Chip Makers Hit By Economic Downturn, Forecast Reduced

Semiconductor revenues are now expected to climb by just 1.2 percent this year and remain essentially flat over 2010, according to a new report released by IHS.

The number is down from a previous 2.9 percent estimate.

"Although the forecast of 1.2 percent revenue growth in 2011 is just barely positive, an expansion of any magnitude is significant from the standpoint of market psychology," said Dale Ford, senior vice president, electronics market intelligence for IHS. "Given the worsening economic environment and growing pessimism in the electronics supply chain, many market forecasters had projected third-quarter revenues would decline, and pull down the results for the full year of 2011. Even the prospect of marginal growth casts a much more optimistic light on the market performance for the year."

IHS noted that the global semiconductor market gained in Q3 despite "major economic headwinds," which may have saved the industry from overall negative growth for the current year. IHS estimates that Q3 chip sales increased by about 3.5 percent to $78.7 billion year over year. For Q4, IHS expects a 2.0 percent decline to $77.1 billion. 2011 sales are expected to come in at $308.5 billion, up from $304.7 billion in 2010.

According to the market research firm, "many major semiconductor suppliers are projecting fourth-quarter revenue declines that average in the high single digits, "but there are some notable exceptions that have indicated solid growth," which include Intel, Samsung, Renesas, Qualcomm and AMD.