ISuppli Revises 2010 IC Forecast, Sees 31% Growth

SAN FRANCISCO—After declining in 2008 and 2009, semiconductor industry revenue is set to grow nearly 31 percent in 2010, reaching a record $300.3 billion, according to a revised forecast issued Thursday (May 6) by market research firm iSuppli Corp. The last time semiconductor industry growth topped 30 percent was 2000, when the dot com craze was driving massive infrastructure build out and the chip market expanded by 36.7 percent. But unlike the Internet-crazed spike in 2000, growth in chip sales this year will be driven by real fundamental supply and demand factors that slowly have been gaining momentum during the past 12 months, the firm said. "Chip sales growth this year will be fueled by a number of key factors, including continued strong consumer demand for hot electronic products, diligent inventory and capacity management efforts among chip makers and the arrival of innovative technologies at both the component and end-system levels," said Dale Ford, iSuppli's senior vice president of market intelligence services, in a statement. ISuppli's 2010 forecast calls for IC revenue to set a new all-time high, eclipsing the previous record of $274 billion set in 2007 by about 9 percent, the firm said. But Ford cautioned that the 2010 growth forecast must be viewed in the context of a dismal 2009. "Compared to 2008, the semiconductor industry in 2010 will achieve more moderate revenue growth of 15.4 percent," Ford said. "The economy represents the biggest wild card in iSuppli's 2010 forecast," Ford warned. "While many indicators have shown sustained improvement, there are, however, a number of financial and economic trouble spots that could endanger the continued growth in the market before the end of 2010." In March, iSuppli said it expected 2010 chip sales to grow 21.5 percent to nearly $280 billion. Ford said the table was set for strong 2010 growth by an unusually robust first quarter. First quarter chip sales grew 1.1 percent compared with the fourth quarter of 2009, he said, the first time the industry achieved sequential growth from the fourth quarter to the first quarter since 2004. Earlier this week, analyst Mike Cowan used first quarter chip sales as the basis for predicting the industry would grow 30.3 percent in 2010. Malcolm Penn, founder and principal analyst with Future Horizons Ltd., also this week raised his forecast for 2010 chip growth to 31 percent. Consumer demand for electronic products continues to surpass expectations and drive demand for chips, according to iSuppli. Strong sales growth is predicted for 2010 in PCs, mobile handsets, LCD-TVs and other semiconductor-rich electronic systems, which will propel global factory revenue for electronic systems to a record high of $1.55 trillion in 2010, up 10.4 percent from $1.4 trillion in 2009, the firm said. Despite speculation by some financial analysts that inventory buildup is an issue in some product areas, such as programmable logic, iSuppli said chip makers are benefiting from careful management of chip inventories and tight controls on manufacturing capacity. "By keeping a tight reign on stockpiles and production, semiconductor companies have been able to hold supplies at levels less than demand," Ford said. "As a result, many semiconductor product segments are experiencing strong upward price pressure." ISuppli predicted that DRAM memory revenue would grow by nearly 77 percent in 2010 and act as a major driver for overall semiconductor growth. Otherchip markets expected to grow by more than 30 percent in 2010 include NAND flash memory, analog ICs, discretes, LEDs and programmable logic, iSuppli said.