Gartner and IHS iSuppli analysts are cutting their fourth-quarter semiconductor forecasts, citing the global economy, Thailand floods and high inventories.
global economic conditions, the flooding in Thailand and rising product
inventory are leading two market research firms to lower their expectations for
the worldwide semiconductor market for the fourth quarter.
Gartner and IHS iSuppli said in separate reports Nov. 17 that the semiconductor
market-which includes everything from microprocessors and memory chips to
digital signal processors, sensors and actuators-will slow during the last
three months of the year before regaining momentum sometime in 2012.
IHS iSuppli analysts
in September had projected market growth at 2.9 percent. However, in their Nov.
17 report, the firm lowered its forecast to 1.2 percent growth over the same period
forecast of 1.2 percent revenue growth in 2011 is just barely positive, an
expansion of any magnitude is significant from the standpoint of market
psychology," Dale Ford, senior vice president, electronics market intelligence for
IHS iSuppli, said in a statement. "Given the worsening economic environment and
growing pessimism in the electronics supply chain, many market forecasters had projected
third-quarter revenue would decline, and pull down the results for the full
year of 2011. Even the prospect of marginal growth casts a much more optimistic
light on the market performance for the year."
surface, the semiconductor space has been growing at a steady pace, IHS iSuppli
analysts said. Microprocessor vendors like Intel, Advanced Micro Devices,
Samsung and Qualcomm have all reported strong third-quarter financial results.
Intel in October announced record revenue results
for the sixth consecutive
quarter, while AMD turned a profit
a year after announcing a
$118 million loss. The companies also are projecting solid fourth quarters.
conditions around the world are worsening, which will impact the semiconductor
space, IHS iSuppli analysts said, predicting a 2 percent revenue decline from
the third quarter. Microprocessors, image sensors and NAND flash memory are
expected to be strong points-with revenue growth up more than 15 percent for
the year-but that will be offset by problems in the memory space. Dynamic RAM,
static RAM and NOR flash memory will all see revenue drops of 15 percent or
more in 2011, and that market deterioration will continue into 2012, they said.
and tsunami that hit Japan in March triggered a yo-yo effect on the
semiconductor supply chain, damaging revenue in the second quarter. However,
the aggressive work done by impacted Japanese semiconductor companies in
response fueled revenue growth in the third quarter.
The flooding in Thailand
will have a ripple effect
throughout the market. Hard disk drive (HDD) shipments are expected to drop by
30 percent this quarter, which will lower PC shipments and impact the
semiconductor space in the first quarter of 2012. The situation won't improve
until HDD makers can recover from the floods and improve inventory levels.
analysts noted that many semiconductor makers announced weak third-quarter
numbers and lowered fourth-quarter guidance, and they pointed to inventory
levels as the key culprit. Vendors were aggressive in building up their
inventories coming out of the global recession, and inventory levels in the
supply chain were high going into the third quarter, and now the market is
expect that average selling prices [ASPs] for foundry-produced components will
be under pressure through the first half of 2012 because of aggressive
investment in capacity made as the industry came out of the last
recession," Peter Middleton, principal research analyst at Gartner, said
in a statement. "That investment is leading to excess capacity at the same
time as concern is rising about end-market demand levels due to weak economic
Index of Inventory Semiconductor Supply-chain Tracking (GIISST) methodology helps
measure the health of the industry, according to analysts. A days-of-inventory
(DOI) level above 1.0 indicates that inventory levels are high, which hurts
ASPs. According to the GIISST, the DOI reached 1.16 in the third quarter, up
from 1.12 in September.