Semiconductor market to decline 2.3% in 2012, says IHS

Press release; Jessie Shen, DIGITIMES [Tuesday 4 December 2012]

Amid increasingly weak economic conditions that are depressing consumer and business spending on electronics, IHS is downgrading its forecast for the global semiconductor market in 2012, with revenues now expected to decline by 2.3% for the year.

Worldwide chip sales are expected to decrease to US$303 billion in 2012, down from US$310 billion in 2011, according to IHS. The newly-adjusted figure shows a steeper descent, compared to the 0.1% retreat first projected by the firm in August and the 1.7% decline forecast in a September report. Even so, the prognosis remains the same: this will mark the first annual decline for the global semiconductor industry since 2009, IHS said.

"Five out of the six major application markets for semiconductors—including the key computer segment—are expected to contract in 2012, pulling down the overall performance of the chip market," said Dale Ford, senior director, electronics and semiconductor research for IHS. "An extremely weak global economy resulted in poor demand for electronics. As a result, the semiconductor industry slipped from stagnation in the first half of 2012 to a slump in the second half. Still, one of the few silver linings is that the fourth quarter is expected to bring a mild recovery in year-over-year growth, setting the stage for a market rebound in 2013."

Among the various semiconductor application markets, the data processing, consumer electronics, industrial, wired communications and automotive segments all are expected to deteriorate in 2012, with only the hot wireless segment set to expand, IHS indicated.

The PC-dominated data processing segment—the largest semiconductor application market—is on track to plunge by 7.8% in 2012, IHS said. Global PC shipments will shrink in 2012 for the first time in 11 years, due to a combination of economic factors and competition with new platforms, including tablets, IHS noted.

On the other hand, wireless semiconductors will be the only application market to grow in 2012, according to IHS.

"The surge in popularity of smartphones and media tablets is driving healthy growth in the overall wireless semiconductor market segment in 2012 with a projected 7.7% expansion," Ford said. "However, all of the other end markets for semiconductors will see revenues fall in 2012, negating all the positive effects of the wireless segment."

Both the sequential and year-over-year quarterly increases throughout 2012 have been very disappointing, with sequential second- and third-quarter growth amounting to just 2.7% and 3.1%, respectively, IHS said. Only the fourth quarter of 2012 is expected to show on-year improvement, with a slight 1.9% uptick compared to the fourth quarter of 2011, IHS observed.

Nonetheless, this slender growth in the fourth quarter could set the stage for a return to a consistent pattern of expansion in 2013, IHS believes.

One year ago IHS predicted that, "Any type of meaningful rebound in revenue growth is not expected to take place until 2013." According to IHS' preliminary estimate, semiconductor revenues will expand by 8.2% in 2013 if the small improvement in worldwide GDP growth forecast for 2013 holds up.

In addition, three out of the four worldwide regions are on course to suffer a retreat in semiconductor revenues in 2012, IHS pointed out. Europe, Middle East and Africa (EMEA) will drop by the greatest margin of all regions, with a 9.3% fall. Japan will contract at a 4.7% rate, while the Americas will decline by 4.6%. Meanwhile, shipments of semiconductors to the Asia-Pacific region will grow barely, up just 0.3%, IHS said.

Illustrating how widespread semiconductor weakness is in 2012, every chip-component segment is set to suffer a revenue decrease—with only four exceptions: CMOS image sensors, LEDs, application-specific logic ICs and sensors, IHS said. CMOS image sensor revenues are forecast to deliver extremely strong results, with 31.8% annual growth. Also, LEDs will deliver double-digit revenue increases at 17.5%. IHS likewise estimates that application-specific logic ICs and sensors will see solid expansion of 5.6% and 4.1%, respectively,

Once again, memory markets are exerting a significant drag on the semiconductor market with a combined forecast decline of 10.7%, IHS indicated. Even the typically hot NAND flash memory market will witness a revenue decline in 2012, IHS said.

Discrete component revenues will fare equally as bad as memory, with revenue falling by 10.6%, IHS said. Digital signal processors (DSPs) are expected to suffer the most dramatic reduction, as revenues in this category plunges 30.9%. This is driven primarily by the withdrawal of Texas Instruments (TI) from the wireless baseband market.