Analyst: Buckle up for double-digit growth again

by Pete Singer, editor-in-chief, Solid State Technology

June 16, 2009 – It’s increasingly clear that 2009 will be a tough year for the semiconductor industry, but if historic trends hold up we can expect to enjoy a return to double-digit growth, at least for 2010 and 2011, according to an optimistic analyst speaking at The ConFab in Las Vegas this week.

Global recessions have always led to pent-up demand for electronics, noted analyst Bill McClean of IC Insights. “There’s perfect correlation,” he said. “Every time we had a global recession, we had pent up demand, everybody cuts back, and what happens — the semiconductor market *booms*.” His take: “We’ve got strong double-digit growth coming in the next couple of years.”

The overall outlook for the year remains negative, with weakness predominant in the first half. IC Insights’ forecast for the semiconductor electronic system production is -14% for 2009 (in US $); its semiconductor market forecast is -17%.

Despite this negative growth, there has still been a strong demand for electronic systems and semiconductors, McClean noted:

“We had about a quarter billion cell phone sales logged in the first quarter of 2009. If you went by the tone of the market, you would have thought cell phone sales went to zero. They didn’t. And more of the mix was toward high-end cell phones –3G cell phones take a lot more integrated circuits. By the end of the year, you’re talking about over 300 million cell phones shipped in the fourth quarter. That’s even more than the fourth quarter of ’08.”

McClean said that even in the worst-case scenarios predicted by some analysts, underlying demand will be stronger than the present IC unit shipments. “We need to be at ’06-’07 levels at least,” he explained. “We’re at 27 billion units — we need to be at 34 billion units. That’s why you’re going to see a sequential IC unit shipment increase in the second quarter of this year probably close to 20%, at least. We have to get back to our underlying demand.” Excess inventories are no longer an issue, he said, saying the IC inventory burn is over. “We’re not going to be talking about IC inventory issues in the second half of this year,” he added.

The industry should also get a boost in the second half from a seasonal uptick, which should be an entirely different story from the first half. “A lot of people forget about seasonal weakness for electronics systems sales, whether it’s PCs, cell phones, or course consumer electronics. The second half of the year is always much stronger than the first, so we have a seasonal uptick to look forward to.”

McClean is also bullish on the overall economy. “We’ve got low oil prices, record low interest rates and $2 trillion in stimulus. This is already starting to get traction in the worldwide market. In the second half we’ve got seasonal strength for systems sales, we’ve got inventory adjustments completed and the global GDP turning positive in the second half.” — P.S.

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