Demand for semiconductors drops while inventory rises

Analysts are predicting a lessening of the semiconductor frenzy in the fourth quarter as demand for consumer electronics drops.

Market  research company iSuppli had predicted that the industry would grow this year by 35.1 percent, but now believes the true figure will be closer to 32 percent.

Despite trimming the figures, iSuppli senior vice president Dale Ford said 2010 is still a year of impressive growth and record revenues for the industry. Revenues will rise by $74 billion compared to last year, and amount to $302 billion for this year.

But iSuppli is forecasting that revenues in the fourth quarter will decline by 0.3 percent, compared to the third calendar quarter.

Ford said: “There has been a significant slowdown in the second half in consumer demand for some electronic devices, including PCs.  Meanwhile, inventories have been building throughout the semiconductor supply chain.”

PC related semiconductors are the major fuel for growth during 2010, he said. Wireless communications is the second strongest growth area.  Sales for PC related semis will rise by 38.6 percent, wireless – including smartphones – by 30 percent.

Q4 2010

Ford said there are still clouds over the outlook for the industry. “Unstable economic condtions and worrisome market reports continue to create an environment of poor visibility and ongoing uncertainty in the electronics industry.” But he thinks that the chip business will experience “a soft landing” in 2011, without the kind of crash the industry saw in 2009. The market research company expects to see global revenues rise in 2011 by 5.1 percent.

The report, Semiconductor sales projected to avoid the double dip scenario, is available from iSuppli.