Market analysis recently supplied by World Semiconductor Trade Statistics confirmed what many of us were thinking: Sales of semiconductor components in the European market are having a very buoyant year. In May, sales jumped 44% compared to the same month last year; total European semiconductor sales in May came to US$3.2 billion.
And it’s not just a case of the May statistics being a fluke. Year-to-date (YDT) semiconductor sales showed a 42.4% increase in 2010 versus the same period in 2009.
But this sales spike isn’t contained only to the European semiconductor market. Global semiconductor sales in May 2010 were US$24.7 billion—an increase of 47.6% versus the same month in 2009. The YTD increase is a mighty 52.3%.
In spite of this boom, semiconductor companies are feeling jittery about some financial factors when looking at 2011. Several of Europe’s countries have financial problems. Greece is over-burdened with crippling debt, Spain and Ireland are both trying to recover from a property slump driven by over-building, and Portugal and Hungary potentially face a Greek-like tragedy as well. America has its own problems, including a sluggish housing market and unemployment figures that the stock markets don’t like.
But it’s not all bad news. There are positive GDP figures that hold a lot of weight. Europe, with almost 500 million inhabitants, accounts for almost one-third of the world’s GDP, and Germany, France, and Britain are all showing healthy GDP figures. The same is true for the USA with a 2.4% growth rate.
But healthy GDP stats don’t always provide the reassurance needed when semiconductor companies budget for the year ahead. They’re extremely cautious when it comes to over-investing in research and development, manufacturing, distribution, and marketing.
Current semiconductor industry indicators show that order books are full, customers are building stocks, lead times are building, and manufacturing is already stretched (of course, that last situation isn’t helped by the endemic problem of double ordering).
These factors tend to make semiconductor companies think very hard when it comes to increasing investment in their operation in order to satisfy a boom-year demand. However, they may burden themselves with expensive debt should the market go into decline, which we know can happen very swiftly. Many remember the financial pain of the industry collapse at the beginning of this decade—they simply won’t get caught in that trap again.
Are they right to err on the side of caution, or will fortune favour the financially brave? Certain OEM sectors always have a large and consistent demand for semiconductor product, such as industrial systems, communications, and automotive.
To get a handle on the outlook for 2011, I took a mini-survey of analysts and came up with an average figure. There are no guarantees with the survey, but my results showed a 10% steady growth pattern for 2011. Not the spectacular leap in sales we’ve witnessed this year, but growth nonetheless. And let’s face it—10% may prove a more sustainable figure than the dizzy heights being achieved during 2010