IHS boosts 2012 chip market forecast

SAN FRANCISCO -- Market research firm IHS iSuppli Wednesday (April 25) lifted its forecast for the 2012 semiconductor market, citing strong ongoing consumer demand for wireless products like cell phones and media tablets.

IHS (El Segundo, Calif) is now forecasting that total chip sales will reach an estimated $324.6 billion in 2012, up 4.3% from last year. The market research firm previously forecasted an increase of 3.3% for the chip market this year.

Gartner Inc, a rival market research firm, increased its forecast for the 2012 chip market in March. Gartner now expects chip sales to increase 4% to $3.16 billion this year.

Barring an unforeseen economic slump in world markets or grave missteps by the chip industry, revenue should continue to climb during the next few years, hitting approximately $412.8 billion by 2016, according to the latest IHS forecast.

"Semiconductor revenue growth is expected to rise in 2012 compared to last year as consumers begin to believe that the global economic recovery is for real," said Len Jelinek, director and chief analyst of semiconductor manufacturing at IHS.


Jelinek said the biggest drivers of semiconductor demand in 2012 would be consumer-oriented products like smartphones and tablets. In addition to Apple Inc's iPhone and iPad, a swarm of competing products will also help drive semiconductor sales, Jelinek said.

"In particular, semiconductor suppliers can anticipate an exceptionally robust third quarter this year in preparation for strong holiday sell-through," Jelinek said.

IHS predicted that the Intel-backed Ultrabook low-power notebook PC platform would have only a minimal impact on 2012 semiconductor revenue. But the forthcoming introduction of Microsoft Corp's Windows 8 -- the first version of the PC operating system that will support touchscreen capability -- means that Ultrabooks have the potential to become a key market revenue driver in 2013, IHS said.

The three major areas of strength for the semiconductor industry this year will be NAND flash, logic ASICs, and microprocessors, according to the IHS foecast. The revenue increases in NAND and logic ASICs will come as a result of growth in sales of tablets and smartphones, while the revenue expansion in microprocessors will be driven by renewed growth in notebooks and the gradual emergence of Ultrabooks, according to IHS.

But IHS warned that the semiconductor industry is in a tenuous position because inventory remains at high levels, despite the fact that chip suppliers have reduced their inventory by 7.5% over the last six months. Further inventory reductions are necessary for manufacturers to experience sustained demand, and companies must continue to monitor inventory levels closely to reduce them through the first half of the year, IHS said.

According to IHS, the largest portion of inventory is held by integrated device manufacturers, which traditionally do not reduce inventory as aggressively as fabless semiconductor companies. Since the end of the second quarter of 2011, IDMs have reduced their inventory by only 5.4%, IHS said. The firm warned that sustainable growth will not occur until the semiconductor industry reduces total inventory by at least another 5%.

This story was originally posted by EE Times.