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Research says semiconductor revenue to plummet in 2012

Research firm IHS iSuppli has downgraded its forecast for global semiconductor revenue in 2012, projecting that sales of PC chips will fall by 7.8 per cent year-over-year while all other semiconductor segments except wireless mobile device processor segment are also expected to shrink.

Overall revenue for semiconductors is now expected to come in at $303 billion (£188 billion) for the year, a decline of 2.3 per cent from $310 billion (£192 billion) in 2011, IHS said. The research firm in August forecast a much less drastic 0.1 per cent decline in 2012 semiconductor revenue, but a September report revised that projection downward to reflect an expected 1.7 per cent year-over-year revenue decline.

"Five out of the six major application markets for semiconductors - including the key computer segment - are expected to contract in 2012, pulling down the overall performance of the chip market," Dale Ford, senior director of electronics and semiconductor research at IHS said in a statement.

"An extremely weak global economy resulted in poor demand for electronics. As a result, the semiconductor industry slipped from stagnation in the first half of 2012 to a slump in the second half," he elaborated.

One bright spot for the semiconductor industry this year was good growth in the wireless segment, largely driven by increased demand for smartphones, tablets, and other mobile devices using such chipsets.

"The surge in popularity of smartphones and media tablets is driving healthy growth in the overall wireless semiconductor market segment in 2012 with a projected 7.7 per cent expansion. However, all of the other end markets for semiconductors will see revenues fall in 2012, negating all the positive effects of the wireless segment," Ford said.

In addition to the projected decline in PC chip sales, a decline in revenue for memory makers is expected to "exert ... a significant drag on the semiconductor market with a combined forecast decline of 10.7 per cent" with the bad news extending to even the "typically hot NAND flash memory market," IHS said.

In fact, the research firm now anticipates that all but four chip component segments - CMOS image sensors, light-emitting diodes (LEDs), application-specific logic integrated circuits (ICs) and sensors -will experience revenue declines in 2012.

"Discrete component revenues will fare equally as bad as memory, with revenue falling by 10.6 per cent," IHS said.

If the overall semiconductor industry does shrink this year, it would be first time that's happened since 2009, the research firm noted. IHS is also forecasting that global PC shipments will decline year-over-year, which would mark the first time that's happened in 11 years.

IHS is projecting that the current fourth quarter will be the only three-month period in 2012 to show annual revenue growth for the global semiconductor market, with a "slight 1.9 per cent uptick compared to the fourth quarter of 2011." But that positive sign could "set the stage for a return to a consistent pattern of expansion in 2013," the research firm said.

Next year's prospects for the industry will remain linked to macroeconomic conditions, which are generally expected to improve, IHS said. The firm's preliminary forecast for 2013 suggests that semiconductor revenue could expand by 8.2 per cent "if the small improvement in worldwide GDP growth forecast for 2013 holds up."

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