Analysts slash semi market growth for 2011

IHS has announced tidings of woe in the semiconductor market during the run up to the holiday season, as another economic crisis rears its head.

Expectations for semiconductor revenues have been slashed amidst stagnating financial conditions, teetering on outright turmoil in some parts of Europe, with growth dropping to 2.9 percent.

It had been expected at the start of last month that revenues would grow by 4.6 percent from $304.5 billion in 2010.  But 2011 is predicted to total $313.3 billion for this year.

The market had been performing reasonably well for most of the year but is expected to become more unstable as the holiday period approaches and demand slackens.  Into the start of 2012, growth will be limited to 3.4 percent, analysts reckon, as consumers remain wary of splashing out on electronics.

Driving the lacklustre semi figures is the wider economic situation, with IHS Global slashing global GDP growth from 3.7 percent to 3.0 following a summer of uncertainty.  This is backed by the IMF which has predicted an “anemic” GDP growth of 1.5 percent in developed nations, heralding a “dangerous new phase” for the world economy.

If this is all sounding a little bit like the late summer of 2008 then IHS thinks that would be about right.  The timing of weakening growth in the semi market mirrors that of a sudden drop in the third quarter of 2008.  This led to semi revenues diving by 5.3 percent in 2008 and 11.6 percent in 2009.

In order to prepare for any double dip recession, which IHS gives a 40 percent chance of happening, the semi market is taking “defensive postures” which should prop overall annual growth.

This is echoed by Gartner which says that excess inventory levels are likely to be chopped as a cautious measure.

This is in part due to the recovery following the Japan crisis which led to increasing inventory.

According to IHS, Japan’s recovery will help offer a slight boost to the second half semi market stats.

And while there is plenty of doom and gloom there are certainly areas of the market which have been performing very well.

Clearly smartphone and tablet shipments have been on the up all year.  This means that semiconductor revenue in the wireless segment is expected to jump 16.7 percent for the year.

And despite low expectations, notebooks have managed to grab “mid-single digit growth” according to IHS. 

Semiconductor revenues for wired communications, consumer electronics and automotive electronics are predicted to drop this year overall.

Nascent markets such as NAND Flash, LEDs and other sensors are expected to see some impressive double digit growth.

Unsurprisingly the much maligned DRAM market, which one analyst described to TechEye as “on a suicide mission”, is set to plummet, with an 18 percent revenue drop expected.