Semiconductor Sales to Follow PCs, Slow in Second Half, Gartner Says

Gartner analysts predict that the boffo semiconductor sales of the first half of the year will not continue in the second half, as they fall in line with softening demand for desktops and notebooks.

The worldwide semiconductor market is poised to have a strong year in 2010, but there are some dark clouds on the horizon, according to Gartner's market research.

Gartner analysts in a Sept. 1 report said they expect global semiconductor revenue to hit $300 billion, a 31.5 percent jump over recession-riddled 2009. That number also represents an improved outlook over the second quarter's forecast, when Gartner said sales would grow 21.7 percent over 2009.

However, much of the growth comes from the explosive sales in the first half of the year. Through the second half of 2010, semiconductor revenues will drop below seasonal norms, coming in line with sales of electronic systems, which appear to be softening.

"Semiconductor growth in the first half of 2010 was very strong, but it is becoming increasingly clear that the industry cannot maintain the momentum in the second half of 2010 and into 2011," Gartner analyst Bryan Lewis said in a statement. "While the impact of the European credit crisis has subsided, the global economic recovery is slowing, and there is concern that electronic equipment vendors are adopting a cautious stance, ready to cut production at the first signs of slowing customer orders."

Gartner analysts on Aug. 31 said they were adjusting their forecast for PC sales in the second half of 2010 to 15.3 percent, a drop of about 2 percent from what had been previously predicted. Overall, Gartner expects PC shipments worldwide for the year to reach 367.8 million units in 2010, a 19.2 percent increase from 308.3 million in 2009.

Intel illustrates the trend that's happening in the industry. The chip making giant had tremendously strong numbers for the first half of the year-$10.3 billion in revenues in the first quarter and $10.8 billion in the second quarter-which executives attributed to solid consumer and corporate spending. The numbers had analysts saying the financial recovery in the IT industry was well under way.

However, in late August, Intel officials said they were reducing third-quarter revenue forecasts from as much as $12 billion down to $11 billion or less due to a weakening in the consumer PC space.

Gartner analysts said they've also seen a softening in the PC market and consumer PC purchases in mature markets were a bit weaker than anticipated. However, they said growing sales of media tablets are to some extent offsetting the soft consumer PC numbers. They added that tablets are becoming a popular alternative to netbooks.

The future of mobile phone sales looks solid, according to Gartner, which increased its projections slightly from the second quarter.

In this market, semiconductor vendors are under intense competitive pressure, and revenue is growing at 13 percent. Smartphones in particular are driving the mobile phone semiconductor market, accounting for 18 percent of all mobile phone sales, and 36 percent of the revenue. By 2014, those numbers will grow to 41 percent of units and 64 percent of revenues, Gartner predicted.

A rapid rise in DRAM (dynamic RAM) revenues also hit its apex in 2010, according to Gartner's Lewis.

"Due to early strength in the PC market and supply constraints, the DRAM industry has been very profitable, with revenue set to increase by 82.5 percent to nearly $42 billion in 2010," Lewis said. "However, during the second half of 2011, this is set to change, and we expect a DRAM downturn in 2012 as sales decline 29 percent."

But strong sales of smartphones and tablets will help keep NAND Flash revenues growing through 2013, Gartner said.