Worldwide Semiconductor Sales Slowing Rapidly; 2011 Revenue to Decline 0.1 Percent

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Worldwide semiconductor revenue has slowed in 2011, and the market is on pace to have revenue total $299 billion, a decline of 0.1 per cent from 2010, according to Gartner. This outlook is down from Gartner’s previous projection in the second quarter for 5.1 per cent growth this year. You can read the media release here.

“Three key factors are shaping the short-term outlook: excess inventory, manufacturing overcapacity and slowing demand due to economic weakness,” said Bryan Lewis, research vice president at Gartner.

Points to Ponder

— PC production unit growth has significantly decreased. Last quarter, Gartner estimated PC production growth of 9.5 per cent; that has now been reduced to 3.4 per cent. Gartner has also lowered its forecast of mobile phone production unit growth from a second-quarter projection of 12.9 per cent growth to 11.5 per cent growth.

— Semiconductor companies’ third-quarter guidance is well below seasonal averages. The current guidance by vendors points to flat to down third-quarter growth. The supply chain is also showing significant slowdown, and semiconductor-related inventory levels are still elevated.

— Typically, we see guidance for 8 to 9 per cent growth in the third quarter because of back-to-school and the holiday build.

— DRAM has been severely impacted by reduced PC demand and falling prices and is now expected to decline 26.6 per cent in 2011.

— NAND flash and data processing ASIC are the fastest-growing device areas in 2011, with about 20 percent growth. This growth is due in part to the strong growth in smartphones and iPads.

E-say

Bryan Lewis (research vice president, Gartner): 2012 is the wild card. We have lowered our 2012 semiconductor forecast from 8.6 per cent to 4.6 per cent due to a worsening macroeconomic outlook. However, the odds of a double-dip U.S. recession continue to rise and are raising fear that sales prospects will deteriorate further.