Chip business expects best year in a decade

Chip counters at iSuppli have been studying the heavens and ruminating on their tea leaves and come to the conclusion that the microprocessor industry can expect to see growth of over 30 per cent this year.

The analyst outfit predicted revenue will rise to $300.3 billion in 2010, up 30.6 per cent from $229.9 billion in 2009. If achieved it will be the best growth figures posted since 2000, when chip makers saw the value of their collective efforts rise by 36.7 per cent

The growth figures are helped by the fact that 2009 was a pretty poor year all round, a fact acknowledged by iSuppli senior vice president of market intelligence services, Dale Ford, when he said, "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.”

According to Ford, "chip sales growth this year will be fueled 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."

“While the growth in 2010 is impressive, it still needs to be viewed in context of the dismal results in 2009,” Ford added. “Compared to 2008, the semiconductor industry in 2010 will achieve more moderate revenue growth of 15.4 per cent.”

The year got off to a good start, posting growth from Q4 last year to Q1 this year - an unusual turn of events. "In 2010, first-quarter chip sales expanded by 1.1 per cent 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 per cent.”

iSuppli predicts strong sales growth in PCs, mobile handsets and LCD-TVs this year. It expects global factory revenue for electronic systems to jump to a record high of $1.55 trillion in 2010, up 10.4 per cent from $1.4 trillion in 2008. The previous record was set in 2008 at $1.53 trillion.

But, while "many indicators have shown sustained improvement," Ford said, there are "a number of financial and economic trouble spots that could endanger the continued growth in the market before the end of 2010.”

“By keeping a tight reign 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.”