Chip sales flat in 2011, will grow (a wee bit) in 2012

Weighed down by disk shortages, economic jitters

The prognosticators at Gartner have ranked the chip makers of the world by 2011 revenue and are calling the market for 2012, with a reasonably upbeat forecast for next year's chip sales, but – paradoxically – a dreadful forecast for companies that make the gear to bake the chips.

Gartner says that when 2011 wraps at the end of next week, the semiconductor industry will have peddled just a bit over $302bn in chips during the year. That's a mere 0.9 per cent bump from $299.4bn in 2010, a year of recovery for the industry after it was slammed by the Great Recession in late 2008 and throughout 2009.

Getting a bead on the chip market has been problematic because of the uncertainty in the European economies and the slowdown in PC shipments caused by the prolonged and deadly flooding in Thailand, where about a quarter of the world's disk drives are manufactured. Disk shortages are slowing down PC sales, and are now projected to do so for the next several quarters.

Back in April, Gartner projected that worldwide semi revenues would rise by 5.1 per cent this year to $314bn. But in September, when it was clear that the macroeconomic climate was clouding up in the US and Europe, Gartner revised its 2011 projection, and said it would actually decline by a tenth of a point. Even with the European debt crisis, disk drive shortages, and PC slowdown fully baked in, Gartner now says that 2011 will actually end up a bit better that its September estimate, hitting that $302bn level.

But don't throw a party quite yet. Earlier this year, Gartner was expecting for 2012's chip sales to rise by 8.6 per cent from that higher $314bn number, and by September it was projecting semis would grow by only 4.6 per cent from the $299bn level. In its latest forecast, however, Gartner has karate-chopped 2012 growth to 2.2 per cent, to $308.7bn.

"With continuing concern over the future of the eurozone affecting the global economy, the high degree of uncertainty impacting spending by both consumers and enterprises looks set to continue, bringing with it significant implications for the semiconductor industry," explained Bryan Lewis, research vice president at Gartner, in a statement accompanying the projections. "The near-term forecast is being shaped not only by economic forces but by an inventory correction, manufacturing oversupply and natural disasters," he said.

Gartner thinks that PC unit shipments will rise by only 5 per cent in 2012, half the stunted growth rate of this year. Mobile phones are expected to see a 7.5 per cent shipment increase, and tablets are anticipated to slow a bit, with only 63 per cent growth.

The DRAM market, which took a 26 per cent dive this year, is expected to eke out 3 per cent growth in 2012, and NAND flash chips are projected to see a 16.6 per cent revenue bump. Smartphones, tablets, and flash will represent more than three-quarters of the revenue growth between now and 2015, according to Lewis.

While the chip business is tightening its belt in preparation for 2012, the companies that make the ingot pulling, etching, packaging, and testing equipment for the semiconductor makers are getting ready to eat sand. Gartner says that worldwide capital equipment spending dedicated to chip manufacturing rose by 13.7 per cent, to $64.2bn, but that it anticipates chip makers will only blow $51.7bn on chip fabbing gear in 2012 – a 19.5 per cent decline.

Gartner assumes that memory, flash, and PC spending will pick up in the second half of next year, and that consequently chip makers will start building out capacity in the second half of the year. And if the demand continues, semi equipment sales will rise by 19.2 per cent in 2013, hitting $61.6bn. Growth will be a few points a year after that.

Intel will be the top dog in the chip racket in 2011, Gartner predicts, with just over $51bn in revenues giving the semi giant a 16.9 per cent share of the worldwide market – the biggest piece of the chip pie ever for Intel, just narrowly edging out 16.8 per cent slice they had in 1998. Samsung will rank second with $29.2bn in sales, followed by Texas Instruments with $12.1bn, Toshiba with $11.7bn, and Renesas Electronics with $10.7bn. ®

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