IC Insights: The sky isn’t falling
Acknowledging the US economy has seen better days, IC Insights says that it's no time to panic and tells the industry to hold out for full Q1 results before re-evaluating forecasts.
By Suzanne Deffree, Managing Editor, News -- EDN, March 21, 2008
IC Insights is bucking the current industry trend to lower estimates for 2008 growth and has stated that it will not cut its expectations, at least not in the near term.
The market researcher – citing economic forecasting surveys, drops in February retail sales, and the increasing number of US job losses – admitted that the US economy has seen much better days. But is the sky falling? IC Insights firmly believes it is not and said it will not downgrade its IC market forecast for 2008 at this point. Currently, IC Insights is forecasting 9% IC market growth for all of 2008.
“Although no government data has been released to indicate that the US economy has had even one quarter of negative GDP growth, IC Insights acknowledges that the US is teetering near that point. However, we also believe it is premature to make adjustments—however slight or great—to our full-year IC market forecast, based on spot-news headlines and a survey of US economists,” the research company said in a statement late Thursday.
According to IC Insights, IC market growth in the first quarter of each year tells a lot about what to expect in terms of overall market growth for the year. The company is basing its growth estimate on an expected Q1 IC market decline of 4% quarter over quarter. IC Insights then expects the market to decline another 2% sequentially in Q2. However, the company expects a major pickup in Q3, forecasting growth of 15% quarter over quarter, to be followed by 3% sequential growth in Q3. Together, the quarters would show full-year 2008 IC market growth of 9%, IC Insight said.
“If a recession has indeed hit the U.S., and other global regions also see their economies slowing throughout 2008, then the IC market may actually decline,” the market research company conceded.
In that scenario, IC Insights estimated that the market could drop 9% in Q1, followed by a 4% decline in Q2, then 10% growth in Q3, and a 3% decline in Q4, all quarter over quarter, for a total IC market decline of 3% in 2008.
IC Insights reminded that there have been five years since 1975 when the IC industry posted a negative growth rate (1975, 1985, 1996, 1998, and 2001). In those years, the Q1 over Q4 IC market displayed at least a 9% decline; 2001 recorded the highest decline at a 20% drop.
If the sequential decline in the Q1 IC market is 9% or worse, IC Insights said that the 2008 IC market would be on pace to register a negative year.
“While the potential for a negative growth year exists, IC Insights is not ready to change its forecast just yet. Rather, we believe it is more prudent to stay with our current outlook of 9% growth at least until complete Q1 results become available—typically in the last week of April—before making any adjustments. All too often, IC forecast revisions made in the late winter must be revised back up in the summer,” the company said.
IC Insights’ stance on the 2008 market varies greatly from that of many of the other major industry market researchers. ISuppli earlier this month warned that it will trim its total 2008 growth forecast from 7.5% on market weakness by March’s end. Gartner also earlier this month cut its estimates for 2008 semiconductor market growth nearly in half to 3.4% on a more-cautious demand-side outlook, much of is being influenced by DRAM and NAND. The IPC also released market data this month that shows electronics sales reflecting a hurting economy, with semiconductor shipments continue to slow down.
