Semiconductor Industry Revenue to Endure Slow Year in 2012

An uncertain global economy and insufficient inventory movement are culprits

January 24, 2012 

With global economic prospects remaining uncertain and semiconductor inventory not moving quickly enough to stimulate new production, the worldwide chip market is expected to suffer a slow year in 2012 marked by sluggish growth at best, according to an IHS iSuppli Global manufacturing market tracker report from information and analysis provider IHS.

Semiconductor industry revenue in 2012 is expected to reach $323.2 billion, up a slight 3.3 percent from last years revenue of $312.8 billion. While expansion this year was better than the paltry 1.25 per- cent increase of 2011, the overall picture could brighten considerably if the United States and the rest of the world recover in 2013. Under such a scenario, growth from 2013 to 2015 will average between a more encouraging 6.6 to 7.9 percent, as shown by Figure 3, with total semiconductor revenue by 2015 rising to some $397.7 billion.

Much of the weak performance in both 2011 and this year can be attributed to external circumstanc- es over which the semiconductor industry has no control—the ambiguous state of the global economy, along with assorted troubles in the worlds major markets of the United States, Europe, Japan and China. And because the world economy is not in a strong-enough position to drive growth, the semiconductor trade is coming under pressure, IHS believes.

Consumer expenditure is also a key factor. Though consumer spending lowered the overall inven- tory of electronics and other items with related semiconductor content during the 2011 holiday season, the reduction was insufficient to re-energize chip demand. Worse, a deliberate decrease in manufacturing run rates by companies in the third quarter of 2011 proved unable to bring inventory down to levels that w ould h a v e fired up additional orders and increased facto r y r un rate s . As a result, demand on ma n ufactu r - ers will remain d e pressed until the second qua r ter of 2012.

Su c h de v elopments will h a v e a ripple effect throughout the indust r y . F or instanc e , because facto r y utilization will not rec o v er until the middle of 2012, the inte g rated device ma n ufacturers (IDM) that both design and ma n ufacture semiconductors in-house will experience e v en g reater stress to simply maintain the viability of   unde r perfo r ming   factorie s . And with cu r rent ma n ufacturing   capacity deemed acc e pt- able for meeting demand, most capital expenditures to boost e f ficiency within the indust r y li k ely will be pushed out to 2013.

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