No "blowout performance" for semiconductor market in 2011

The semiconductor market will keep growing in 2011 – but don’t expect the “blowout performance” anticipated for this year. 

The growth will be helped by the ongoing recovery in the global economy and the electronics market. According to market research by iSuppli, global semiconductor revenue is forecast to reach $317.4 billion in 2011, an increase of 5.1 percent from the $302 billion projected for this year.

iSuppli expects that “the slight uptick” cannot compare with the torrid 32 percent increase the industry will see in 2010. But, with the worst of the recession behind us, it predicts that revenue will continue to see a steady climb after this year.

In addition, semiconductor revenue is expected to rise to approximately $357.4 billion in 2014.

“Despite the resumption of growth in the semiconductor markets, enthusiasm is muted at best as the ghost of the recent economic downturn continues to haunt the industry,” said Dale Ford, senior vice president for market intelligence at iSuppli.

“Several factors bearing witness to the wretched effects of the recession – among them stubborn unemployment, tight credit availability and the lack of recovery in the housing market – are hindering consumer spending, the largest contributing factor to the US Gross Domestic Product.”

There are some indications that softening demand will take hold in certain segments, starting in the fourth quarter and continuing through the first quarter of 2011, iSuppli says in the upcoming report Semiconductor Revenue Growth Targets Soft Landing Following 2010 Boom.

“Already, semiconductor revenue growth in the second half of 2010 is slowing compared to the more vigorous first half, and a slight sequential contraction in the fourth quarter is now projected,” said Ford said.

“Visibility for OEMs and semiconductor suppliers also has become limited for the end of the year.”

However, revenue has recovered and is back in 2010 to pre-recession levels in almost all sectors.

Meanwhile, the usual seasonal pattern of a weak first quarter followed by strong growth accruing over the remainder of the year – a pattern interrupted this year – is expected return in 2011, with iSuppli forecasting that each quarter should experience sequential growth.

With the semiconductor industry in 2010 rebounding from the “dismal performance of 2009”, revenue was at its highest level in at least seven years – exceeding even the previous 2007 peak of $274.2 billion.

Strong demand for the data processing segment, comprising computer systems and peripherals, is set to represent the largest application in 2010, accounting for 40 percent market share.

The PC business has been the star of the show so far this year, with iSuppli saying it had delivered “an amazing performance during the first half of 2010”, with shipments up 22.8 percent on the same period in 2009.

It was followed by wireless communications with 20 percent of the market. iSuppli expects this category to also display stronger-than-average growth in the next five years.

In a very close third place was the consumer electronics sector, gaining a 19 percent share of market for 2010. But researchers warned that, while growth for the segment was “solid” during the first half of the year, economic conditions threaten to “cast some doubt on second-half prospects”. With consumer confidence levels falling, inventory build-up is also likely to lead to a reduction in Average Selling Prices, so hampering revenue growth.

The LCD-TV segment in particular was expected to see some weakness during the last two quarters of 2010 – explained by rising inventories in North America and China.

What’s left of the end-equipment market that is reliant on semiconductor consumption is split between three segments. Wired communications and industrial electronics each have about a nine percent share of the market, with automotive electronics bringing up the rear at six percent.

The figures follow iSuppli announcing revised predictions last month – it had predicted that the industry would grow by 35.1 percent this year but trimmed this figure to closer to 32 percent.

Meanwhile, DisplayLink (UK) Ltd has come second on Deloitte’s Technology Fast 50 awards with 9,041 percent growth from last year, with Ubisense taking 14th place with 1,730 percent growth.