IHS iSuppli downgrades chip market outlook on PC weakness

August 24, 2012 - IHS iSuppli is downgrading its outlook for 2012 global semiconductor revenues, shifting from slight single-digit growth to predicting the industry’s first annual decline since 2009. The firm blames a weakening economy that has eroded demand for PCs and related components.

The decline is "a major event for the global semiconductor market," said Dale Ford, senior director at IHS. Even though electronics markets remained very weak through all of 2011, the firm never projected a full-year revenue dropoff, he noted.

IHS iSuppli’s most recent forecast for 2012 chip sales growth, issued in July, was 3.0% to $320.8B. In April the firm had inched up its outlook to 4.3% (to $324.6B) citing strong ongoing consumer demand for wireless products like cellphones and media tablets. Its original 2012 forecast issued in January was for 3.3% growth.

Preliminary global annual semiconductor revenue growth
forecast, in % change of US $. (Source: IHS iSuppli)

Global chip revenues declined a seasonally typical -3.6% in 1Q12, but increased barely 3% in 2Q12. In a separate report issued this week the firm declares this is "a troubling sign for the health of the semiconductor market," attributed to the Eurozone crisis, slowing manufacturing growth in China, and stubbornly highly unemployment in the US.

Revenue guidance from key chip suppliers suggests 3Q12 will be slightly better — 6% Q/Q growth — but the firm says that is just further "subdued expansion" that won’t prevent the market from contracting this year.

Late-year introduction of ultrabooks and ultrathin PC platforms will give the PC market a boost, but macroeconomic malaise will exert too much pressure on PC demand, for both consumer and corporate spending, the firm notes.

IHS iSuppli still feels confident in a strong rebound in 2013, sticking with its projection of 9% Y/Y chip sales growth, assuming economic conditions improve. Nevertheless, it couches its optimism with persistent "multiple high-impact events" that present possible risks to create a strong economic downturn, from the Eurozone crisis to slowing Chinese growth to US tax and budget expirations to Middle East turmoil.

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