Semiconductor Growth – When and Where?
Is an economic recovery underway in the semiconductor business? If so, what markets are most likely to benefit from this recovery?
A number of economic research firms support the claim that the semiconductor market is in a moderate upturn. For example, iSuppli predicts that revenue will rise to 10.6 percent in the fourth quarter of 2009 compared to the same period in 2008 – not that 4Q2008 was a great quarter. In fact, global semiconductor revenue is expected to decline in 2009 for the second consecutive year. Still, an upturn in the last quarter of 2009 would be a most welcomed sign.
Another source – the Semiconductor Industry Association (SIA) – recently reported that worldwide sales of semiconductors in August were $19.1 billion, an increase of 5 percent from July 2009, though year to date sales were down by 21.3 percent from this same time last year. The rate of sales decline has slowed from the first six months of 2009 during which sales declines by 25 percent year-on-year. All monthly sales numbers represent a three-month moving average of global semiconductor sales.
Another research firm that tracks global chip sales is e-forecasting.com. This firm recently announced that the North American Semiconductor Chip Sales leading indicator went up 4.4 percent in August to a reading of 176.8, after an increase of 4.1 percent in July. This indicator represents a “composite index that forecasts six months ahead, on average, business activity in the region for sales for semiconductors.”
As a point of reference, the global economy is also doing better – at least better than this same time last year. E-forecasting expects US GDP Q3 growth to be revised to 4.2 percent from an advance estimate today of 3.5 percent.
Though both the US economy and semiconductor markets are poised for growth, several indicators will temper that upturn. These indicators include the continued rise in the US unemployment rate, which is expected to grow to an average of 10 percent by next year. Another problem is the struggling credit and banking markets as well as the rising foreclosures in the housing market. All of these factors should keep US consumer spending at a very cautious level.
By contrast, China’s consumer spending is set to rebound in 2010, thanks in part to various government stimuli like the “Home Appliance Products to Rural Area” program. This stimili has helped to expand the domestic LCD-TV market in China. Regardless of local stimuli, China’s semiconductor market is expected to rebound vigorously in 2010 as exports of electronic products recover from the global economic crisis, according to iSuppli Corp.
What semiconductor markets are best situated to benefit from any upturn in the economy? According to the U.S. Bureau of Economic Analysis, Dept. of Commerce, final sales of computers subtracted 0.11 percentage point from the third-quarter 2009 change in real GDP after subtracting 0.04 percentage point from the second-quarter change.
Our own data – Chip Design Trends (CDT) – supports this decline in the PC market by predicting that fewer new chip designs are being targeted for PC applications. By contrast, the embedded systems market is expected to continue to grow (see Figure).
Figure: In the computer market, more designers are performing ASIC prototypes and verification on applications destined for the embedded systems market vs the traditional PC market. (Chip Design Trends – ASIC Prototyping survey 2009)
Consumer electronics will also see a rebound, as exports form China are expected to improve significantly next year. iSuppli predicts that the big export markets in China will be 3G smart phones, netbooks, Blu-ray DVD players, LCD-TVs, energy meters, surveillance and medical electronics.
Will growth in these markets be strong enough to generate new jobs? That’s the big question that, as yet, remains unpredicted.
Where do you see growth in the semiconductor market? Let me know by taking this quick poll. Thx. — JB
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