After A Lackluster 2011, 2012 Semi Growth Looks Tepid, Too

Dec. 22, 2011
The 2012 forecast for the semiconductor industry based on numbers from IHS iSuppli and Gartner is in the low single digits. This editorial explains why.

Global semi market

Read 2012 Technology Forecast articles

Welcome to our annual Technology Forecast, where our staff editors and roster of contributing technical experts get a chance to muse about the future of the electronics industry. As for me, I gathered the reports that came rolling in at the end of the year. The semiconductor forecasts were particularly gloomy, showing very modest growth for 2011 with no signs of growth perking up in 2012.

Gartner Inc. says worldwide semi revenue grew just 1% in 2011 to reach $302 billion. IHS iSuppli reduced its 2011 semi forecast in mid-November to 1.2% compared to 2010, which was down from the previous forecast of 2.9% (see the figure).

Gartner is projecting worldwide semiconductor revenue of $390 billion in 2012, which would be a 2.2% increase from 2011. This is down from a previous projection of 4.6% growth for 2012. IHS iSuppli predicts 3.2% growth over 2011 and says a return to stronger growth won’t begin until 2013.

“With continuing concern over the future of the eurozone affecting the global economy, the high degree of uncertainty impacting spending by both consumers and enterprises looks set to continue, bringing with it significant implications for the semiconductor industry,” says Brian Lewis, research vice president at Gartner. “The near-term forecast is being shaped not only by economic forces but by an inventory correction, manufacturing oversupply, and natural disasters.”

The Bad And The Good
The natural disasters are, of course, the ones that occurred in Japan and Thailand in 2011. Though the Japan earthquake and tsunami mainly impacted 2011 results, the Thailand flooding catastrophe was forecast to reduce hard-disk drive (HDD) shipments by 30% in the fourth quarter of 2011, causing PC shipments to fall short of expectations and indirectly exerting a negative impact on the semiconductor market in the first quarter of 2012.

Limitations in PC production are expected to hit in the first quarter of 2012 when HDD inventories will be depleted. Full production levels won’t be restored as drive manufacturers continue to recover from the damage from the flood.

What are the driving forces for the semiconductor industry? Gartner thinks smart phones will dominate 2012 semiconductor growth, while NAND flash will be the fastest-growing semiconductor IC with 16.6% growth due to the strong rise in mobile consumer devices.

“Our latest forecast analysis shows that dollar growth in smart phones, media tablets, and solid-state drives in total will generate 77% of semiconductor market growth through 2015—clearly a very significant concentration of opportunity,” said Lewis.

Power-Management ICs Take a Hit
The 2011 market for power-management semis grew more slowly than expected due to a slowdown in consumer spending and the Japanese earthquake. IHS pegged revenue in 2011 to reach $33.1 billion, up 6.7% from 2010. Further bad news is that the market is expected to rise just 3.9% in 2012 to a projected $34.4 billion.

But there’s a silver lining if you look past 2012. IHS says revenue expansion overall in this segment will be positive for the next five years, with growth to average 7.2% during the period.

The most promising market will be for inverters, anticipated to grow from $4.2 billion in 2010 to $7.5 billion in 2015. Various markets will fuel the need for efficient inverters including automotive, solar and wind turbines, motor controls in appliances, and manufacturing automation.

Of particular interest will be the submarket for microinverters designed specifically for 200-W solar applications, projected to be one of the highest-growth segments in the entire power-management space.

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