Chip Execs Bullish on 2011

Right on the heels of positive news for the manufacturing sector, chip executives are predicting solid sales and employment growth for 2011. (See: Positive Signs From the US Manufacturing Industry.)

However, the data, gathered in a global survey conducted by {complink 7219|KPMG International} also indicates the chip cycle will peak within the next 12 months.

Seventy-eight percent of executives responding to the survey, conducted in collaboration with the {complink 7501|Semiconductor Industry Association (SIA)}, expect that revenue will grow by more than 5 percent next year, a sign of resilience, as 87 percent of 2009 respondents projected similar revenue increases. In looking at the jobs picture, 29 percent of the respondents predict workforce growth of greater than 5 percent, compared to 23 percent in 2009 and 17 percent in 2008 — reflecting increased confidence in the resilient semiconductor industry.

The KPMG report is much more optimistic about the employment prospects for the industry than recent manufacturing reports. Manufacturing employment dropped slightly between October and November, according to the Institute for Supply Management, although overall employment trends remain positive. Also of interest: China's significance in the chip industry is dropping slightly, while the region remains a powerhouse for manufacturing.

Somewhat surprising is the chip industry's data on customer interest in green technology. The level of customers “strongly” interested in environmentally friendly, energy conservation products dropped from last year. KPMG doesn't speculate on why this is the case, but anecdotal reports from the electronics industry overall is the technology hasn't produced the kind of sales growth that had been expected. In the US, stimulus funds allocated toward environmental upgrades in infrastructure have largely stalled, although globally, the application of solar technology is increasing.

Here are highlights from the report:

Revenue growth
Reflecting the fundamental strength of the semiconductor industry, 39 percent of the industry executives expect their companies' semiconductor revenues to increase by 10 percent or more in the next fiscal year, compared to 54 percent last year.

Growth drivers

Survey respondents also identified the top drivers of current revenue growth for 2011:

  • Sixty-eight percent believe that current revenue growth will be driven by wireless handsets and other wireless communications devices.
  • Sixty-five percent tabbed consumer products.
  • Fifty-five percent identified computing.

Also, more executives believe industrial products (43 percent vs. 39 percent in 2009) and automotive products (38 percent vs. 30 percent) will be important revenue drivers over the next year.

The expected profitability growth for 2011 reflects continued confidence in industry fundamentals, but a less bullish view than last year's survey. Thirty-seven percent of respondents anticipate profitability growth in excess of 5 percent for 2011, and a year ago 76 percent expected that level of growth for 2010.

Future geographic growth
Although China is still considered to be the most important geographic area for semiconductor revenue growth three years from today (70 percent of respondents gave the highest rating of 8-10), KPMG's survey found that its significance has diminished slightly, dropping from 78 percent last year and 79 percent in 2008.

Conversely, both the US and Europe appear poised to play a larger role in industry growth over the next three years, as 47 percent of executives gave the US an 8-10 rating compared with a 42 percent in last year's survey, and Europe increased to 30 percent in this year's survey from 25 percent a year ago.

R&D spending
In this year's findings, more executives (83 percent) expect semiconductor R&D spending to increase in the next calendar year, with 47 percent saying it will be greater than 5 percent, compared to 72 percent and 45 percent, respectively, last year.

The KPMG semiconductor industry survey results show that 53 percent of respondents anticipate the semiconductor cycle will peak within the next 12 months, which is somewhat contradictory to the responses received in the areas of revenue and profitability growth.

Green technology
Sixty-two percent indicate a high or extremely high level of interest from customers for energy-efficient and/or energy-renewable products, compared to 65 percent last year.

News from the technology sector continues to provide reason to believe the recession is behind us. However, other data, including that from the housing and financial markets, are fueling uncertainty. Going forward, I think we in the electronics industry should remember that the latest recession was fueled by overall economic trends. In the past, electronics industry downturns were largely of our own making: oversupply and undersupply; tech bubbles and reckless investment. We are all encouraged by the news from the manufacturing and chip sectors, but we should continue to proceed with caution.

9 comments on “Chip Execs Bullish on 2011

  1. bolaji ojo
    December 3, 2010

    I gave up on forecasts from the industry a long time ago. The numbers never seem to hit the target and this has always been the source of the demand-supply imbalances that have plagued this market. Of course, you can't lay this blame at the doorsteps of any particular group or individual — there are just too many variables involved for anyone to accurately predict future sales. The bullish expectations, though, is not out of sync with global economic predictions so this time semiconductor executives may actually get it right. We hope.

  2. Ashu001
    December 3, 2010


    For anyone in the High-Tech electronics industry this report has very hopeful indicators.I feel encouraged by this report and would look to get more details and possibly channelize more investments in this area.




  3. t.alex
    December 3, 2010

    Hopefully the execs are not over-bullish about their predictions.

    I believe tablets will replace netbooks, notebooks, even mobile phones, and other form of personal computing. Especially with the fast growing trend of Android OS (just count how many new devices every 3 months), and new versions being released somewhere every 6 months, android tablets will be everywhere. 


  4. kumar1863
    December 3, 2010

    Thanks Barbara, the report is really looking positive and encouraging. This will rise the people hopes who are in technical area. If we look at the higher R&D spendings in the future , it will reflects the country's growth and it's perspective about the future demands.  This will give promising future opportunities for students when comes to employment.    

  5. eemom
    December 3, 2010

    Thanks for the encouraging report.  It is nice to read positive news.  While I agree that you can't trust forecasts, this one, while bullish, does not seem overly agressive as compared with how the economy in general seems to be recovering.  The data seems to be supporting a reasonable projected progress that we will hopefully see in 2011 and beyond.  I am not sure I agree about the semiconductor cycle peaking in the next 12 months.  After the downturn in 2008, we hopefully continue to see growth in the Industry.

    It was also very nice to read that US as well as Europe were gaining confidence for Industry growth while China is slowiy declining.

  6. DataCrunch
    December 3, 2010

    Although I tend to agree with Bolaji on his views on industry forecasts, I feel like I have to agree with these projections by the chip execs.  I think the growth coming from emerging markets for electronic goods will be better than expected in 2011 and beyond.  Let’s hope so!

  7. Mydesign
    December 6, 2010

         Semiconductor industry is growing very faster and showing the recovery sign. As a part of recession in IT and other industry, purchasing power of peoples have gone below a certain level, which forced the companies to slow down the production line. From 3rd quarter of 2009, almost all the companies started showing the positive sign of market pick up and hence the production also goes high. Now a day’s almost all techies would prefer to have, at least on laptop and a couple of high end mobiles.  Many new innovations are happening in the electronic appliance sector also. Peoples are spending about 40-55% of their earnings for purchasing high end appliances.

        Now a day during festival season, it’s a fashion to replace the existing appliances by a latest model. That is peoples would like to replace the existing CRT/LCD TV by either LED/3D or Plasma TV, Video player by either DVD or Blue Ray player. So the demands for this type of equipments are always high. Hence as a result of this high demand, companies are increasing the production, which in turn helps for the growth of semiconductor industry. Mean time innovations are also happening for new technologies or compact equipments. Thanks God, as a result of this we (techies) are also surviving.

  8. Barbara Jorgensen
    December 6, 2010

    I think one factor is going to be how tied the tech market is to overall economic growth. The “last worst” downturn was of the industry's making (2001)–hope in the tech bubble fueled overdevelopment and production and the consequences were painful. To some extent, the tech industry learned from that–for all its shortcomings, the supply chain is a lot better than it was 10 years ago. But weakness in the financial and housing markets doesn't seem to be shaking off.

    As several people pointed out, new electronics are always coming along and electronic content is just about everything is growing. I think it's fair to expect some growth next year in the semiconductor/tech sector.


  9. Ashu001
    December 21, 2010


    After reading both these articles,I am starting to have grave doubts about the so-called Resurgence of Tech spending in 2011.Especially when you consider how big and important a market America really is for most Tech companies.If they do sell less gadgets(as looks increasingly likely from these articles) and lets not forget Austerity is already gripping large parts of Europe today and Fodd Inflation is hitting New Highs in Asia,then Global disposable income across the board is going to shrink and shrivel in 2011.After all,we all have to eat rather buy the latest I-thingy….

    I kind of agree with what Simon Black is saying here..

    I guess finally its going to be the middle-ground so these articles definitely put in place ground for caution for sure.



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