All signs are pointing to a stronger second quarter of this year than originally predicted. Databeans’ current outlook for the chip industry for 2010 has been revised up to $277 billion, a 23% increase over 2009. The research firm expects microprocessor and logic revenue this year to reach over $41 billion and $76 billion respectively. Memory revenue, driven by ongoing demand in the Flash market and higher prices for DRAM, is expected to reach close to $61 billion. And after surveying several of the large analog suppliers, this market is expected to weigh in at $41 billion, an increase of 28% over 2009.
For the second quarter, sequential growth for these key markets driving the overall semiconductor industry is expected. Microprocessor revenue is expected to end the quarter at $10,5 billion – a 3% increase from the first quarter. Logic is expected to be up 7%, memory up 4%, and general purpose analog is expected to grow by over 8% in the second quarter.
Inventory stocking is completed and Databeans believes this growth is driven by the current demand in the end markets for consumer products including wireless devices as well as industrial application markets. The computer replacement cycle has been long overdue and will continue to add to demand although some drop off is expected for memory in the third quarter because of the higher prices as PC OEMs could cut back on what they offer consumers in the mid-range platforms.
Meanwhile, another respected market researcher, iSuppli, is even more optimistic, predicting a 30,6% growth rate to reach $300,3 billion this year. It should be noted that there is some disparity between Databeans’ and iSuppli’s base-line 2009 figures, with the former putting it at $226,3 billion and the latter at $229,9 billion. To put in perspective the significance of iSuppli’s prediction, the last time the global semiconductor industry achieved annual revenue growth greater than 30% was when Bill Clinton was president, Gladiator was topping the box office and the Dot-Com boom was the hot thing.
Of course, one must bear in mind that, in contrast to that whopping 36,7% expansion of 2000, the semiconductor industry is currently in a recovery phase, so the current expansion does not represent pure growth. However, unlike the Internet-crazed spike in 2000, growth in chip sales this year will be driven by real fundamental supply/factors that slowly have been gaining momentum during the past 12 months.
“Building on the continuing expansion in sales that followed the downturn in late 2008 and early 2009, the semiconductor industry is set to achieve remarkable revenue growth and record size in 2010,” said Dale Ford, senior vice president, market intelligence services, for iSuppli. “Chip sales growth this year will be fuelled by a number of key factors, including continued strong consumer demand for hot electronic products, diligent inventory and capacity management efforts among chip makers and the arrival of innovative technologies at both the component and end-system levels.”
This year will mark an all-time annual high for global semiconductor revenue, eclipsing the previous record of $274 billion set in 2007 by about 9%. Ford noted that 2010 is bringing a return to normal semiconductor market conditions after the aberrant industry performance in 2009, when chip sales plunged due to external economic conditions. “While the growth in 2010 is impressive, it still needs to be viewed in context of the dismal results in 2009,” Ford noted. “Compared to 2008, the semiconductor industry in 2010 will achieve more moderate revenue growth of 15,4%.”
The stage for strong annual growth in 2010 was set by unusually robust conditions in the first quarter. “Semiconductor sales most commonly decline in the seasonally slow first quarter compared to the peak holiday period in the fourth quarter,” Ford observed. “However, in 2010, first-quarter chip sales expanded by 1,1% compared to the fourth quarter of 2009. This is the first time the industry has achieved sequential growth in the first quarter since 2004, and it represents the strongest growth during the period since 2002, when revenue grew by 5,4%.”
A major factor driving demand in the first quarter and beyond is consumer demand for electronic products, which continues to surpass expectations. Strong sales growth is predicted for 2010 in PCs, mobile handsets, LCD-TVs and other semiconductor-rich electronic systems. This will propel global factory revenue for electronic systems to a record high of $1,55 trillion in 2010, up 10,4% from $1,4 trillion in 2008. The previous high for electronic OEM revenue was $1,53 trillion in 2008.
Overall electronic equipment demand is being boosted by the health of the overall economy. “The economy represents the biggest wild card in iSuppli’s 2010 forecast,” Ford warned. “While many indicators have shown sustained improvement, there are, however, a number of financial and economic trouble spots that could endanger the continued growth in the market before the end of 2010.”
Beyond strong demand, semiconductor suppliers are also benefitting from careful management of chip inventories and tight controls on manufacturing capacity. “By keeping a tight rein on stockpiles and production, semiconductor companies have been able to hold supplies at levels less than demand,” Ford said. “As a result, many semiconductor product segments are experiencing strong upward price pressure.”
iSuppli agrees that dramatic growth in DRAM revenues will be a major driver of growth in the overall semiconductor market, projecting DRAM revenue growth in 2010 to reach nearly 77%. According to iSuppli, other major growth drivers in 2010 will be NAND Flash memory, analog ICs, discretes, LEDs and programmable logic devices (PLDs). All of these major market segments are forecasted to attain growth of more than 30% during the year. Most of the significant product segments are expected to expand by more than 20%.
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