Feeds

iSuppli: Semi recovery a 'false spring'

2010 revenues to barely exceed 2007

Build a business case: developing custom apps

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. ®

The essential guide to IT transformation

More from The Register

next story
Reg man looks through a Glass, darkly: Google's toy ploy or killer tech specs?
Tip: Put the shades on and you'll look less of a spanner
So, Apple won't sell cheap kit? Prepare the iOS garden wall WRECKING BALL
It can throw the low cost race if it looks to the cloud
One step closer to ROBOT BUTLERS: Dyson flashes vid of VACUUM SUCKER bot
Latest cleaner available for world+dog in September
Samsung Gear S: Quick, LAUNCH IT – before Apple straps on iWatch
Full specs for wrist-mounted device here ... but who'll buy it?
Apple promises to lift Curse of the Drained iPhone 5 Battery
Have you tried turning it off and...? Never mind, here's a replacement
Now that's FIRE WIRE: HP recalls 6 MILLION burn-risk laptop cables
Right in the middle of Burning Mains Man week
Apple's iWatch? They cannae do it ... they don't have the POWER
Analyst predicts fanbois will have to wait until next year
HUGE iPAD? Maybe. HUGE ADVERTS? That's for SURE
Noo! Hand not big enough! Don't look at meee!
AMD unveils 'single purpose' graphics card for PC gamers and NO ONE else
Chip maker claims the Radeon R9 285 is 'best in its class'
prev story

Whitepapers

Top 10 endpoint backup mistakes
Avoid the ten endpoint backup mistakes to ensure that your critical corporate data is protected and end user productivity is improved.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Backing up distributed data
Eliminating the redundant use of bandwidth and storage capacity and application consolidation in the modern data center.
The essential guide to IT transformation
ServiceNow discusses three IT transformations that can help CIOs automate IT services to transform IT and the enterprise
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.