SILICON VALLEY, CA -- While semiconductor industry executives note the rise of the United States as the second most important market for growth, behind China, their revenue and profitability growth expectations overall are down from a year ago and they do not plan to hire as many people, according to a global survey conducted by KPMG LLP, the U.S. audit, tax and advisory firm.
In KPMG's Seventh Annual Global Semiconductor Industry Survey, 41 percent of the semiconductor executives surveyed expects that revenue will grow by more than 5 percent next year, compared with 78 percent a year ago, and 87 percent in 2009. They also see less growth in profitability, with 30 percent anticipating profits to increase by greater than 5 percent over the next 12 months, compared with 37 percent last year.
In addition, this year the Semiconductor Business Confidence Index, a metric based on survey data, measured 46, compared to 60 in 2010 and 61 in 2009. The confidence index has risen from 36 in 2008, indicating that forecasted industry conditions entering 2012 will not be as severe as the beginning of 2009.
"It is not unexpected to see the industry take a breath after two strong years following the economic and industry downturn," said Gary Matuszak, KPMG Global Chair for the Technology, Media and Telecommunications practice. "Executives continue to pursue their growth agendas, and will be acquisitive, but remain very apprehensive about the direction of the economy."
In fact, in the KPMG survey, capital spending, R&D spending, and hiring are at lower levels than prior years. Just 27 percent, compared with 46 percent a year ago, anticipate capital spending to increase by more than five percent. Thirty-three percent expect more than a five percent rise in R&D spending, compared with 47 percent a year ago. And 19 percent of the respondents predict workforce growth of greater than 5 percent, compared with 29 percent in 2010.
U.S. Market Growing In Importance
Semiconductor executives continue to note the increasing importance of the U.S. market. Consider that in 2008, 38 percent of the executives felt that the U.S. was an important market for revenue growth, behind China (79 percent), Taiwan (44 percent) and Japan (40 percent). In each subsequent year an increasingly greater number of executives named the U.S. as an important market. Today, 50 percent, as compared with 47 percent a year ago, view the U.S. as important, second to China, at 60 percent, with Japan ranked third, at 37 percent.
"Wireless, computing and consumer applications are providing the strongest demand for semiconductors, and with retail sales strengthening, especially during the peak holiday season, the U.S. consumer is showing an appetite for the latest and greatest," said Ron Steger, Partner in Charge, KPMG Global Semiconductor Practice. "China's decrease in importance might be the result of the Chinese government's tightening in lending but it is clear that the industry sees the China and U.S. markets as the two most significant global end markets for growth."
The KPMG survey respondents were also asked to rank the importance of application markets in driving revenues. The top driver of current revenue growth for 2012 was wireless handsets and other wireless communications devices again. However, computing has become the second most important driver, followed by consumer products, a switch in positions from last year's survey.
Also of note is the rise in alternative/renewable energy (solar, thermal, battery technologies) and medical application markets, although both are still at relatively low levels. "Worthy of note is that the respondents appear to be signaling that conditions in the renewable energy market may be bottoming out, a positive data point," said Steger.
In other survey findings:
Sixty-four percent of semiconductor executives believe that global semiconductor revenue will be impacted 3 percent or more by counterfeit technology, including a third who said the impact will be 5 percent or more. To combat counterfeiting, the top three actions by companies are deploying more sophisticated identification technologies, providing detailed testing protocols and enhancing product return testing programs.
More than a third of the respondents said there will be an increase over the next 12 months in the number of semiconductor intellectual property (IP) infringement cases in which their company is involved.
When asked about their company's cost to respond to the IP infringement cases over the next three years, 30 percent expect the cost to increase more than five percent. International standardization of patent laws and enforcement policies and stronger global IP policies and cooperation among major countries are cited as the two actions that would improve the regulatory environment for IP infringement cases
More survey respondents said their companies' settle IP infringement cases through negotiation, with litigation in special patent courts and litigation in select geographic markets rounding out the top three ways to settle the cases.
Despite the current high cost of equipping a 300mm wafer fabrication plant, more respondents, 40 percent, believe the industry will move to 450mm wafers, while 31 percent anticipate the industry remaining at 300mm wafers for the foreseeable future, and 30 percent were unsure. Most importantly, 54 percent believe the transition to the 450mm wafer will occur between 2013 and 2016.