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Semiconductor Update: Quake Will Not Derail Chip Industry Growth in 2011

The March 11 earthquake and tsunami in Japan will end up having very little impact on revenue growth of the global semiconductor industry in 2011, according to revised forecasts of two major market research firms and a key industry association.

World Semiconductor Trade Statistics (WS TS) mid-year revised forecast predicted that chip revenue will increase 5.4 percent to $314.4 billion. In its initial forecast for 2011, issued last November, the WSTS reported revenue would grow 4.5 percent. The Semiconductor Industry Association endorses the WSTS forecast.

However, researcher IHS iSuppli has a more bullish forecast for the year. They stated that the semiconductor industry will grow 7.2 percent, despite the March 11 natural disaster in Japan. In April, IHS iSuppli forecast the chip industry would grow 7 percent in 2011.

"Thanks to the hardiness of the global electronics supply chain, the semiconductor industry is set for a year of solid growth in 2011," said Dale Ford, senior vice president for semiconductor market intelligence at IHS iSuppli. "Neither the Japan quake disaster nor weak economic conditions will derail the market's expansion."

Ford said strong demand for consumer items, such as tablets and smart phones, caused the researcher to increase its forecast slightly.

Gartner Inc., a market researcher based in Stamford, Conn., reported worldwide semiconductor revenue will see a 5.1 percent increase from 2010. Earlier in the year, Gartner predicted industry revenue would rise 6.2 percent.

"The disaster in Japan clearly had an impact on the semiconductor market, and supply chain behavior, but it is less than initially feared," said Peter Middleton, principal research analyst at Gartner. The earthquake and tsunami in Japan disrupted production of silicon wafers, batteries, crystal oscillators and other materials.

Although the impact is less than feared, Middleton noted there will be some "residual effects" from the earthquake in the third quarter. He added that there will be "an effort to draw down inventory, which will weaken the semiconductor market in late 2011 and early 2012."

Demand for mobile devices, such as media tablets and smart phones, will drive semiconductor demand for the next several years.
Demand growth in 2011 will be driven by the wireless and mobile segments, led by high demand for media tablets, smart phones, e-book readers, solid-state drives, and handheld video game players, according to IHS iSuppli. Wireless communications will generate the strongest increase in semiconductor revenue of all chip application markets in 2011, with a 17.6 percent increase.

Through 2013, two-thirds of semiconductor industry revenue growth will come from smart phones and tablets, according to Gartner. Such mobile devices will drive demand for mobile applications processors, DRAM, NAND flash memory, and application-specific standard products (ASSP).

The industrial electronics segment will be the second-fastest growing semiconductor application market, with revenue rising by 7.3 percent, reported IHS iSuppli.

PCs will be the third-fastest growing semiconductor application market in 2011, with growth of 6.2 percent.

Sectors achieving slower expansion this year will include consumer electronics at 3.1 percent, and automotive electronics at 3 percent. Semiconductor revenue this year for wired communications is anticipated to contract by 1.7 percent, the only sector to suffer negative growth, IHS iSuppli research shows.

Following the 7.2 percent increase in 2011, growth will then moderate. It will increase 4.8 percent in 2012, 4 percent in 2013, 8 percent in 2014, and 7.5 percent in 2015, according to IHS iSuppli.

By 2015, semiconductor revenue will break the $400 billion mark reaching $411.8 billion. That is a compound annual growth rate of 6.3 percent between 2010 and 2015, reported IHS iSuppli.