Gartner Says Worldwide Semiconductor Industry to Grow 5.1 Percent in 2011 With Revenue Reaching $315 Billion

Through 2013, Two-Thirds of Semiconductor Revenue Growth Will Come from Smartphones and Tablets

STAMFORD, Conn., June 21, 2011— Worldwide semiconductor revenue is projected to total $315 billion in 2011, a 5.1 percent increase from 2010 revenue of $299 billion, according to Gartner, Inc. This is down from Gartner's previous projection in the first quarter for 6.2 percent growth this year.

The earthquake and tsunami in Japan raised concerns about the supply of silicon wafers, batteries, crystal oscillators, packaging and other specialized materials. However, supply constraints due to the situation in Japan have not derailed the electronics industry.

"The disaster in Japan clearly had an impact on the semiconductor market, and supply chain behavior, but it is less than initially feared," said Peter Middleton, principal research analyst at Gartner. "In response, in the last two weeks of March, vendors stepped up efforts to secure supply in the face of uncertainty and potential shortfalls — leading to some double ordering which continued into the second quarter. We think vendors were cautious with their second quarter guidance, and we expect the majority will exceed those estimates."

"Although the impact is less than feared, we are anticipating some residual effects in the third quarter of 2011 as friction in the supply chain may impact some production and some surprises may occur," Mr. Middleton said. "However, once third-quarter trends are established and supply chain participants are satisfied that all issues are understood and production is normalized, we expect an effort to draw down inventory, which will weaken the semiconductor market in late 2011 and early 2012."

Gartner forecasts worldwide application-specific standard product (ASSP) revenue to reach $79.7 billion in 2011 and grow to $99.4 billion by the end of 2015. With Apple's application-specific integrated circuit (ASIC) investment and a commanding grip on popular mobile devices, the ASIC market will experience solid growth through 2015. The highest overall growth through 2015 is coming from nonoptical sensors, which are primarily driven by automotive applications, but high growth is coming from increased sensor use in applications outside automotive, especially smartphones, tablets and video game hardware.

Analysts said they are seeing rapid semiconductor growth in the smartphone and media tablet categories. Through 2013, two-thirds of semiconductor industry revenue growth will come from smartphones and tablets.

"One critical trend is the introduction of new generations of high-performance mobile application processors, which form the heart of both smartphones and media tablets," said Jon Erensen, research director at Gartner. "These high-end processors, combined with higher amounts of DRAM and NAND flash memory, will enable the performance and storage required for advanced new applications, including context-aware computing, augmented reality and computational photography."

"The similarity in architecture between smartphones and media tablets enables handset and tablet OEMs to centralize design around the application processor, which hosts the operating system of choice, and allows the vendor to leverage that design across multiple product categories," Mr. Erensen said.

About Gartner:

Gartner, Inc. (NYSE: IT) is the world's leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the valuable partner to 60,000 clients in 11,000 distinct organizations. Through the resources of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,400 associates, including 1,200 research analysts and consultants, and clients in 85 countries. For more information, visit www.gartner.com.

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