IHS today said that it expects chip sales to climb by an "anemic" 2.9 percent to $313.3 billion in 2011. Last month, IHS had issued a forecast of 4.6 percent growth.
"Mounting economic weakness is taking its toll on the worldwide electronics and semiconductor industries just as these markets are entering the critical pre-holiday sales season," said analyst Dale Ford. "While economic challenges have persisted into 2011, consumer spending could have still sustained a reasonable level of growth in electronics demand if conditions had remained reasonably stable. Unfortunately, the accelerating decline and instability of the economy has reasserted itself as the primary driver of tepid electronics and semiconductor revenue growth in 2011."
For 2012, IHS expects a ripple effect that will limit sales growth to just 3.4 percent.
According to the market research firm, the timing and weakening growth at this time resembles a scenario of the third quarter of 2008, when the industry dipped into a sudden recession. Back then, semiconductor revenue declined by 5.3 percent in 2008 and by 11.6 percent in 2009. 2011 sales may be saved by "agile adjustments in business strategy" that "may allow semiconductor suppliers to avoid an annual decline in market revenue," IHS said.
If the general economy falls into a recession, however, IHS expects 2011 chip revenue to be flat, an "unstable and volatile semiconductor supply and demand environment entering 2012" and a market that would not recover until 2013. IHS said that it estimates the possibility of a return to recession at 40 percent.