2011 IC market forecast lowered to +4% while the O-S-D market forecast remains at 10%
As described in IC Insights' soon-to-be-released Mid-Year Update to The McClean Report, the worldwide semiconductor industry growth forecast for 2011 has been lowered from 10% to 5% and the 2011 IC market forecast from 10% to 4%. The primary cause for this downgrade is the weak performance of the worldwide economy in the first half of this year.
Some of the unexpected economic "headwinds" the worldwide economy faced in the first half of 2011 are shown in Figure 1. These events caused quarterly worldwide economic growth to slow significantly in the first half of 2011 as compared to 2010 and in turn served to slow worldwide electronics and semiconductor industry market growth. While any of these negative events by themselves may not have had a serious impact, combined, they served to noticeably slow the worldwide economy in the first half of this year.
Currently, the "debt ceiling" issue in the U.S. has not been resolved. Moreover, the work to contain the European debt crises is ongoing, although some progress had been made with regard to the financial situation of Greece. IC Insights' current forecast assumes that these issues will be resolved and that neither of them will cause a serious negative financial situation for the worldwide economy in the second half of 2011.
Although the U.S. debt ceiling and European debt crises are likely to be addressed without creating a worldwide financial panic or meltdown, both of these situations have caused a great amount of uncertainty throughout the world, affecting both businesses and consumers alike. The problem with uncertainty in the marketplace is that it typically results in "hesitation" and "worry" for consumers and businesses. This environment of hesitation and worry is not conducive to good economic growth and can sometimes have a worse impact than if the negative event itself took place!
Overall, the quarterly worldwide GDP growth figures have been on a fairly steep decline since reaching a very strong level of 4.6% in 2Q10. In fact, the 2Q11 worldwide GDP growth estimate of 3.1% is 33% lower as compared to the level registered one year earlier in 2Q10. Moreover, the 3.1% figure for 2Q11 is only 0.6 points above the global recession mark of 2.5% growth.
IC Insights expects 2H11 worldwide GDP growth to be better when compared to the first half of the year. One reason behind this expectation is that Japan's GDP is forecast to be much stronger in the second half of this year as post-earthquake investment and re-building efforts gain momentum. Moreover, the U.S. economy is also expected to perform better in the second half of 2011 due to lower gasoline prices (as compared to the first half of the year), a pick up in automotive assembly production (rebounding from the negative effects from the Japan earthquake), and an increase in capital spending by U.S. businesses before the expiration of various tax breaks at the end of the year.
Although worldwide GDP growth in the second half of 2011 is not forecast to revert back to the levels registered in the first three quarters of 2010, it is expected to show noticeable improvement over the first half of 2011. This improvement is forecast to help drive a moderately better second-half semiconductor market as compared to the first half and a full-year 2011 growth rate of 5%.