Semiconductors facing slow 2H, strong growth expected for 2011

The semiconductor industry faces a slower second half than the first of 2010, while high single-digit growth is expected for 2011, according to the International Data Corporation (IDC).

IDC posted a qualitative summary update to its Semiconductor Application Forecaster, highlighting some of the key trends affecting its forecast for the remainder of 2010 and 2011.

One of the contributing factors to its forecast is a recent IT sentiment survey, which found that IT Managers are putting increasingly higher priority on software, PC, storage, networking, and security projects. There is also a significant increase in prioritising an upgrade to Windows 7 in 2011.

IDC expects mobile phone and connected device chipset sales will continue to be robust for the rest of the year. Migration to the 802.11n wireless standard is also remaining strong, while the move to LTE, with wider infrastructural upgrades facilitating the switch, is expected in 2011.

Cutbacks in PC orders by PC semiconductor vendors in the first half of 2010 have been balanced by higher DRAM prices and more stable growth in non-PC applications. IDC forecasts that spending in these sectors should increase in 2011.

Strong demand for digital TVs and lower panel pricing are fuelling semiconductor sales, but low demand for single-function portable products, which now face mounting competition from the multi-function smartphone, is negatively impacting semiconductor sales in 2010. This is expected to continue into 2011.

Another sector that is helping semiconductor sales is the automobile industry. Many vehicles are being created with more electronics equipment, while passenger vehicle sales in BRIC countries are increasing and there is higher adoption of M2M connectivity technologies. Smart grind technology is also helping overall sales.

Despite the optimistic outlook for 2010 and 2011, IDC was quick to qualify that economic problems throughout the world, such as high unemployment and low consumer sentiment, could negatively influence the recovery in the semiconductor industry that is expected over the next several months.

“Taking into account the macroeconomic trends, semiconductor supply chain behavior, and secular long-term growth seen in applications such as smartphones, mobile PCs, media tablets, and automotive, IDC expects that semiconductor revenues for 2010 and 2011 could end up one to two percentage points above what was forecasted in June 2010, representing year-over-year growth of 22-24% and 8-9%, respectively for 2010 and 2011,” said Mali Venkatesan, research manager at IDC and leader of the study.