Worldwide semiconductor sales slowing rapidly; 2011 revenue to decline 0.1 percent

STAMFORD, USA: Worldwide semiconductor revenue has slowed in 2011, and the market is on pace to have revenue total $299 billion, a decline of 0.1 percent from 2010, according to Gartner, Inc. This outlook is down from Gartner's previous projection in the second quarter for 5.1 percent growth this year.

"Three key factors are shaping the short-term outlook: excess inventory, manufacturing overcapacity and slowing demand due to economic weakness," said Bryan Lewis, research vice president at Gartner. "Semiconductor companies' third-quarter guidance is well below seasonal averages. The current guidance by vendors points to flat to down third-quarter growth. Typically, we see guidance for 8 to 9 percent growth in the third quarter because of back-to-school and the holiday build. The supply chain is also showing significant slowdown, and semiconductor-related inventory levels are still elevated."

PC production unit growth has significantly decreased. Last quarter, Gartner estimated PC production growth of 9.5 percent; that has now been reduced to 3.4 percent. Gartner has lowered its forecast of mobile phone production unit growth from a second-quarter projection of 12.9 percent growth to 11.5 percent growth in this most recent outlook.

DRAM has been severely impacted by reduced PC demand and falling prices and is now expected to decline 26.6 percent in 2011. NAND flash and data processing ASIC are the fastest-growing device areas in 2011, with about 20 percent growth. This growth is due in part to the strong growth in smartphones and iPads.

"2012 is the wild card. We have lowered our 2012 semiconductor forecast from 8.6 percent to 4.6 percent due to a worsening macroeconomic outlook," Mr. Lewis said. "However, the odds of a double-dip U.S. recession continue to rise and are raising fear that sales prospects will deteriorate further. Gartner is closely monitoring IT and consumer sales trends for any significant signs of weakness."