Semi growth to hit high point in current cycle this year
By Ann Steffora Mutschler -- EDN, January 2, 2007
Good news for the semiconductor industry: 2007 will be the peak year of the present growth cycle, with double-digit growth expected, according to El Segundo, Calif.-based market research firm iSuppli Corp.
On the other hand, the bad news for the semiconductor industry this year is that due to the changing dynamics of the business, growth will amount to only 10.6 percent—far below historical market peaks.
Still, iSuppli expects worldwide semiconductor revenue to expand to $285.8 billion this year, from $258.5 billion in 2006, compared to iSuppli’s newly revised forecast of 9 percent semiconductor growth in 2006.
After this year, growth is expected to decelerate to 8.7 percent in 2008 and bottom out at 3.7 percent in 2009, before bouncing back to a 7.4 percent rise in 2010.
The figure below is iSuppli’s global semiconductor forecast:
Source: iSuppli Corp., January 2007
While some industries would kill to achieve 10.6 percent growth, this rate represents a moderate rise for a semiconductor business that has seen expansions as high as the 30 to 40 percent range during its best years, the firm notes.
However, the mild peak comes with a benefit in that global semiconductor revenue is not expected to suffer a contraction during the present cycle, coming as welcome news to semiconductor companies that still have the 28.9 percent revenue plunge of 2001 fresh in their minds.
“The milder cyclical swing reflects changed dynamics in the semiconductor industry,” said Gary Grandbois , principal analyst with iSuppli, in a statement.
The average annual growth rate of the semiconductor market has been slowing for a decade: the industry’s compound annual growth rate (CAGR) has settled in to a range between 7 and 9 percent, compared to an average in the mid-teens in the past.
The cyclical behavior also is moderating in terms of peaks and valleys, with the variance between the high and low years of the present cycle amounting to only 6.9 percentage points, compared to 52.7 percentage points between the previous low point in 2001 and the peak in 2004.
“Factors contributing to the semiconductor market’s more moderate cycles include improved inventory practices, better management of manufacturing capacity and greater flexibility in memory production,” Grandbois explained.
The semiconductor industry is also expected to post an improved performance this year due to a healthier market for electronic equipment and a stabilization in average selling prices (ASP).
Global revenue for all types of electronic equipment will rise to $1.47 trillion in 2007, up 6.7 percent from $1.37 trillion in 2006, compared to growth of 6.6 percent in 2006, the firm notes.
Semiconductor demand from all major applications will rise this year compared to 2006, with the strongest growth occurring in data processing, wired communications and consumer electronics.
In terms of wired communications gear, semiconductor revenue derived from this segment is expected to grow by 18.2 percent this year, compared to 9.9 percent last year. While revenue for consumer-electronics oriented chips will grow by 14.4 percent this year, compared to 10.3 percent last year, and the data processing segment will increase its semiconductor demand by 9 percent this year, compared to only 5.8 percent last year.
Microprocessors suffered in 2006
Microprocessors suffered a tough 2006 due to major competitive pressure that eroded pricing, combined with slowing PC demand. However, conditions are set to improve as the dust settles from the competitive battle between Intel Corp. and Advanced Micro Devices Inc.
iSuppli estimates microprocessor revenue declined by 6.6 percent last year – a significant drop for a product that has consistently grown by an average of about 8 percent annually. Microprocessor revenue growth is expected to bounce back to double digits this year, at 10.8 percent, rising to $35.4 billion, up from $31.9 billion last year.
Revenue growth for logic ICs is also expected to accelerate this year with global logic IC revenue to reach $72.7 billion, up 10.8 percent from $65.6 billion last year, compared to 7.8 percent growth last year.
in 2006.
Finally, iSuppli believes analog ICs are another area that will see accelerated growth this year with revenue for analog ICs amounting to $46.99 billion in 2007, up 11.2 percent from $42.3 billion last year. In comparison, analog IC revenue grew by only 8.8 percent last year, the firm concluded.
