009 and is forecasted to continue into 2011. Double Dip Denied
“The most common word that is heard in the last month regarding the economy and the semiconductor industry is ‘double-dip,’” Ford observed. “Fears abound that the market’s recent success is too good to be true and that an imminent correction is due. However, iSuppli does not agree with a double-dip outlook. Rather, iSuppli projects a return to more standard growth patterns in the second half of 2010 and into 2011 that will result in semiconductor revenue growth of 7 percent next year.”
The sequential semiconductor revenue increase of 8.2 percent in the second quarter pf 2010 is expected to represent the peak growth period this year. Growth will decelerate to 6.7 percent in the third quarter and to just 0.4 percent in the fourth quarter.
iSuppli projects that the industry will enjoy seven sequential quarters of growth before a seasonal downturn occurs in the first quarter of 2011. This will be the longest period of consecutive quarterly growth since the industry grew by 19 straight quarters between 1991 and 1995.
Looking at specific semiconductor device areas in 2010, the memory segment will generate some of the strongest growth.
DRAM revenue will rise by more than 86 percent, while NAND flash memory will expand in excess of 33 percent. This will cause overall memory revenue to rise by 56 percent for the year.
Every major semiconductor category—i.e., microcomponents, logic, analog, discretes and optical and sensors—is projected to rise by more than 25 percent in 2010.
Other major growth drivers in 2010 will be LEDs, Programmable Logic Devices (PLDs), general-purpose analog ICs and discrete components. These market segments are forecasted to see growth between 36 percent and 49 percent during 2010. NOR flash memory is the only major semiconductor product projected to not achieve double-digit growth in 2010.
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