Feeds

iSuppli: Semi recovery a 'false spring'

2010 revenues to barely exceed 2007

Business security measures using SSL

A consensus is evolving that the semiconductor industry is going to recover mightily in 2010. But the analysts at iSuppli want to remind everyone that things are only going to feel so good this year because they were so bad in late 2008 and through 2009.

The latest estimates for global semi sales for this year from iSuppli suggest a dramatic recovery, with chip sales of $279.7bn, up 21.5 per cent from the $230m level set in 2009.

"Amid double-digit growth in revenue, rising prices, supply constraints and soaring capital equipment purchases, enthusiasm over the semiconductor industry’s 2010 outlook has hit a fever pitch," explained Dale Ford, senior vice president of market intelligence services at iSuppli in a statement accompanying the projections. "However, conditions in 2010 appear so fantastic only in comparison of 2009. In reality, 2010 is likely to simply be a year when semiconductor industry growth on a sequential quarterly basis returns to a more normal pattern."

The expected bounce in 2010 is no doubt better than the alternative. But, just to keep everyone grounded, iSuppli stressed that the levels in 2010 will only be 2.3 per cent higher than the $273.4bn set in 2007. The recession in the United States started that December and spread throughout 2008 as the financial crisis kicked in. The levels set in 2010 will only be 8 per cent higher than the $258.9bn level of semiconductor sales in 2008. It will be a long time before the industry gets back the money it was not able to make in 2008 and 2009.

To drive home the message that this rebound is a false spring of sorts, Ford reminded everyone that the crash of 2009 was the first time in the history of the semiconductor industry that a downturn was instigated primarily from economic conditions. The big fall in 2001, said Ford, was the result of the dot-com bust and excess semiconductor manufacturing capacity coming online during the dot-com boom. In general, he added, the ups and downs of the semi market have been driven more by technology issues than economic ones.

The question now is how tightly the rising and falling of the semiconductor market is bound to the general global and regional economic conditions. One expects that 2009, which makes a break with historical trends, is setting a new one: As the economy goes, so goes semis.

While revenue is great, what investors want to see is profits. The real concern is whether the semiconductor industry will be any more profitable in 2010 than it was in 2007, despite our increasing appetite electronic devices crammed with chips. According to iSuppli, mobile phone makers are saying that supplies of chips used in their devices are currently constrained, and chip makers are trying to raise prices and therefore margins.

But despite that, iSuppli's procurement pricing index says that the average price of semiconductor components will fall by 2 per cent in the first and second quarter - what it says is a typical price decline for the industry and not reflective of a "surge in pricing". And that means competition is high and profits will continue to be under pressure.

If capital spending is any gauge, then the semiconductor industry still has a way to go to a full recovery. iSuppli says that chip makers will spend 46.8 per cent more on wafer baking equipment in 2010 than they did last year, but even with that the capital spending will be less than half the levels set by the industry in 2007 and 2008. Chip makers are focused on moving to new technologies right now, not building out capacity for existing technologies. ®

New hybrid storage solutions

More from The Register

next story
Half a BILLION in the making: Bungie's Destiny reviewed
It feels very familiar - but it's still good
Oi, Tim Cook. Apple Watch. I DARE you to tell me, IN PERSON, that it's secure
State attorney demands Apple CEO bows the knee to him
Apple's big bang: iPhone 6, ANOTHER iPhone 6 Plus and WATCH OUT
Let's >sigh< see what Cupertino has been up to for the past year
Huawei ditches new Windows Phone mobe plans, blames poor sales
Giganto mobe firm slams door shut on Microsoft. OH DEAR
4K-ing excellent TV is on its way ... in its own sweet time, natch
For decades Hollywood actually binned its 4K files. Doh!
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Get your Indian Landfill Android One handsets - they're only SIXTY QUID
Cheap and deafening mobes for the subcontinental masses
Apple's SNEAKY plan: COPY ANDROID. Hello iPhone 6, Watch
Sizes, prices and all – but not for the wrist-o-puter
prev story

Whitepapers

Providing a secure and efficient Helpdesk
A single remote control platform for user support is be key to providing an efficient helpdesk. Retain full control over the way in which screen and keystroke data is transmitted.
Saudi Petroleum chooses Tegile storage solution
A storage solution that addresses company growth and performance for business-critical applications of caseware archive and search along with other key operational systems.
Security and trust: The backbone of doing business over the internet
Explores the current state of website security and the contributions Symantec is making to help organizations protect critical data and build trust with customers.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.