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IC Market Will Grow 8 Percent Per Year Through 2021

The global integrated circuit market will grow 8 percent through 2021 as average selling prices for chips increase, according to researcher IC Insights.

Growth for the industry will be stronger over the next 15 years than it was over the previous 15 years, although the IC unit growth rate will slow, the researcher reported. From 1996 to 2011, the IC industry grew revenue at a 5.2 percent annual rate.

The chip industry will grow despite significant obstacles, including global economic difficulties and technology hurdles to improving manufacturing process of ICs, according to IC Insights.

IC unit shipments are expected to grow 7 percent over the next 10 years, compared to 9.5 percent over the past 15 years, IC Insights noted. The growth rate will slow because more functions will be integrated on a single chip, along with the slowing of global GDP.

However, IC average prices will rise by 1 percent per year through 2021 to offset the slower unit growth rate. From 1996 to 2011, the average IC price fell 4 percent.

The average price will rise for several reasons, including the transition of semiconductor suppliers to a "fab-lite" model. More companies are opting to outsource production to foundries, which should lead to decreased spending on IC fab capacity, according to IC Insights. In addition, IC suppliers will spend a lower percentage of their sales on capital expenditures, which should also limit fab capacity. In 2011, chip suppliers invested about 21 percent of their sales on capital expenditures. In 2012, that percentage is 19 percent, the researcher reported.

There will also be a delay in the transition to 450 mm wafers from 300 mm wafers. Typically, the transition to larger size wafers boosts semiconductor supply. Delays in the transition would slow supply growth.