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Chip sales likely to fall in 2011

Economic woes mean sales are slipping in Q4

Worldwide computer chip sales may have been relatively strong during 2010, but analysts are warning that next year's sales totals could prove disappointing.

Market research firm iSuppli was initially looking at positive results for 2011, but lingering economic woes continue to curtail consumer and enterprise buying mean chip sales are already starting to soften.

Dale Ford, a senior vice president at iSuppli, said chip sales had been very strong at the start of this year as businesses finally started replacing older systems. However, they are now slipping in the generally-lucrative fourth quarter.

"Despite the resumption of growth in the semiconductor markets, enthusiasm is muted at best as the ghost of the recent economic downturn continues to haunt the industry," Ford said.

"Several factors bearing witness to the wretched effects of the recession - among them stubborn unemployment, tight credit availability and the lack of recovery in the housing market - are hindering consumer spending."

Analysts started trimming semiconductor projections for this year earlier late last month.

ISuppli's 2010 global semiconductor revenue forecast was scaled back due to what the researcher called slowing consumer demand and rising inventories.

And now iSuppli also is saying that slowing consumer demand will keep 2011 from being as robust as 2010.

According to iSuppli, global semiconductor revenue in 2011 should reach $317.4bn, up a modest 5.1 percent from $302bn projected for this year. That's a dramatic switch from a 32 percent uptick this year.

"Sure, the semiconductor market isn't going to grow at anything near the 32% pace it did last year, but that doesn't surprise me," said Dan Olds, an analyst with The Gabriel Consulting Group.

"The general economic conditions are still woeful. There is just too much uncertainty out there for companies and consumers alike to do much in the way of spending."

Olds added that with continued economic uncertainty, buyers are going to be hesitant to have products sitting untouched on their shelves for too long.

"At the end of the day, demand is going to dictate supply," he said. "If firms don't think the demand will be out there, they are going to do anything they can to make sure they aren't stuck with excess inventory that will depreciate rapidly."

See also: Laptop slump hits Q3 graphics shipments

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