The global semiconductor market is 'on steroids'

ANALYST OUTFIT Isuppli claims that the global semiconductor market in 2010 has been injected with a powerful dose of steroids.

In its latest report Isuppli raised its revenue forecast to a record level for the year. Isuppli now predicts global semiconductor revenue in 2010 will rise by 35.1 per cent to reach $310.3 billion, up from $229.6 billion in 2009. Isuppli previously forecast that the market would grow by 30.9 per cent this year, so this is an admission by Isuppli that it got its forecast wrong with its earlier market predictions.

There is good money in this predictions business. If you guess wrong you just publish another figure with a different prediction or downgrade it "due to new economic conditions". This means that if Julius Caesar was not assassinated on the Ides of March, the prediction could be delayed by a week or two or even to the Ides of April, due to "newly received data".

Anyway Isuppli said that with an $80.7 billion increase, 2010 will bring the largest annual expansion in semiconductor revenue in history in dollar terms.

In comparison, semiconductor revenue increased by slightly less than $60 billion during the next best year for chip sales growth which was the dot-com-fueled year of 2000.

Dale Ford, SVP at Isuppli said that the semiconductor market already was in for strong growth in 2010 because of heavy consumer demand for electronic products.

He said it's now apparent that semiconductor sales are getting an infusion of growth hormone in 2010 because of a number of factors, including rising prices, inventory buildups and richer chip content in key electronic products like smartphones and advanced LCD TVs. All this is causing chip revenue to bulge to awesome dimensions this year.

Factory OEM revenue for electronic equipment is projected to grow by $131 billion to reach $1.54 trillion in 2010, up 9.3 per cent from 2009. The previous high for electronics OEM revenue was $1.53 trillion in 2008.

Shipment and revenue growth for electronics equipment is surpassing expectations in areas including PCs, cell phones, LCD TVs and other semiconductor-rich products.

But it looks like the percentage semiconductor revenue growth will vastly exceed the expansion of the end-equipment markets.

Ford warned that careful management of semiconductor inventories and tight controls on manufacturing capacity have resulted in an environment where supply is not able to match demand.

This means that prices in many semiconductor segments are inflated. The adoption of innovative technologies both at the system and component level is resulting in rising sales of highly integrated semiconductors that capture a larger share of the value of electronics systems. These integrated semiconductors tend to command higher pricing, said Ford.

He predicts that DRAM revenue will rise by more than 86 per cent, while NAND flash memory will expand in excess of 33 per cent. This will cause overall memory revenue to rise by 56 per cent for the year.

Every major semiconductor category, microcomponents, logic, analog, discretes and optical and sensors will rise by more than 25 per cent in 2010.

Other major growth drivers in 2010 will be LEDs, programmable logic devices, general-purpose analog ICs and discrete components. These market segments are forecasted to see growth between 36 per cent and 49 per cent during 2010. µ