Market research firm iSuppli on August 2 said it has raised its forecast for worldwide semiconductor revenue growth in 2010.
Worldwide semiconductor revenues in 2010 will reach US$310.3 billion in 2005, up 35.1% from US$229.6 billion in 2009, according to iSuppli. The firm previously had predicted 30.9% growth in semiconductor revenues this year.
With an US$80.7 billion increase, 2010 will bring the largest annual expansion in semiconductor revenues in history in dollar terms, iSuppli noted. In comparison, semiconductor revenues increased by slightly less than US$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 VP 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 smartphones and advanced LCD TVs. All this is causing chip revenues to bulge to awesome dimensions this year.
Robust semiconductor revenue growth in 2010 is based on a strong increase in the sales of electronic equipment, iSuppli indicated. Factory OEM revenues for electronic equipment is projected to grow by US$131 billion to reach US$1.54 trillion in 2010, up 9.3% from 2009.
The previous high for electronics OEM revenues was US$1.53 trillion in 2008.
However, percentage semiconductor revenue growth will vastly exceed the expansion of the end-equipment markets for a number of reasons, including pricing, according to iSuppli.
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, iSuppli said. 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, iSuppli said. 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, iSuppli said. 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%. In contrast, the 2010 growth represents a recovery from a collapse in the prior year of 2009 and is forecast to continue into 2011.
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% next year.
The sequential semiconductor revenue increase of 8.2% in the second quarter of 2010 is expected to represent the peak growth period this year. Growth will decelerate to 6.7% in the third quarter and to just 0.4% in the fourth.
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.
Muscular memory
Looking at specific semiconductor device areas in 2010, the memory segment will generate some of the strongest growth, according to iSuppli. DRAM revenues will rise by more than 86%, while NAND flash memory will expand in excess of 33%. This will cause overall memory revenues to rise by 56% for the year.
Every major semiconductor category - microcomponents, logic, analog, discretes and optical and sensors - is projected to rise by more than 25% in 2010, iSuppli noted.
Other major growth drivers in 2010 will be LEDs, programmable logic devices, general-purpose analog ICs and discrete components, iSuppli said. These market segments are fore cast to see growth between 36% and 49% during 2010. In addition, NOR flash memory is the only major semiconductor product projected to not achieve double-digit growth in 2010, according to iSuppli.
