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iSuppli drops 2011 semiconductor forecast on slow Q4

Memory market weighs down global revenue; 2012 expected to start slow

An industry analyst firm has lowered its forecast for the worldwide semiconductor market for this year because of declining revenue in the fourth quarter.

In September, IHS iSuppli predicted that the global seminductor market would grow by 2.9% compared to 2010. Two months later, the analyst firm dropped that expectation to a 1.2% increase.

Dale Ford, a senior vice president for iSuppli, reported that third-quarter revenue was strong -- up 3.5% compared to the second quarter -- in the computer chip market, but the final three months of the year are looking bleaker. Revenue is predicted to drop by 2% in the fourth quarter compared to the third quarter.

"Although the forecast of 1.2% revenue growth in 2011 is just barely positive, an expansion of any magnitude is significant from the standpoint of market psychology," Ford said. "Given the worsening economic environment and growing pessimism in the electronics supply chain, many market forecasters had projected third-quarter revenues would decline, and pull down the results for the full year of 2011. Even the prospect of marginal growth casts a much more optimistic light on the market performance for the year."

So where is the trouble mainly coming from? The chip industry was rocked in March when a devastating earthquake and tsunami hit Japan, damaging many semiconductor manufacturing facilities, and disrupting Japan's electrical supply and transportation infrastructure.

In the months after the disaster, most manufacturing was moved outside of the disaster area, and the plants have since rebounded in the third quarter.

According to iSuppli, memory is the primary market weighing down the semiconductor industry in the fourth quarter. DRAM, SRAM and NOR Flash memory are expected to see revenue declines of 15% or more this year. iSuppli predicts that the memory market will not get much better in 2012, as all segments, including NAND flash memory, are expected to decline.

The good news, though, comes in the microprocessor, image sensor and NAND flash memory markets, where revenue is expected to grow by more than 15% in 2011, iSuppli reported.

Zeus Kerravala, principal analyst with ZK Research, agrees with iSuppli that the tough economy will continue to be a drag on the global semiconductor market into the new year.

"The tough times will continue," he said. "I mean, Europe is a mess. U.S. IT spending is looking flat. This is bad."

Kerravala said the semiconductor market tends to act as a leading economic indicator . A lowered expectation for the year here is a tough sign for the global economy.

"Europe needs to get cleaned up," he noted. "The situation in Europe has created a fair amount of uncertainty in the overall macro economy, which causes companies to be cautious and consumers to slow down spending. I think 2012 is going to start weak."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin or subscribe to Sharon's RSS feed . Her e-mail address is [email protected] .

Read more about processors in Computerworld's Processors Topic Center.


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