IHS iSuppli analysts are lowering its projections for the semiconductor space as the global economy continues to worsen.
IHS iSuppli is the latest market research firm to cut its semiconductor
revenue projections for 2011, citing the struggling economy and increasing
consumer pessimism over the situation.
firm said Sept. 21 that it now expects semiconductor revenue to grow by an
"anemic" 2.9 percent, to $313.3 billion. In August, IHS iSuppli analysts had
pegged growth at 4.6 percent.
economic woes and consumer concerns come at a particularly bad
time for the computer industry
, according to Dale Ford, vice president of
electronics supply chain and semiconductors for IHS iSuppli.
economic weakness is taking its toll on the worldwide electronics and
semiconductor industries just as these markets are entering the critical
pre-holiday sales season," Ford said in a statement. "While economic challenges
have persisted into 2011, consumer spending could have still sustained a
reasonable level of growth in electronics demand if conditions had remained
reasonably stable. Unfortunately, the accelerating decline and instability of
the economy has reasserted itself as the primary driver of tepid electronics
and semiconductor revenue growth in 2011.
effect of the weak economy will roll over into 2012, with semiconductor revenue
growth projected to be 3.4 percent, he said.
iSuppli's report comes a week after Gartner
analysts dropped their semiconductor revenue estimates
for both 2011 and
2012. Gartner cited continued slowing of demand for PCs and other consumer
devices fueled by ongoing concerns about the stagnant economy, both in the United
States and other parts of the world.
analysts now expect worldwide revenue in the semiconductor space for 2011 to
come in at about $299 billion, a 0.1 percent decline from 2010. In the second
quarter, Gartner had predicted a 5.1 percent revenue increase for the year. The
third quarter, which normally is a strong one for the industry, could be
relatively weak, according to Bryan Lewis, research vice president at Gartner.
companies' third-quarter guidance is well below seasonal averages," Lewis said
in a statement. "The current guidance by vendors points to flat-to-down
third-quarter growth. Typically, we see guidance for 8 to 9 percent growth in
the third quarter because of back-to-school and the holiday build. The supply
chain is also showing significant slowdown, and semiconductor-related inventory
levels are still elevated."
a report Sept. 20, Gartner analysts reiterated their worries about high
inventory levels for semiconductor suppliers, noting that continued weakening
of consumer and business spending will leave inventory levels high.
semiconductor industry entered the third quarter of 2011 with moderately high
levels of inventory," Gartner analyst Gerald Van Hoy said in a statement.
"Current levels are too high given the weakening economic sentiment, and
the industry must rein in production growth and take action to reduce
accumulated inventory. We expect that these actions will occur during the next
few quarters with production and sell-through expected to return roughly to
balance by the second quarter of 2012."
iSuppli analysts noted the declines in gross domestic products during the
course of 2011 as an indication of the weakening economy. They also said the
slowing growth in the electronics and semiconductor market this year echoes the
drop the industry saw in the third quarter of 2008, which hit just as the
global recession began to set in and which led to an 11.6 percent drop in
semiconductor revenue in 2009. That said, semiconductor suppliers may be able
to avoid a drop in revenue with smart business strategies.
the memory of the painful market contraction of 2008 and 2009 still fresh in
mind, participants in the semiconductor supply chain are taking defensive
postures and working to reduce inventories and production levels," Ford said.
"Because of this, IHS still believes the semiconductor market can deliver weak
seasonal growth that will support a low single-digit sequential expansion in
semiconductor revenues in the third quarter that will prop up overall annual
growth and prevent a decline in the market for the year."
market could see a small boost in the second half of the year, thanks to the
increase in demand and shipments following the earthquake and tsunami in March
in Japan, the
firm said. However, the analysts said they put the chances of another global
recession at 40 percent, and said that if it happens in 2011, semiconductor
market growth could be flat for 2011.
also would lead to greater volatility in the market throughout 2012, a
situation that wouldn't stabilize until 2013, the firm said.
to the growth of smartphones and tablets, semiconductor revenue in the wireless
space will grow by 16.7 percent, IHS iSuppli said.