IHS cuts 2011 semiconductor forecast

By Dylan McGrath, EE Times -- EDN, November 17, 2011

SAN FRANCISCO -- Market research firm IHS iSuppli Thursday (November 17) cut its forecast for 2011 semiconductor sales, but said it still predicts slight growth for the year because of continued growth in the third quarter.

IHS said it now expects chip sales to reach $308.5 billion this year, up 1.2% from 2010. The firm had forecast in September that chip sales would increase 2.9% in 2011.

According to IHS, global semiconductor grew to about $78.7 billion in the third quarter, up about 3.5% compared to the second quarter, despite major economic headwinds. While the growth was lower than IHS' September projection of 4.8% for the third quarter, revenue expansion in the quarter means that growth for the full year has been salvaged, IHS said.

"Although the forecast of 1.2% revenue growth in 2011 is just barely positive, an expansion of any magnitude is significant from the standpoint of market psychology," said Dale Ford, senior vice president of electronics market intelligence for IHS, in a statement.

Ford said that given a worsening economic environment and growing pessimism in the electronics supply chain, many IC market watchers had predicted that chip sales would decline in the third quarter, pulling down forecasts for the full year. "Even the prospect of marginal growth casts a much more optimistic light on the market performance for the year," Ford said.

A number of market research firms have cut their forecasts for the semiconductor market in recent weeks as sales have slowed and inventory correction set in. Some analysts are now projecting that chip sales will decline in 2011 compared to last year.

IHS projects that semiconductor sales will slip to $77.1 billion in the fourth quarter, down about 2% compared to the third quarter, the company said. While many major chip suppliers are projecting sequential sales declines in the high single digits or greater for the fourth quarter, a number of major IC firms -- including Intel Corp, Samsung Electronics Co Ltd, Renesas Electronics Corp, and Qualcomm Inc -- have projected solid growth in the fourth quarter that will limit the overall market decline, IHS said.

Chip sales would have to decline by 7% or more in the fourth quarter to put the industry in negative territory for the year, IHS said.

This story was originally posted by EE Times.