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Smartphones Media Tablets Drive Semiconductor Demand in 2012

The proliferation of mobile devices such as smart phones and media tablets will be strong growth drivers for semiconductors through at least 2016.
Semiconductor revenue will grow more than expected this year because of healthy demand for portable equipment, according to researcher IHS.

Chip revenue will grow about 4.3 percent to $324.7 billion in 2012, IHS reported. Earlier, IHS had forecast that revenue growth would be at 3.3 percent.

Semiconductor demand is expected to rise this year because consumers are beginning "to believe that the global economic recovery is for real,” said Len Jelinek, director and chief analyst of semiconductor manufacturing at IHS. With consumer confidence rising, spending on products such as smart phones and media tablets will likely increase which in turn will help drive semiconductor demand.

Demand for the iPhone and iPad from Apple Inc. is already robust, and a host of competing products will also result strong sales.

Semiconductor suppliers can anticipate an exceptionally strong “third quarter this year in preparation for strong holiday sell-through,” said Jelinek.

However, new ultrabooks released this year will have minimal impact on chip sales, though the long-term potential growth of ultrabooks is bright, according to IHS. Ultrabooks are thin, lightweight, full-featured computers.

Three strongest product areas in 2012 will be NAND flash, logic application specific integrated circuits, and microprocessors. NAND and ASIC demand will be driven by media tablets and smartphones, and microprocessor growth will be driven by notebooks.

Semiconductor revenue growth should continue for the next few years and reach $412.8 billion by 2016, IHS reported.

The fly in the ointment concerning revenue growth could be semiconductor inventory levels. Semiconductor suppliers have reduced their inventories by 7.5 percent over the last six months. However, total inventory remains at high levels both in terms of aggregate dollar value as well as in days of inventory. Further reductions are necessary for manufacturers to experience sustained demand, according to IHS.