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2011 Chip Sales Stalling, but Expect a Brighter 2012

Last week {complink 7526|Semico Research Corp.} released its industry forecast for the balance of 2011 and 2012. Unfortunately, all the indicators have moved 2011 into the negative territory. Semiconductor sales will end the year 1.6 percent lower than 2010.

That should not be too surprising, as the Semico Inflection Point Indicator (IPI) began moving down in May of 2010, warning us of a sluggish second half 2011. The economic malaise, along with the natural disasters around the world, has only made semiconductor sales even more challenging.

The good news is that the IPI points to a bottom in the first quarter of 2012. Not only are all the economic and supply chain indicators pointing to a better 2012, but it is also consistent with the industry technology cycles. {complink 2657|Intel Corp.} is rolling out its 22nm process technology by the end of this year, while {complink 12822|GlobalFoundries Inc.} and {complink 5388|Taiwan Semiconductor Manufacturing Co. (TSMC)} are ready with their 28nm processes.

New technologies mean new products or at least new features for our existing electronics devices. In addition, the good news is that GlobalFoundries remains committed to its capacity expansion and technology development plans. Expansions at its Fab 1 in Dresden and Fab 8 in New York remain on schedule. And at its recent Technology Conference in Santa Clara, Calif., GlobalFoundries' executives proudly discussed its continued push to develop 20nm processes and even 14nm.

This is all good news for the industry. New technology opens the door for new electronic products and new features for our existing products. The addition of large-scale manufacturing capacity helps reach economies of scale quickly for reduced costs. How can this be a stimulus? Cellphone vendors and tablet makers (including ultrabook manufacturers) and even TV/set-top box companies have a great opportunity to stimulate the electronics market by enticing us to buy a new device with a “must-have” feature that consumers can't live without.

This industry has always grown on the backs of those who lead the pack with new technology and innovative designs. Combine a faster, lower-power processor with a sensor and a new application, and that'll get consumers and businesses excited again. A good time to roll out some new products will be the second half of 2012: Cellphones and PCs will be in another refresh cycle, and the automotive market will return to normal production levels after suffering setbacks in 2011.

If you'd like more details on Semico's IPI and the outlook for semiconductor sales in 2012, visit Semico's Website at www.semico.com or click here: Semico IPI.

5 comments on “2011 Chip Sales Stalling, but Expect a Brighter 2012

  1. mfbertozzi
    September 6, 2011

    It is an interesting editorial Joanne, it summarizes very well picture for 2011, even I still hold some doubts about 2012. Chip sales could ramp next year, but (imo) scenario is uncertainty especially in terms of device which will bring market's leadership. Depending on successful of PC or smartphone or tablet, maybe chip sales will be impacted on and as consequence, also sales forecast could change the trend.

  2. Eldredge
    September 6, 2011

    Along with the current economic difficulties, the promise of emerging new technoogies often encourages an expectant pause. It will be interesting to see if 2012 comes out as anticipated.

  3. Anand
    September 7, 2011

    The good news is that the IPI points to a bottom in the first quarter of 2012.

    @Joanne, do you think analysis will hold good even if there is a recession ? Many people are predicting this second recession which will be more severe than the first one, so dont you think forecast is bit optimistic ?

  4. jbond
    September 7, 2011

    With the promise of new technology and manufacturers coming out with new products, 2012 looks like it could shape up to be a great year. It is going to be interesting to see how the global economies are functioning and if they are going to be anymore setbacks. I think the 2011 holiday season is going to be a strong determining factor of what’s to come for 2012. If sales are sluggish, this is going to indicate that more people are holding onto their money. If more people aren't confident in spending, chip makers could actually have a rough 2012.

  5. Joanne Itow
    September 7, 2011

    Thanks for all the good insights/comments regarding the Semico forecast.  Semico’s forecast does not assume there will be another recession.  We believe we will dodge that bullet because the world economy continues to see growth in Asia and emerging markets.  All the macroeconomic indices point to a slow but growing world economy.  Employment is one of those variables that always take longer to regenerate after a severe downturn.  A recession triggered by an unexpected jolt to the economy such as a shock to oil prices or a debt default in Europe would certainly change the game significantly.

    As for a technology ‘pause’, consumers may hold back on purchases due to the anticipation of new technology/new product rollouts as well as low consumer confidence.    We expect to see a sluggish holiday season.  As the innovators roll out new products in the second half of 2012, sales should improve.  And last but not least, one of the main traps that most of us fall into is following a trend for too long, i.e. when things are going down, we think things will continue to go down.  When things are good it’s hard to envision the drop-off.   The trick is to find the inflection point.  That is exactly what the Semico IPI has pinpointed for over 20 years.  A variety of information including semiconductor sales, inventories, printed circuit board sales and end market data are used to develop Semico’s Inflection Point Indicator.  It accurately forecasted the quick recovery in 2010 and the slowdown we are currently experiencing. Semico continues to expect things to improve after Q1 2012.  Time will tell. 

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