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Declining GDP Slows Semiconductor Industry Growth

Another major market researcher has downgraded its 2011 forecast for the semiconductor industry, citing global economic woes and increasing consumer pessimism.

Researcher IHS predicts semiconductor revenue will rise by just 2.9 percent in 2011 to $313.3 billion, up from $304.5 billion in 2010. Last month, the researcher said the chip industry would grow by 4.6 percent.

Last week, market researcher Gartner Inc. downgraded its forecast and said semiconductor revenue would fall 0.1 percent in 2011 compared to 2010.

Continued economic weakness is impacting the global electronics and semiconductor industries just as the “the critical pre-holiday sales season begins,” said Dale Ford, vice president, electronics supply chain and semiconductors for IHS. “The continuing impact of a weakened and stagnant economy is expected to continue to be a drag on the semiconductor market in 2011, limiting revenue growth to 3.4 percent.”

Chip demand in 2011 is falling as gross domestic product (GDP) declines. In March, the global GDP growth for the year was forecast to be 3.7 percent. IHS now predicts that the GDP will only grow 3 percent. During the same period, the GDP growth projection for the world’s advanced economies fell to 1.4 percent, down from 2.4 percent.

As economic conditions deteriorate, IHS said there is a 40 percent a possibility of another recession. If there is a recession, it likely means that semiconductor market growth will be flat for 2011. Another recession would also lead to unstable and uncertain semiconductor supply and demand environment in 2012, according to the researcher.

There are some bright spots for the semiconductor industry in 2011. Because of strong growth in smart phone and media tablet shipments, semiconductor revenue in the wireless market is expected to rise 16.7 percent in 2011, reported IHS.

PC shipments are also expected to have mid single-digit growth, which will mean semiconductor revenue in the data processing market will rise in the low single-digit range. However, semiconductor revenue in wired communications, consumer electronics, and automotive electronics are expected to fall in 2011.

NAND flash, image sensors, light-emitting diodes (LEDs), and other sensors are expected to achieve strong double-digit growth, while dynamic random access memory (DRAM) revenue is set to fall by more than 18 percent, according to IHS.