Semiconductor growth cut: Echoes of 2008 recession

September 23, 2011 — Macroeconomic factors like consumer caution and global GDP cuts will have an impact on global electronics demand in 2011, said IHS, which lowered its semiconductor revenue growth forecast for 2011.

Semiconductor revenue will rise just 2.9% in 2011 to $313.3 billion, predicts the latest IHS iSuppli Application Market Forecast Tool (AMFT). IHS previously forecast 4.6% growth on August 2nd. Revenue was $304.5 billion in 2010. IHS expects 3.4% semiconductor market growth in 2012.

Back in June at a SEMI event, Semico Research’s Jim Feldhan warned of a "weak" semiconductor market in 2H11 into early 2012; he predicted a significant slump (-9%) in 4Q11 and just 2% growth in 2012. Jim Walker of Gartner shared that sentiment: Gartner’s revised forecast indicates that most likely, the semiconductor revenue growth for 2011 will be -0.1%; in 2012, growth of 4.6%. With new lower GDP predictions out from the International Monetary Fund (IMF), IC Insights’ Bill McClean agrees that there’s "more downside than upside potential," although he believes a forecast of a 10% growth in the IC market in 2012 is still reasonable.

The "mounting economic weakness" is weighing down electronics/semiconductor suppliers just as the "critical pre-holiday sales season" begins, said Dale Ford, vice president, electronics supply chain and semiconductors for IHS. He adds that consumer spending is the key to overall electronics demand, and "the accelerating decline and instability of the economy has reasserted itself as the primary driver of tepid electronics and semiconductor revenue growth in 2011."

This industry weakening mirrors conditions see in the "sudden drop" the semiconductor/electronics sector felt in Q3 2008, which plunged semiconductor revenues down through 2009. For 2011, however, agile adjustments in business strategy may allow semiconductor suppliers to avoid an annual decline in market revenue. The semiconductor supply chain adopted "defensive postures" with regards to inventory and production capacity following the 2008 recession, Ford noted. This means weak seasonal growth, but not a longer-term market decline.

However, an amplified negative response to recession in the electronics supply chain could lead to a highly uncertain, unstable and volatile semiconductor supply and demand environment entering 2012 that would not stabilize again until 2013. This is a possible concern, according to IHS.

IHS’s most recent global GDP growth forecast is 3.0% for 2011, down from 3.7% previously forecast. The GDP growth projection for the world


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