Global Semiconductor Industry will continue its slow growth in 2012

Global Semiconductor Industry saw tremendous growth in 2010 post the global financial crisis as major semiconductor companies invested in manufacturing facilities to meet the raising demand from consumers fueled by sales of tablets, personal computers, datacenter server demand and mobile phones particularly smart phones. But the growth stalled in 2011 due to the volatile macro economic environment particularly the European Debt Crisis and the US economic slowdown, subsequent effect on other countries particularly nations like India, China, etc that saw slowdown in economic growth, natural disasters like the Japan Earthquake and Tsunami, Thailand Flooding too played their part but the global semiconductor industry survived these adverse conditions and grew modestly in single digit. The industry went through bad patch in 2009 due to the Global financial crisis where the YoY growth declined by 20% but it recovered in 2010 with a remarkable double digit more than 20-30% growth but due to the above mentioned adverse conditions growth was modest between 2-4% in 2011. But with the growing consumer demand for tablets, e-readers, personal computers like laptops, ultra books, smartphones, datacenters and cloud computing, etc the Global Semiconductor Industry is expected to reach approximately $412.8 billion in 2016 according to IHS iSuppli Global Manufacturing Market Tracker report. Global semiconductor revenue will reach $324.6 billion with 4.37% YoY growth in 2012 where as industry grew by only 1% in 2011 according to IHS.

Source: IHS iSuppli Research, April 2012

According to IDC, Worldwide semiconductor revenues increased more than 3.7% YoY to $301 billion in 2011, compared to more than 24% YoY growth to $282 billion in 2010. IDC expects 2012 semiconductor revenue growth to be in the 6-7% range fueled by accelerated growth in second half of 2012 when fab utilization rates rise and semiconductor cycle that started in mid 2011 will bottom out by second half. Gartner forecasts worldwide semiconductor revenue to total $316 billion in 2012, a 4% increase from 2011 level of $306.8 billion, up $5.4 billion, or 1.8% from 2010 level of $301.4 billion. Gartner is expecting a rebound starting in the second quarter of 2012, supported by inventory corrections, bottoming foundry utilization rates and global economy stabilizing. According to both IDC and Gartner, Intel is the market leader with close to $51 billion in revenues; Samsung is number 2 with $27 billion revenues (Gartner) and $29 billion revenues (IDC).According IDC Texas Instruments is third followed by Toshiba and Renesas Electronics but according to Gartner Toshiba is number three followed by Texas Instruments and Renesas. Also similar difference is there for number seven and eight positions according to IDC Hynix is seven and STMicro eight but Gartner classifies STMicro is seven and Hynix is eight.

Microprocessors performed well in 2011 after not doing so well in 2010 and are expected to continue to do well in 2012 with high average selling price and strong demand for Intel chips for use in Personal computers like notebooks & ultra books and servers. NAND flash memory revenues are expected to grow in 2012 just the way they grew in 2011 fueled by strong increase in mobile consumer devices and solid-state drives. DRAM pricing fell by 50% has affected the overall industry revenues in 2011due to falling ASPs and oversupply as it poorly performed where in the revenues fell by 25%. But DRAM will see slight recovery in 2012 as one of the major player Elpida filed for bankruptcy. Inventory is a major concern for the industry and according to IHS despite the semiconductor suppliers reducing their inventory by 7.5% over the last 6 months, total inventory remains at high levels both in terms of aggregate dollar value as well as in days of inventory but further reductions at least another 5%, expected through H1 2012, are necessary for chip makers to experience sustained demand and growth.

Gartner forecasts semiconductor revenue from media tablets will reach $9.5 billion as unit production is expected to increase by 78% YoY, semiconductor revenue from PCs will reach $57.8 billion as unit production expected to increase 4.7% and semiconductor revenue for mobile phones will reach $57.2 billion as production is expected to grow 6.7% in 2012. Consumer demand from Asia Pacific and Americas is expected to rise further but demand in Japan and Europe is expected to be seeing negative growth. The semiconductor industry is also seeing consolidation as larger players have significant cash reserves and looking to acquire smaller players as companies in the industry is positioning themselves for the next phase of growth with devices becoming more intelligent and needing support for high-level operating systems, connectivity, and application processing capabilities, according to IDC. A number of mergers and acquisitions came to fruition in 2011, most notably Qualcomm–Atheros, Texas Instruments–National Semiconductor, SMSC–Conexant, Broadcom–NetLogic, CSR–Zoran, and Microsemi–Zarlink and this trend is expected to continue in 2012 according to IDC. Ultimately the growth of the global semiconductor industry is dependent on macroeconomic environment stabilizing and improving with containment of European Debt crisis and growth returning back to emerging countries like India, China, etc that drive demand for PCs, tablets like iPads and e-readers, Smartphones like iPhones, no major natural disasters, and manufacturers of PCs like notebooks, ultra books, servers, mobile phones, etc launch new models and attract more consumers. Most of the research firms and semiconductor companies expect that growth will return by second half of 2012.