The small 0.3% rise in worldwide semiconductor sales in January, compared to December, 2009 may not seem significant at first glance. Seasonally, January is a weak month and normally figures of reported several percentage points lower than the previous month. With US$22.5 billion in sales in January and a slight increase over December, overall growth for the year is now expected to top 20% and that may well be a conservative figure when third quarter figures are eventually released.
Both Future Horizons and IC Insights had projected in January that if a small decline in sales should occur in January, compared to December then the industry should expect strong growth for the rest of the year. This could lead to 20% growth rates.
Gartner and iSuppli are also touting 20% rates for the year based on stronger than expected sales or less than expected decline in IC revenue for January. However, both market research firms may be under-estimating the strength of ASP’s and overall demand pick-up, which could lead to greater growth rates for the industry in 2010.
A common theme of presentations by IC Insights and Future Horizons at the beginning of this year was the possibility that should January revenue figures post any type of increase over December, then the industry should be aware of a much bigger growth curve in 2010.
Neither research firm wanted to put a real figure on that possible growth percentage but nevertheless the SIA has reported revenue up in January.
“Worldwide semiconductor sales in January increased significantly compared to one year ago, reflecting today’s improving business environment for the industry,” said SIA President George Scalise. “January and February of 2009 were the low point of the industry downturn as the semiconductor industry and electronics manufacturers quickly responded to the global economic recession. We are currently seeing strength across a range of demand drivers for semiconductors, including personal computers, cell phones, automobiles, and industrial applications.”
What Scalise didn’t say was that with the PC and mobile phone markets recovering strongly after the recession, memory IC’s are in hot demand. The lack of spare capacity due to a severe reduction in capital spending over the last three years is fuelling price rises and importantly a return profitability for memory manufacturers.
According to iSuppli, the strongest chip segment in the first quarter of 2010 will be DRAM and NAND flash memory, which will experience a 99.3% increase in revenue compared to the same period in 2009.
However, as both IC Insights and Future Horizons had previously pointed out, memory manufacturers will be capacity constrained throughout 2010 and into 2011 as there is simply not the spare capacity in place without building more cleanroom space. That would not start to impact availability meaningfully to see pricing pressure ease in 2010. By the time of peak purchasing in the third quarter ASPs in the memory sector could significantly help to lock in significant revenue growth for the whole industry this year.
“iSuppli predicts global semiconductor revenue in 2010 will rise to $279.7 billion, up 21.5 percent from $230.2 billion in 2009,” commented Dale Ford, Senior Vice President at iSuppli in a research note before the SIA figures for January were issued. “This will mark the first year of double-digit percentage revenue growth for the semiconductor industry since 2006. Following the 11.1 percent decline in revenue in 2009, the strong growth in 2010 represents a major improvement in market conditions for the global semiconductor industry. Semiconductor revenue growth this year will swing by 32.6 percentage points in the positive direction, from negative 11.1 percent in 2009 to positive 21.5 percent in 2010.”
A 21.5% growth projection could prove to be highly conservative come the third quarter results.