IHS cuts IC forecast

El Segundo, Calif. — Due to increased economic concerns, IHS iSuppli has cut its semiconductor revenue growth forecast for 2011 from 4.6 percent growth, issued in August, to 2.9 percent growth. The market is forecast to reach $313.3 billion, up from $304.5 billion in 2010.

Gartner Inc., Stamford, Conn., also recently cut its global semiconductor market growth projections from 5.1 percent growth in 2011 to negative 0.1 percent growth, totaling $299 billion. The market research firm’s reasons: inventory correction, overcapacity and slow demand.

“Mounting economic weakness is taking its toll on the worldwide electronics and semiconductor industries just as these markets are entering the critical pre-holiday sales season,” stated Dale Ford, vice president, electronics supply chain and semiconductors for IHS. “While economic challenges have persisted into 2011, consumer spending could have still sustained a reasonable level of growth in electronics demand if conditions had remained reasonably stable. Unfortunately, the accelerating decline and instability of the economy has reasserted itself as the primary driver of tepid electronics and semiconductor revenue growth in 2011. The continuing impact of a weakened and stagnant economy is expected to continue to drag on the semiconductor market in 2012, limiting revenue growth to 3.4 percent.”

Despite reductions in gross domestic product (GDP) projections in 2011 and a similarity to the 2008/2009 downturn, Ford believes that “agile adjustments in business strategy may allow semiconductor suppliers to avoid an annual decline in market revenue” this year.

“With the memory of the painful market contraction of 2008 and 2009 still fresh in mind, participants in the semiconductor supply chain are taking defensive postures and working to reduce inventories and production levels,” stated Ford. “Because of this, IHS still believes the semiconductor market can deliver weak seasonal growth that will support a low single-digit sequential expansion in semiconductor revenues in the third quarter that will prop up overall annual growth and prevent a decline in the market for the year.”

In addition, Ford noted in his report that a “near-term rebound in demand and shipments in the Japanese market and electronics industry is expected to provide a modest second-half boost to the semiconductor market.”

There are also growth opportunities for specific semiconductor segments, driven by smart phone and tablet demand, Ford said. For example, semiconductor revenue in the wireless market is expected to increase by 16.7 percent in 2011. NAND flash, image sensors, LEDs and other sensors are expected to achieve strong double-digit growth.

However, there are segments that will experience downgrades. Semiconductor revenues in wired communications, consumer electronics and automotive electronics are expected to fall in 2011. And DRAM revenue will decline by more than 18 percent, according to IHS.